WTBA West Bancorporation Inc - 10-K

ITEM 1A.  RISK FACTORS

West Bancorporation’s business is conducted almost exclusively through West Bank. West Bancorporation and West Bank are subject to many of the common risks that challenge publicly traded, regulated financial institutions. An investment in West Bancorporation’s common stock is also subject to the following specific risks. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations.

Risks Related to Credit Quality

We must effectively manage the credit risks of our loan portfolio.

The largest component of West Bank’s income is interest received on loans. Our business depends on the creditworthiness of our customers. There are risks inherent in making loans, including risks of nonpayment, risks resulting from uncertainties of the future value of collateral, and risks resulting from changes in economic and industry conditions. We attempt to reduce our credit risk through prudent loan application, underwriting and approval procedures, including internal loan reviews before and after proceeds have been disbursed, careful monitoring of the concentration of our loans within specific industries, and collateral and guarantee requirements. These procedures cannot, however, be expected to completely eliminate our credit risks, and we can make no guarantees concerning the strength of our loan portfolio.

The information that we use in managing our credit risk may be inaccurate or incomplete, which may result in an increased risk of default and otherwise have an adverse effect on our business, results of operations and financial condition.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Although we regularly review our credit exposure to specific clients and counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud or catastrophic events affecting certain industries. Moreover, such circumstances may become more likely to occur or be detected in periods of general economic uncertainty. We may also fail to receive full information with respect to the risks of a counterparty. In addition, in cases where we have extended credit against collateral, we may find that we are under-secured, for example, as a result of sudden declines in market values that reduce the value of collateral or due to fraud with respect to such collateral. If such events or circumstances were to occur, it could result in potential loss of revenue and have an adverse effect on our business, results of operations and financial condition.

Our loan portfolio includes commercial loans, which involve risks specific to commercial borrowers.

West Bank’s loan portfolio includes a significant amount of commercial real estate loans, construction and land development loans, commercial lines of credit and commercial term loans. West Bank’s typical commercial borrower is a small- or medium-sized, privately owned Iowa or Minnesota business entity. Commercial loans often have large balances, and repayment usually depends on the borrowers’ successful business operations. Commercial loans also are generally not fully repaid over the loan period and thus may require refinancing or a large payoff at maturity. If the general economy turns downward, commercial borrowers may not be able to repay their loans, and the value of their assets, which are usually pledged as collateral, may decrease rapidly and significantly. Also, when credit markets tighten due to adverse developments in specific markets or the general economy, opportunities for refinancing may become more expensive or unavailable, resulting in loan defaults.

Our loan portfolio includes commercial real estate loans, which involve risks specific to real estate values.

Commercial real estate loans were a significant portion of our total loan portfolio as of December 31, 2025. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Adverse developments affecting real estate values in one or more of our markets could increase the credit risk associated with our loan portfolio. Additionally, commercial real estate lending typically involves higher loan principal amounts, and repayment of the loans is generally dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events, including governmental regulations outside of the control of the borrower or lender, could negatively impact the future cash flows and market values of the affected properties.

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If the loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time of originating the loans, which could cause us to charge off all or a portion of the loans. This could lead to an increased provision for credit losses and adversely affect our operating results and financial condition.

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

The federal banking regulators have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the CRE Guidance, a financial institution that, like West Bank, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors (i) total reported loans for construction, land development, and other land represent 100 percent or more of total risk-based capital, or (ii) total reported loans secured by multifamily and non-farm non-residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300 percent or more of total risk-based capital. Based on these criteria, West Bank had concentrations of 89 percent and 398 percent, respectively, as of December 31, 2025. The purpose of the CRE Guidance is to assist banks in developing risk management practices and capital levels commensurate with the level and nature of commercial real estate concentrations. The CRE Guidance states that management should employ heightened risk management practices, including board and management oversight, strategic planning, development of underwriting standards, and risk assessment and monitoring through market analysis and stress testing. West Bank believes that its current risk management processes adequately address the regulatory guidance; however, there can be no guarantee of the effectiveness of the risk management processes on an ongoing basis.

We are subject to environmental liability risk associated with real estate collateral securing our loans.

A significant portion of our loan portfolio is secured by real property. Under certain circumstances, we may take title to the real property collateral through foreclosure or other means. As the titleholder of the property, we may be responsible for environmental risks, such as hazardous materials, which attach to the property. For these reasons, prior to extending credit, we have an environmental risk assessment program to identify any known environmental risks associated with the real property that will secure our loans. In addition, we routinely inspect properties following the taking of title. When environmental risks are found, environmental laws and regulations may prescribe our approach to remediation. As a result, while we have ownership of a property, we may incur substantial expense and bear potential liability for any damages caused. The environmental risks may also materially reduce the property’s value or limit our ability to use or sell the property. We also cannot guarantee that our environmental risk assessment will detect all environmental issues relating to a property, which could subject us to additional liability.

Risks Related to Accounting Policies and Estimates

Our allowance for credit losses may be insufficient to absorb potential losses in our loan portfolio.

We maintain an allowance for credit losses at a level we believe adequate to absorb current expected credit losses based on an analysis of the loan portfolio. The level of the allowance reflects management’s estimate of current expected losses in the portfolio as of the balance sheet date and is based on a cash flow-based model that considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts.

Determination of the allowance is inherently subjective as it requires significant estimates and management’s judgment of credit risks and future trends, all of which may undergo material changes. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. In addition, bank regulatory agencies periodically review our allowance and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different from those of management. Also, if charge-offs in future periods exceed the allowance for credit losses, we will need additional provisions to increase the allowance. Any increases in provisions will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations.

