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WB

WEST BANCORPORATION INC (WTBA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered accelerating profitability: net income $9.3M and diluted EPS $0.55, up 16% QoQ and 55% YoY, driven by higher net interest income and a 9 bps sequential improvement in fully tax-equivalent net interest margin to 2.36% .
  • Credit quality remained pristine with 0.00% nonperforming assets, no nonaccruals or >30-day past dues; allowance for credit losses/loans was 1.01% vs. 1.03% in Q2 .
  • Deposits declined $85.5M QoQ (2.5%) due to anticipated public fund cash flows; uninsured deposits were ~28.6% of total, while brokered deposits fell $3.5M QoQ to $204.8M .
  • Management highlighted continued margin tailwinds from repricing of fixed-rate loans (weighted avg 4.86% on fixed-rate book) and potential Fed cuts; dividend maintained at $0.25/share .

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose to $22.5M (+$1.1M QoQ) as loan yields improved to 5.66% and NIM expanded to 2.36% (+9 bps QoQ) on a FTE basis; noninterest income rose modestly with trust services strength .
  • Efficiency ratio improved to 54.06% from 56.45% in Q2, reflecting revenue lift and disciplined expense control; ROAA reached 0.92% and ROAE 15.25% .
  • Credit quality “pristine” with no nonaccruals and no substandard/doubtful loans; watch list increased due to one well-collateralized customer relationship, but overall portfolio remained strong, diversified in CRE .

Management quotes:

  • “We had a strong third quarter with continued improvements in net interest income and net interest margin while prudently managing our noninterest expenses.” — CEO David Nelson .
  • “Credit quality… remains pristine… no past dues, no OREO, no non-accrual loans, no doubtful accounts, and no substandard loans.” — Chief Risk Officer Harlee Olafson .
  • “In our fixed-rate loan portfolio, the weighted average rate… is currently 4.86%. There’s still plenty of room… repricing into 2026.” — CFO Jane Funk .

What Went Wrong

  • Total deposits decreased $85.5M QoQ (ex-brokered down $82.0M), reflecting expected public fund outflows and competitive pricing pressures that limit deposit beta aggressiveness near term .
  • Noninterest expense ticked up slightly QoQ to $13.6M, mainly higher compensation, partially offsetting efficiency gains; data processing and technology expenses remain elevated vs. prior year .
  • Watch list loans rose to $38.7M from $10.8M, tied primarily to one transportation-related customer; management views collateral as sufficient but it warrants monitoring .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Operating Revenue ($USD Millions)$20.319 $23.098 $23.829 $25.004
Diluted EPS ($USD)$0.35 $0.46 $0.47 $0.55
Net Interest Margin (FTE, %)1.91% 2.28% 2.27% 2.36%
Efficiency Ratio (%)63.28% 56.37% 56.45% 54.06%
ROAA (%)0.60% 0.81% 0.80% 0.92%
ROAE (%)10.41% 13.84% 13.65% 15.25%

Estimate comparison

MetricQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 Actual
Revenue ($USD Millions)$23.500*$23.829 $24.200*$25.004
Diluted EPS ($USD)$0.45*$0.47 $0.47*$0.55

Values retrieved from S&P Global.

Loan and deposit balances

MetricQ3 2024Q2 2025Q3 2025
Loans ($USD Billions)$3.021 $2.966 $3.009
Deposits ($USD Billions)$3.279 $3.392 $3.307
Loans/Total Deposits (%)92.15% 87.45% 91.00%

KPIs and margin drivers

MetricQ1 2025Q2 2025Q3 2025
Loan Yield (%)5.52% 5.59% 5.66%
Cost of Interest-Bearing Liabilities (%)3.25% 3.28% 3.26%
Nonperforming Assets / Total Assets (%)0.00% 0.00% 0.00%
ACL / Loans (%)1.01% 1.03% 1.01%
Tangible Common Equity Ratio (%)5.97% 5.94% 6.40%
Estimated Uninsured Deposits (% of Total)——28.6%