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Our accounting policies and methods are the basis for how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure they comply with U.S. generally accepted accounting principles (GAAP) and reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances. The application of the chosen accounting policy or method might result in us reporting different amounts than would have been reported under a different alternative. If management’s estimates or assumptions are incorrect, the Company may experience a material loss.

Changes in accounting policies or standards could materially impact our financial statements.

From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, trends in financial and business reporting, including new disclosure requirements, could require us to incur additional reporting expense. These changes are beyond our control, can be difficult to predict and could have a material adverse impact on our financial condition and results of operations.

If a significant portion of any unrealized losses in our portfolio of investment securities were to incur credit losses, we would recognize a material charge to our earnings, and our capital ratios would be adversely impacted.

Factors beyond our control can significantly influence the fair value of investment securities in our portfolio and can cause potential adverse changes to the fair value of those securities. These factors include, but are not limited to, changes in interest rates, rating agency downgrades of the securities, defaults by the issuer or individual mortgagors with respect to the underlying securities, and instability in the credit markets. Any of the foregoing factors could result in realized losses in future periods.

We analyze our investment securities quarterly to determine whether, in the opinion of management, any of the securities have credit losses. To the extent that any portion of the unrealized losses in our portfolio of investment securities is determined to have credit losses, we will recognize a charge to our earnings in the quarter during which such determination is made, and our capital ratios will be adversely impacted. If the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the security is written down to fair value through income.

At December 31, 2025, we had $93.3 million of net unrealized losses in our securities portfolio. If we are forced to liquidate any of those investments prior to maturity, including because of a lack of liquidity, we would recognize as a charge to earnings the losses attributable to those securities.

Failure to maintain effective internal controls over financial reporting could impair our ability to accurately and timely report our financial results and could increase the risk of fraud.

Effective internal controls over financial reporting are necessary to provide reliable financial reports and prevent fraud. Management believes that our internal controls over financial reporting are currently effective. While management will continue to assess our controls and procedures and take immediate action to remediate any future perceived issues, there can be no guarantee of the effectiveness of these controls and procedures on an ongoing basis. Any failure to maintain an effective internal control environment could impact our ability to report our financial results on an accurate and timely basis, which could result in regulatory actions, loss of investor confidence, and an adverse impact on our business operations and stock price.

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Risks Related to Information Security and Business Interruption

The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

As a bank, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us, our third-party partners or our clients, which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our customers or third-party vendors, denial or degradation of service attacks, and malware or other cyber attacks.

There continues to be a rise in electronic fraudulent activity, security breaches and cyber attacks within the financial services industry, especially in the commercial banking sector due to cyber-criminals targeting commercial bank accounts, and as a result of increasingly sophisticated methods of conducting cyber attacks, including those employing artificial intelligence. Moreover, in recent periods, several large corporations, including financial institutions, third party partners specializing in providing services to financial institutions, and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity. Some of our customers may have been affected by these breaches, which could increase their risks of identity theft and other fraudulent activity that could involve their accounts with us.

Information pertaining to us and our customers is maintained, and transactions are executed, on networks and systems maintained by us and certain third-party partners, such as our online banking, mobile banking and core deposit and loan recordkeeping systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect us and our customers against fraud and security breaches and to maintain the confidence of our customers. Breaches of information security also may occur through intentional or unintentional acts by those having access to our systems or the confidential information of our customers, including employees. In addition, increases in criminal authorized activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies (including browsers and operating systems), or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our customers and underlying transactions, as well as the technology used by our customers to access our systems. Our third-party partners’ inability to anticipate, or failure to adequately mitigate, breaches of security could result in a number of negative events, including losses to us or our customers, loss of business or customers, damage to our reputation, the incurrence of additional expenses, disruption to our business, additional regulatory scrutiny or penalties, or our exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Furthermore, there has been heightened legislative and regulatory focus on privacy, data protection and information security. New or revised laws and regulations, including with respect to the use of artificial intelligence by financial institutions and service providers, may significantly impact our current and planned privacy, data protection and information security-related practices, the collection, use, retention and safeguarding of customer and employee information, and current or planned business activities. Compliance with current or future privacy, data protection and information security laws could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could adversely affect our business, financial condition or results of operations.

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Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business.

Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products or those developed by our third-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed, for example datasets may contain biased information or otherwise be insufficient; and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations. If the analyses that products incorporating artificial intelligence assist in producing for us or our third-party partners are deficient, biased or inaccurate, we could be subject to competitive harm, potential legal liability and brand or reputational harm. The use of artificial intelligence may also present ethical issues. If we or our third-party partners offer artificial intelligence enabled products that are controversial because of their purported or real impact on human rights, privacy, or other issues, we may experience competitive harm, potential legal liability and brand or reputational harm. In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners.

We depend on information technology and telecommunications systems of third parties, and any systems failures, interruptions or data breaches involving these systems could adversely affect our operations and financial condition.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems, third-party servicers, accounting systems, mobile and online banking platforms and financial intermediaries. We outsource to third parties many of our major systems, such as data processing and mobile and online banking. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. A system failure or service denial could result in a deterioration of our ability to process loans or gather deposits and provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a loss of customer business or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, failures of third parties to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of these third parties, could disrupt our operations or adversely affect our reputation.

It may be difficult for us to replace some of our third-party vendors, particularly vendors providing our core banking and information services, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason, and even if we are able to replace them, it might be at higher cost or result in the loss of customers. Any such events could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our operations rely heavily on the secure processing, storage and transmission of information and the monitoring of a large number of transactions on a minute-by-minute basis, and even a short interruption in service could have significant consequences. We also interact with and rely on retailers, for whom we process transactions, as well as financial counterparties and regulators. Each of these third parties may be targets of the same types of fraudulent activity, computer break-ins and other cybersecurity breaches described above, and the cybersecurity measures that they maintain to mitigate the risk of such activity may be different than our own and may be inadequate.

As a result of financial entities and technology systems becoming more interdependent and complex, a cyber incident, information breach or loss, or technology failure that compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including ourselves. As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact.

Other Risks Related to West Bank’s Operations and the Economy

We are subject to liquidity risks.

West Bank maintains liquidity primarily through customer deposits and other short-term funding sources, including advances from the Federal Home Loan Bank (FHLB) and the Federal Reserve discount window, brokered deposits and purchased federal funds.

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If economic influences change so that we do not have access to short-term credit, or our depositors withdraw a substantial amount of their funds for other uses, West Bank might experience liquidity issues. Our efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated reductions in our liquidity. If this were to occur and additional short-term borrowings or debt are needed for liquidity purposes in the future, there can be no assurance that such borrowings or debt would be available or, if available, would be on favorable terms. If we increase our short-term borrowings or debt, our cost of funds will increase, thereby reducing our net interest income, or we may need to sell a portion of our investment portfolio, which, depending upon market conditions, could result in the Company or West Bank realizing losses. At December 31, 2025, our borrowed funds decreased to $376.4 million, compared to $392.6 million at December 31, 2024. Although we believe West Bank’s current sources of funds are adequate for its liquidity needs, there can be no assurance in this regard for the future.

The competition for banking and financial services in our market areas is high, which could adversely affect our financial condition and results of operations.

We operate in highly competitive markets and face strong competition in originating loans, attracting deposits and offering our other services. We also compete in recruiting and retaining talented employees. The Des Moines metropolitan market area, in particular, has attracted many new financial institutions within the last two decades. We also compete with nonbank financial service providers, such as financial technology companies, many of which are not subject to the same regulatory restrictions that we are and may be able to compete more effectively as a result.

Customer loyalty can be influenced by a competitor’s new products, especially if those offerings are priced lower than our products. Some of our competitors may also be better able to attract customers because they provide products and services over a larger geographic area than we serve. This competitive climate can make it more difficult to establish and maintain relationships with new and existing customers, lower the rate that we are able to charge on loans, and affect our charges for other services. Our growth and profitability depend on our continued ability to compete effectively within our markets, and our inability to do so could have a material adverse effect on our financial condition and results of operations.

Loss of customer deposits due to increased competition could increase our funding costs.

We rely on customer deposits to be a low cost and stable source of funding. We compete with banks and other financial services companies, including digital asset service providers, for deposits. If our competitors raise the rates they pay on deposits, we may need to raise our rates to avoid losing deposits. Deposit balances can decrease when customers perceive alternative investments, such as money market funds, treasury securities, and certificates of deposit at other financial institutions as providing a better risk/return trade-off. If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek other, potentially more expensive funding alternatives. Higher funding costs could reduce our net interest margin and net interest income and could have a material adverse effect on our financial condition and results of operations.

Damage to our reputation could adversely affect our business.

Our business depends upon earning and maintaining the trust and confidence of our customers, stockholders and employees. Damage to our reputation could cause significant harm to our business. Harm to our reputation can arise from numerous sources, including employee misconduct, vendor nonperformance, cybersecurity breaches, compliance failures, litigation or governmental investigations, among other things. In addition, a failure to deliver appropriate standards of service, or a failure or perceived failure to treat customers and clients fairly, can result in customer dissatisfaction, litigation, and heightened regulatory scrutiny, all of which can lead to lost revenue, higher operating costs and harm to our reputation. Adverse publicity about West Bank, whether or not true, may also result in harm to our business. Should any events or circumstances that could undermine our reputation occur, there can be no assurance that any lost revenue from customers opting to move their business to another institution and the additional costs and expenses that we may incur in addressing such issues would not adversely affect our financial condition and results of operations.

We are subject to various legal claims and litigation.

We are periodically involved in routine litigation incidental to our business. Regardless of whether these claims and legal actions are founded or unfounded, if such legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the Company’s reputation. In addition, litigation can be costly. Any financial liability, litigation costs or reputational damage caused by these legal claims could have a material adverse impact on our business, financial condition and results of operations.

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The soundness of other financial institutions could adversely affect us.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients. Many of these transactions expose us to credit risk in the event of default by our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our results of operations or earnings. Additionally, we may be negatively affected by brand or reputational harm to other community banks or to the community banking industry.

We may experience difficulties in managing our growth.

In the future, we may decide to expand into additional communities or attempt to strengthen our position in our current markets through opportunistic acquisitions of all or part of other financial institutions or related businesses or through the hiring of teams of bankers from other financial institutions that we believe provide a strategic fit with our business, or by opening new locations. To the extent that we undertake acquisitions or new office openings, we are likely to experience the effects of higher operating expense relative to operating income from the new operations, which may have an adverse effect on our overall levels of reported net income, return on average equity and return on average assets. To the extent we hire teams of bankers from other financial institutions, our salaries and employee benefits expense will likely increase, which may have an adverse effect on our net income, without any guarantee that the new banking team will be successful in generating new business. Other effects of engaging in such growth strategies may include potential diversion of our management’s time and attention and general disruption to our business.