Segment/mix

Segment/MixQ3 2025
Loan Mix: C&I17%
Loan Mix: CRE – Non-Owner Occupied36%
Loan Mix: CRE – Owner Occupied13%
Loan Mix: Multifamily14%
Loan Mix: 1–4 Family3%
Loan Mix: Construction & Development15%
Loan Mix: Consumer & Other2%
Deposit Mix: Noninterest-Bearing16%
Deposit Mix: Interest-Bearing Demand13%
Deposit Mix: Savings & Money Market51%
Deposit Mix: Time Deposits14%
Deposit Mix: Brokered6%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateFY 2025~22–23% run-rate in H1 2025 Q3 effective ~19% due to energy tax credit change; forward similar to H1 (~22–23%) Maintained forward rate; Q3 one-time lower
Net Interest MarginH2 2025–2026Improvement expected on asset repricing NIM +9 bps QoQ to 2.36%; continued tailwinds from fixed-rate repricing and potential Fed cuts Qualitative upward bias
Loan GrowthH2 2025–2026Robust pipeline; selective growth Mid-single digits “doable”; QoQ period-end loans +$42.5M Maintained
Deposit BetasH2 2025–2026Savings from 2024 cuts; pockets of pressure Betas likely less aggressive vs year-ago in competitive environment Cautious
DividendOngoing$0.25/share quarterly $0.25/share declared Oct 22, payable Nov 19 Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Previous Mentions)Q2 2025 (Previous Mentions)Q3 2025 (Current Period)Trend
Margin trajectoryNIM up 30 bps vs Q4’24; deposit costs down 38 bps; asset repricing underway Expect margin improvement; deposit costs flat-to-up slightly; repricing continues NIM 2.36% (+9 bps QoQ); loan yield up; further repricing/Fed cuts supportive Improving
Deposit dynamics/pricingSlight deposit decline; rate actions largely done absent Fed +$195M core deposits (municipal bond); brokered down; pockets of pricing pressure Deposits −$85.5M QoQ; betas less aggressive near term; uninsured ~28.6% Competitive; mixed
Credit qualityNo nonaccruals; strong underwriting; office risk monitored “Enviable zeros”; watchlist modest; CRE performing Pristine; watchlist up to $38.7M (one collateralized relationship) Strong; vigilant
Minnesota markets & M&AFacilities leveraged for relationship growth Deposit-rich opportunities; construction complete New opportunities from competitor M&A; cautious manufacturing backdrop Share gains; cautious macro
Tariffs/macroCustomer cost/supply concerns from tariffs; diversified clients can weather —Q&A on ag stress: limited direct exposure; some manufacturing slowdown Watchful
Tech/treasury enhancements——Treasury management and digital banking enhancements forthcoming Investment/enablement

Management Commentary

  • Strategy: “West Bank remains focused on executing our strategic goals and mission objectives… upcoming enhancements to our treasury management services and digital banking capabilities.” — CEO David Nelson .
  • Margin outlook: “Loan balances increased… margin improved nine basis points… loan yield 5.66% vs 5.59% in Q2 and 5.52% in Q1.” — CFO Jane Funk .
  • Deposits and funding: “Objective… fund growth via deposit gathering and investment portfolio cash flows; may use limited wholesale/brokered funding temporarily.” — CFO Jane Funk .
  • Credit stance: “No past dues, no OREO, no non-accrual loans… small watch list mainly transportation; credits well secured.” — Chief Risk Officer Harlee Olafson .
  • Market execution: “Targeting deposit-rich business banking opportunities… winning high-value retail deposits from business owners and key executives.” — Minnesota Group President Brad Peters .

Q&A Highlights

  • Growth pipeline and outlook: Management sees mid-single-digit loan growth as “doable,” supported by selective underwriting and market share opportunities in Minnesota following competitor M&A .
  • Funding strategy and betas: Aim to fund with core deposits and securities cash flows; expect deposit betas to be less aggressive than last year given competition; limited use of wholesale/brokered as needed .
  • Margin tailwinds: ~$550M of fixed-rate loans repricing over next ~12 months; fixed-rate portfolio weighted average rate 4.86%, leaving room for yield improvement .
  • Tax rate: Q3 effective rate ~19% due to an energy-related investment tax credit timing change; forward rate expected to revert similar to H1 (~22–23%) .
  • Capital deployment: Building capital; no specific plans disclosed; priority is organic growth and attractive loan opportunities .

Estimates Context

  • Q3 2025: EPS $0.55 vs $0.47 consensus (beat), Revenue $25.004M vs $24.200M consensus (beat); one estimate for each metric in quarter . Values retrieved from S&P Global.*
  • Q2 2025: EPS $0.47 vs $0.45 consensus (beat), Revenue $23.829M vs $23.500M consensus (beat); one estimate each . Values retrieved from S&P Global.*

Implications: Consensus likely needs to adjust upward for NIM trajectory and sustainable EPS run-rate given asset repricing and pristine credit; near-term deposit betas and public fund flows introduce variability in funding costs .

Key Takeaways for Investors

  • Strong beat on EPS and revenue with sequential and YoY improvement in NIM; margin tailwinds from fixed-rate repricing should persist into 2026, supporting earnings momentum .
  • Credit quality is a differentiator (0.00% NPAs; no nonaccruals); watch list growth tied to one collateralized transportation relationship, but overall risk indicators remain favorable .
  • Funding costs are stabilizing; deposit outflows tied to anticipated public fund usage and competitive pricing pressures—monitor deposit betas and uninsured deposit share (~28.6%) .
  • Efficiency ratio improved to 54.06% with disciplined expense control; continued operational leverage possible if revenue growth outpaces expense creep .
  • Dividend maintained at $0.25/share (4.9% annualized yield at period-end price), signaling confidence in capital build and earnings durability .
  • Regional strategy in Minnesota is yielding deposit-rich relationships amid competitor M&A; pipeline supports mid-single-digit loan growth while preserving underwriting selectivity .
  • Near-term trading: Positive skew from earnings beats and pristine credit; watch for updates on deposit flows and margin trajectory; medium-term thesis hinges on sustained repricing tailwinds and conservative risk profile .