To the extent that we grow through acquisitions or office openings, we cannot provide assurance that we will be able to adequately or profitably manage such growth. Acquiring other banks and businesses will involve risks similar to those commonly associated with new office openings, but may also involve additional risks. These additional risks include potential exposure to unknown or contingent liabilities of banks and businesses we acquire, exposure to potential asset quality issues of the acquired bank or related business, difficulty and expense of integrating the operations and personnel of banks and businesses we acquire, and the possible loss of key employees and customers of the banks and businesses we acquire.

Maintaining or increasing our market share may depend on lowering prices and the adoption of new products and services.

Our success depends, in part, on our ability to adapt our products and services to evolving industry standards and customer needs. There may be increased pressure to provide products and services at lower prices. Lower prices can reduce our net interest margin and revenues from our fee-based products and services. In addition, the widespread adoption of new technologies could require us to make substantial expenditures to modify or adapt our existing products and services. Also, these and other capital investments in our business may not produce expected growth in earnings anticipated at the time of the expenditure. We may not be successful in introducing new products and services, achieving market acceptance of our products and services, or developing and maintaining loyal customers.

The loss of the services of any of our senior executive officers or key personnel could cause our business to suffer.

Much of our success is due to our ability to attract and retain senior management and key personnel experienced in banking and financial services who are very involved in the communities we currently serve. Our continued success depends to a significant extent upon the continued services of relatively few individuals. In addition, our success depends in significant part upon our senior management’s ability to develop and implement our business strategies. The loss of services of a few of our senior executive officers or key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition or results of operations, at least in the short term.

Labor shortages and a failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition.

A number of factors may adversely affect the labor force available to us or increase labor costs, including changes in unemployment levels and decreased labor force size and participation rates. Although we have not experienced any material labor shortage to date, we have recently observed an overall tightening and increasingly competitive local labor market. A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.

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In addition, if we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures we take to respond to a decrease in labor availability have unintended negative effects, our business could be adversely affected. An overall labor shortage, lack of skilled labor, increased turnover or labor-driven inflation, caused by general macroeconomic factors, could have a material adverse impact on our business, results of operations and financial condition.

Changes in interest rates could negatively impact our financial condition and results of operations.

Our earnings and cash flows are largely dependent on our net interest income, which is the difference between the interest income we earn on interest-earning assets, such as loans, investment securities and short-term investments, and the interest expense that we pay on interest-bearing liabilities, such as deposits and borrowings. Additionally, changes in interest rates also affect our ability to fund our operations with client deposits and the fair value of securities in our investment portfolio and derivatives portfolio. Therefore, any change in general market interest rates, including changes in federal fiscal and monetary policies, can have a significant effect on our net interest income and results of operations. Interest rates are sensitive to many factors, including government monetary and fiscal policies, domestic and international economic and political conditions and competition.

Our interest-earning assets and interest-bearing liabilities may react in different degrees to changes in market interest rates. Interest rates on some types of assets and liabilities may fluctuate prior to changes in broader market interest rates, while rates on other types of assets and liabilities may lag behind. The result of these changes to rates may cause differing spreads on interest-earning assets and interest-bearing liabilities. We cannot control or accurately predict changes in market rates of interest.

It is currently expected that, during 2026, the Federal Open Market Committee of the Federal Reserve (“FOMC”) will continue to closely monitor interest rates, in part to manage the rate of inflation to its preferred level. In the fourth quarter of 2025, the FOMC decreased the target range for the federal funds rate to a range of 3.50 percent to 3.75 percent, following a series of significant increases beginning in 2022. If the FOMC further alters the targeted federal funds rates, overall interest rates likely will continue to change, which may impact the entire national economy. Changes in interest rates directly impact the Company’s net interest income and also may affect the demand for loans and the value of fixed-rate investment securities. These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on the Company’s business, financial condition, liquidity and results of operations.

In addition, the Company could be prevented from altering the interest rates charged on loans or from maintaining the interest rates offered on deposits and money market savings accounts due to “price” competition from other banks and financial institutions with which the Company competes. As of December 31, 2025, the Company had $540.4 million of non-maturity, noninterest-bearing deposit accounts and $2.4 billion of non-maturity interest-bearing deposit accounts. The Company does not know what market rates will be throughout 2026, including the frequency and significance with which the FOMC may continue to change the target range for the federal funds rate. If the Company fails to offer interest at a sufficient level to keep these non-maturity deposits, core deposits may be reduced, which would require the Company to obtain funding in other ways or risk slowing future asset growth.

Our business is subject to domestic and, to a lesser extent, international economic conditions and other factors, many of which are beyond our control and could materially and adversely affect us.

Our financial performance generally, and in particular the ability of customers to pay interest on and repay principal on outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer, is highly dependent upon the business environment, not only in the markets where we operate, but also in the states of Iowa and Minnesota, generally, in the United States as a whole, and internationally. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; inflation or changes in interest rates; high unemployment; changes in U.S. trade and foreign policies, legislation, treaties and tariffs; natural disasters; military conflicts and acts of war or terrorism; immigration enforcement, widespread disease or pandemics; or a combination of these or other factors. Such unfavorable conditions could materially and adversely affect us.

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The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflicts, including the current conflicts between Russia and Ukraine and between Israel and Palestine and recent military activity in Venezuela, which are increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets and political systems. Sanctions imposed by the United States and other countries in response to such conflicts could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. The specific consequences of the conflicts on our business are difficult to predict at this time, but in addition to inflationary pressures affecting our operations and those of our customers and borrowers, we may also experience an increase in cyberattacks against us, our customers and borrowers, service providers and other third parties.

Continued elevated levels of inflation could adversely impact our business, results of operations and financial condition.

The United States has experienced elevated levels of inflation in recent years, with the consumer price index climbing approximately 2.7 percent in 2025, before seasonal adjustment. Continued elevated levels of inflation could have complex effects on our business, results of operations and financial condition, some of which could be materially adverse. For example, while we generally expect any inflation-related increases in our interest expense to be offset by increases in our interest revenue, inflation-driven increases in our levels of noninterest expense could negatively impact our results of operations. Elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness. It is also possible that governmental responses to elevated inflation rates could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls. The duration and severity of the current inflationary period cannot be estimated with precision.

We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, whether due to an inability to raise capital, operational losses, or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, could be adversely affected.

The Company and West Bank are required by federal and state regulatory authorities to maintain adequate levels of capital to support their operations. The ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry and market conditions, and governmental activities, many of which are outside of our control, as well as on our financial condition and performance. Accordingly, we cannot provide assurance that we will be able to raise additional capital, if needed, or do so on terms acceptable to us. Failure to meet these capital and other regulatory requirements could affect customer confidence, our ability to grow, our costs of funds, FDIC insurance costs, our ability to pay dividends on common stock and to make distributions on our junior subordinated debentures, our ability to make acquisitions, our ability to make certain discretionary bonus payments to executive officers, and our results of operations and financial condition.

Risks Related to the Supervision and Regulation of the Banking Industry and Government Policies

We may be materially and adversely affected by the highly regulated environment in which we operate.

We are subject to extensive federal and state regulation, supervision and examination. A more detailed description of the primary federal and state banking laws and regulations that affect us is contained in Item 1 of this Form 10-K in the section captioned “Supervision and Regulation.” Banking regulations are primarily intended to protect depositors’ funds, FDIC funds, customers and the banking system as a whole, rather than our stockholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things.

As a financial holding company, we are subject to extensive regulation and supervision and undergo periodic examinations by our regulators, who have extensive discretion and authority to prevent or remedy unsafe or unsound practices or violations of law by banks and financial holding companies. Failure to comply with applicable laws, regulations or policies could result in sanctions by regulatory agencies, civil monetary penalties and/or damage to our reputation, which could have a material adverse effect on us. Although we have policies and procedures designed to mitigate the risk of any such violations, there can be no assurance that such violations will not occur.

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Current or proposed regulatory or legislative changes to laws applicable to the financial industry may impact the profitability of our business activities and may change certain of our business practices, including our ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. In addition, political developments, including the possible implementation of policies proposed by the presidential administration, including tariffs, mass deportations and tax or financial regulations or the appointment of new personnel in regulatory agencies, add uncertainty to the implementation, scope and timing of regulatory reforms. These changes may also require us to invest significant management attention and resources to make any necessary changes to operations in order to comply and could therefore materially and adversely affect our business, financial condition and results of operations.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the options available to the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate, and changes in reserve requirements against bank deposits. These monetary policy options are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

Following a series of significant increases to the target federal funds rate made by the Federal Reserve throughout 2022 and 2023 as part of an effort to combat elevated levels of inflation that affected the U.S. economy, the Federal Reserve enacted several rate cuts in 2024 and 2025. The occurrence or significance of additional changes in the target federal funds interest rate in 2026 and beyond is not known at this time.

The monetary policies and regulations of the Federal Reserve have had a significant effect on our operating results and those of commercial banks in the past and are expected to continue to do so in the future. The specific impact of such policies upon our business, financial condition and results of operations cannot be predicted.

Other Risks Related to the Banking Industry in General

Technology is changing rapidly and may put us at a competitive disadvantage.

The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. Effective use of technology increases efficiency and enables banks to better serve customers. Our future success depends, in part, on our ability and the ability of our third-party partners to effectively implement new technology. The widespread adoption of new technologies, including mobile banking services, artificial intelligence, cryptocurrencies and payment systems, could require us in the future to make substantial expenditures to modify or adapt our existing products and services as we grow and develop new products to satisfy our customers’ expectations and comply with regulatory guidance. Many of our larger competitors have substantially greater resources than we do to invest in technological improvements. As a result, they may be able to offer, or more quickly offer, additional or superior products that could put West Bank at a competitive disadvantage.

Consumers may decide not to use banks to complete their financial transactions, which could adversely affect our business and results of operations.

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods. For example, consumers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks.

While we do not offer products relating to digital assets, including cryptocurrencies, stablecoins or other similar assets, there has been a significant increase in digital asset adoption globally over the past several years. Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions. Accordingly, digital asset service providers which, at present are not subject to the same degree of scrutiny and oversight as banking organizations and other financial institutions, are becoming active competitors to more traditional financial institutions.

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The process of eliminating banks as intermediaries, known as “disintermediation”, could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations. Potential partnerships with digital asset companies, moreover, could also entail significant investment.

Climate change could adversely affect our business, affect client activity levels and damage our reputation.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. New governmental regulations or guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, may affect whether and on what terms and conditions we will engage in certain activities or offer certain products or services. The governmental and supervisory focus on climate change could also result in our becoming subject to new or heightened regulatory requirements, such as requirements relating to operational resiliency or stress testing for various climate stress scenarios. Any such new or heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements. In connection with the transition to a low carbon economy, legislative or public policy changes and changes in consumer sentiment could negatively impact the businesses and financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.

Furthermore, the long-term impacts of climate change could have a negative impact on our customers and their businesses, as well as the stability of our deposit base. Physical risks include extreme storms and other weather related events that damage or destroy property and inventory securing loans we make, or may interrupt our customers’ business operations, putting them in financial difficulty, and increasing the risk of default. Our customers are also facing changes in energy and commodity prices driven by climate change, as well as new regulatory requirements resulting in increased operational costs.

Risks Related to West Bancorporation’s Common Stock

Our stock is relatively thinly traded.

Although our common stock is traded on the Nasdaq Global Select Market, the average daily trading volume of our common stock is relatively small compared to many public companies. The desired market characteristics of depth, liquidity, and orderliness require the substantial presence of willing buyers and sellers in the marketplace at any given time. In our case, this presence depends on the individual decisions of a relatively small number of investors and general economic and market conditions over which we have no control. Due to the relatively small trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause the stock price to fall more than would be justified by the inherent worth of the Company. Conversely, attempts to purchase a significant amount of our stock could cause the market price to rise above the reasonable inherent worth of the Company.

The stock market can be volatile, and fluctuations in our operating results and other factors could cause our stock price to decline.

The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, loss of investor confidence, interest rate changes, government shutdowns, actions taken by the federal government, elections, international trade wars or international currency fluctuations may negatively affect the market price of our common stock. Moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein. As a result, period-to-period comparisons should not be relied upon as an indication of future performance. Our stock price could fluctuate significantly in response to the impact of these risk factors.

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Issuing additional common or preferred stock may adversely affect the market price of our common stock, and capital may not be available when needed.

The Company may issue additional shares of common or preferred stock in order to raise capital at some date in the future to support continued growth, either internally generated or through acquisitions. Common shares have been and will be issued through the Company’s 2017 Equity Incentive Plan and the Company’s 2021 Equity Incentive Plan as grants of restricted stock units vest. As additional shares of common or new shares of preferred stock are issued, the ownership interests of our existing stockholders may be diluted. The market price of our common stock might decline or fail to increase in response to issuing additional common or new preferred stock. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control. Accordingly, we cannot provide any assurance that we will be able to raise additional capital, if needed, on acceptable terms. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected.

The holders of our 5.25% Fixed-to-Floating Rate Subordinated Notes due in 2032 and the holders of our junior subordinated debentures have rights that are senior to those of our common stockholders.

As of December 31, 2025, the Company had $20.6 million in junior subordinated debentures outstanding that were issued to the Company’s subsidiary trust, West Bancorporation Capital Trust I, and $60.0 million aggregate principal amount outstanding of the Company’s 5.25% Fixed-to-Floating Rate Subordinated Notes due in 2032 (the Notes). The junior subordinated debentures and the Notes are senior in order of payment to the Company’s shares of common stock. As a result, the Company must make payments on the junior subordinated debentures (and the related trust preferred securities (TPS)) and the Notes before any dividends can be paid on its common stock, and in the event of the Company’s bankruptcy, dissolution or liquidation, the holders of the debentures and the Notes must be satisfied before any distributions can be made to the holders of the common stock. The Company has the right to defer distributions on the junior subordinated debentures (and the related TPS) for up to five years during which time no dividends may be paid to holders of the Company’s common stock. The Company’s ability to pay future distributions depends upon the earnings of West Bank and the issuance of dividends from West Bank to the Company, which may be inadequate to service the obligations. Interest payments on the junior subordinated debentures underlying the TPS are classified as “dividends” by the Federal Reserve supervisory policies and therefore are subject to applicable restrictions and approvals imposed by the Federal Reserve Board.

Our ability to pay dividends is subject to certain limitations and restrictions, and there is no guarantee that we will be able to continue paying the same level of dividends in the future that we have paid in the past or that we will be able to pay future dividends at all.

Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. The timing, declaration, amount and payment of future cash dividends, if any, will be within the discretion of our board of directors and will depend upon then-existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, growth opportunities, any legal, regulatory, contractual or other limitations on our ability to pay dividends and other factors our board of directors may deem relevant.

As a non-operating entity, we are dependent on distributions from West Bank to fund dividend payments to our shareholders. The ability of West Bank to pay dividends to us is limited by its obligations to maintain sufficient capital and liquidity and by other general restrictions on dividends that are applicable to the bank, including the requirement under the Iowa Banking Act that West Bank may not pay dividends in excess of its undivided profits. If these regulatory requirements are not met, West Bank will not be able to pay dividends to us, and we may be unable to pay dividends on our common stock.

In addition, as a bank holding company, our ability to declare and pay dividends is subject to the guidelines of the Federal Reserve regarding capital adequacy and dividends. It is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the organization’s expected future needs, asset quality and financial condition, and that bank holding companies should inform and consult with the Federal Reserve in advance of declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid. Any future payment of dividends will depend on the Bank’s ability to make distributions and payments to us, as these distributions and payments are our principal source of funds to pay dividends.

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Also, banking institutions that do not maintain a capital conservation buffer, comprised of Common Equity Tier 1 Capital, of 2.5% above the regulatory minimum capital requirements will face constraints on the payment of dividends, stock repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall, unless prior regulatory approval is obtained.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollars in thousands, except per share amounts)

INTRODUCTION

The Company’s financial highlights and key performance measures are presented in the table below.

As of and for the Years Ended December 31,

Performance Ratios

Return on average assets

Return on average equity

Efficiency ratio (1)(2)

Nonperforming assets/total assets (1)

Net interest margin (2)

Dividends and Per Share Data

Basic earnings per common share

Diluted earnings per common share

Cash dividends per common share

Dividend payout ratio

Dividend yield

Operating Results and Year-End Balances

Net income

Total assets

Securities available for sale

Loans

Deposits

Borrowings

Stockholders’ equity

Average equity to average assets ratio

Definition of ratios:

• Return on average assets - net income divided by average assets.

• Return on average equity - net income divided by average equity.

• Efficiency ratio - noninterest expense (excluding other real estate owned expense and write-down of premises) divided by noninterest income (excluding net securities gains/losses and gains/losses on disposition of premises and equipment) plus tax-equivalent net interest income.

• Nonperforming assets to total assets - total nonperforming assets divided by total assets.

• Net interest margin - tax-equivalent net interest income divided by average interest-earning assets.

• Dividend payout ratio - dividends paid to common stockholders divided by net income.

• Dividend yield - dividends per share paid to common stockholders divided by closing year-end stock price.

• Average equity to average assets ratio - average equity divided by average assets.

(1) A lower ratio is more desirable.

(2) As presented, this is a non-GAAP financial measure. For further information, refer to the section "Non-GAAP Financial Measures" of this item.

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(dollars in thousands, except per share amounts)

The Company’s 2025 net income was $32,560, compared to $24,050 in 2024. Basic and diluted earnings per common share for 2025 were $1.92 and $1.92, respectively, compared to $1.43 and $1.42, respectively, in 2024. During 2025, we paid our common stockholders $16,914 ($1.00 per common share) in dividends compared to $16,806 ($1.00 per common share) in 2024. The dividend declared and paid in the first quarter of 2026 was $0.25 per common share.

Total assets were $4,142,244 at December 31, 2025, compared to $4,014,991 at December 31, 2024, a 3.2 percent increase. Our loan portfolio declined to $3,001,690 as of December 31, 2025, from $3,004,860 as of December 31, 2024. Deposits increased to $3,468,470 as of December 31, 2025, from $3,357,596 as of December 31, 2024.

The Company compares three key performance metrics to those of an identified peer group for evaluating its results. The peer group for 2025 consists of 20 Midwestern, publicly traded financial institutions including Bank First Corporation, Bridgewater Bancshares, Inc., ChoiceOne Financial Services, Inc., Civista Bancshares, Inc., Equity Bancshares, Inc., Farmers National Banc Corp., Farmers & Merchants Bancorp., First Business Financial Services, Inc., First Financial Corp., First Mid Bancshares, Inc., German American Bancorp, Inc., HBT Financial, Inc., Hills Bancorporation, Isabella Bank Corporation, LCNB Corp., Mercantile Bank Corporation, MidWest One Financial Group, Inc., Nicolet Bankshares, Inc., Peoples Bancorp, Inc., and Southern Missouri Bancorp, Inc. The Company is in the middle of the group in terms of asset size. The Company's goal is to perform at or near the top of this peer group relative to what we consider to be three key metrics: return on average equity, efficiency ratio and nonperforming assets to total assets. We believe these measures encompass the factors that define the performance of a community bank. Company and peer results for the key financial performance measures are summarized below.

West Bancorporation, Inc.

Peer Group Range

As of and for the year ended December 31, 2025

As of and for the year ended December 31, 2025

Return on average equity

Efficiency ratio (1)

Nonperforming assets to total assets

(1)    The efficiency ratio is a non-GAAP financial measure. For further information, refer to the Non-GAAP Financial Measures section of this report.

The following discussion describes the consolidated operations and financial condition of the Company, including its subsidiary West Bank and West Bank’s special purpose subsidiaries. Results of operations for the year ended December 31, 2025 are compared to the results for the year ended December 31, 2024 and the consolidated financial condition of the Company as of December 31, 2025 is compared to December 31, 2024. Results of operations and financial condition for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2024 annual report on Form 10-K filed with the SEC on February 20, 2025.

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(dollars in thousands, except per share amounts)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This report is based on the Company’s audited consolidated financial statements that have been prepared in accordance with GAAP established by the FASB. The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company’s significant accounting policies are described in the Notes to Consolidated Financial Statements. Based on its consideration of accounting policies that involve the most complex and subjective estimates and judgments, management has identified its most critical accounting policies to be those related to the allowance for credit losses.

Expected credit losses on loans are reflected in the allowance for credit losses (ACL) through a charge to credit loss expense. When the Company deems all or a portion of a loan to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount. The Company applies judgment to determine when a loan is deemed uncollectible; however, generally speaking, a loan will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.

The Company measures expected credit losses on loans on a collective (pool) basis when the loans share similar risk characteristics and uses a cash flow based model to estimate expected credit losses for each of these pools. The Company’s methodology for estimating the ACL considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical experience was observed. Loans that do not share risk characteristics are evaluated on an individual basis.

The Company uses a cash flow-based model to estimate expected credit losses for all loan segments. For each of the loan segments, the Company calculates a cash flow projection using contractual terms, estimated prepayment speeds, estimated curtailment rates, and other relevant data. The Company uses regression analysis that links historical losses of the Company and a peer group to two economic metrics: national unemployment rate and 10-year treasury rate over 2-year treasury rate spread to establish the loss rates applied to the projected cash flows. For all loan segments, the Company uses a forecast period of four quarters and reverts to a historical loss rate after four quarters. When estimating prepayment speed and curtailment rates, the modeling is based on historical internal data. In addition to the historical loss information, the Company utilizes qualitative factors to adjust the ACL as appropriate. Qualitative factors are based on management’s judgment of the changes in underlying loan composition of specific portfolios, trends relating to credit quality and collateral values, company-specific data, or effects of other factors such as market competition or legal and regulatory requirements.

The allowance for credit losses as of December 31, 2025 was $30,525, or 1.02 percent of outstanding loans, compared to $30,432, or 1.01 percent of outstanding loans as of December 31, 2024.

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(dollars in thousands, except per share amounts)

NON-GAAP FINANCIAL MEASURES

This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, and the presentation of the efficiency ratio on an adjusted and FTE basis, excluding certain income and expenses. Management believes these non-GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. These measures are considered standard measures of comparison within the banking industry. Additionally, management believes providing measures on an FTE basis enhances the comparability of income arising from taxable and nontaxable sources. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on a fully taxable equivalent basis and efficiency ratio on an adjusted and FTE basis, to their most directly comparable measures under GAAP.

As and for the Years Ended December 31

Reconciliation of net interest income and net interest margin on an FTE basis to GAAP:

Net interest income (GAAP)

Tax-equivalent adjustment (1)

Net interest income on an FTE basis (non-GAAP)

Average interest-earning assets

Net interest margin on an FTE basis (non-GAAP)

Reconciliation of efficiency ratio on an FTE basis to GAAP:

Net interest income on an FTE basis (non-GAAP)

Noninterest income

Adjustment for realized securities losses, net

Adjustment for losses on disposal of premises and

equipment, net

Adjusted income

Noninterest expense

Efficiency ratio on an adjusted and FTE basis (non-GAAP) (2)

(1) Computed on a tax-equivalent basis using a federal income tax rate of 21 percent, adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results, as it enhances the comparability of income arising from taxable and nontaxable sources.

(2) The efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company’s financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable.

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(dollars in thousands, except per share amounts)

RESULTS OF OPERATIONS - 2025 COMPARED TO 2024

OVERVIEW

Net income for the year ended December 31, 2025 was $32,560, compared to $24,050 for the year ended December 31, 2024. Basic and diluted earnings per common share for 2025 were $1.92 and $1.92, respectively, and for 2024 were $1.43 and $1.42, respectively.

The increase in net income in 2025 compared to 2024 was primarily due to an increase in net interest income, partially offset by a decrease in noninterest income and an increase in noninterest expense. Net interest income increased $17,619, or 24.7 percent, in 2025 compared to 2024. The increase in net interest income was primarily due to the increase in interest income on short-term assets consisting of deposits with banks and securities purchased under agreements to resell and decrease in interest expense on deposits and borrowed funds, partially offset by a decrease in interest income on securities.

The Company recorded no credit loss expense in 2025, compared to a credit loss expense of $1,000 in 2024. The credit loss expense recorded in 2024 included a $2,000 increase in the allowance for credit losses related to loans, which was offset by a $1,000 decrease to the allowance for credit losses related to unfunded commitments.

Noninterest income decreased $2,170, or 25.7 percent, in 2025 compared to 2024, primarily due to an increase in realized losses on the sales of securities, partially offset by a one-time third party contract incentive included in other income. Noninterest expense increased $2,474, or 4.8 percent, in 2025 compared to 2024, primarily due to increases in salaries and employee benefits, occupancy and equipment expense and technology and software expense, partially offset by a decrease in data processing expense and FDIC insurance.

The Company’s ratio of nonperforming assets to total assets was 0.00 percent as of both December 31, 2025 and 2024. For more discussion on loan quality, see the “Loan Portfolio” and “Summary of the Allowance for Credit Losses” sections in this Item of this Form 10-K.

Net Interest Income

Net interest income increased to $88,981 for 2025 from $71,362 for 2024, as the impact of the growth in average balances of interest-earning assets and decline in average rate paid on interest-bearing liabilities exceeded the effects of the increase in average balances of interest-bearing liabilities. The net interest margin for 2025 increased 44 basis points to 2.35 percent, compared to 1.91 percent for 2024. The average yield on earning assets declined by 2 basis points, while the average rate paid on interest-bearing liabilities decreased by 53 basis points. For additional analysis of net interest income, see the section captioned “Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates; and Interest Differential” in this Item of this Form 10-K.

Credit Loss Expense

No credit loss expense was recorded in 2025, compared to a net credit loss expense of $1,000 in 2024. The credit loss expense recorded in 2024 included a $2,000 increase in the allowance for credit losses related to loans, which was offset by a $1,000 decrease to the allowance for credit losses related to unfunded commitments. The credit loss expense associated with loans recorded in 2024 was primarily due to changes in forecasted loss rates, driven by an increase in forecasted unemployment rate, and an adjustment to qualitative factors within the commercial real estate segment. The negative $1,000 credit loss expense recorded in 2024 related to unfunded commitments was primarily due to a decrease in the balance of unfunded commitments, primarily from the funding of construction loans. Management believed the allowance for credit losses on loans at December 31, 2025 was adequate to absorb expected losses in the loan portfolio as of that date.

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(dollars in thousands, except per share amounts)

Noninterest Income

The following table shows the variance from the prior year in the noninterest income categories shown in the Consolidated Statements of Income.

Years ended December 31

Noninterest income:

Change

Change %

Service charges on deposit accounts

Debit card interchange income

Trust services

Increase in cash value of bank-owned life insurance

Realized securities losses, net

Other income

Total noninterest income

In 2025, the Company sold $63,690 of securities from the available for sale securities portfolio and realized a net loss of $3,959, compared to sales of $11,841 of securities available for sale and a realized net loss of $1,172 in 2024. The transaction in 2025 improves balance sheet flexibility and will be used to improve our long-term earnings profile through redeployment of the proceeds into higher-earning assets or repayment of higher-costing borrowings.

The increase in other income was primarily due to a one-time third party contract incentive.

Noninterest Expense

The following table shows the variance from the prior year in the noninterest expense categories shown in the Consolidated Statements of Income. In addition, accounts within the “Other expenses” category that represent a significant portion of the total or a significant variance are shown.

Years ended December 31

Noninterest expense:

Change

Change %

Salaries and employee benefits

Occupancy and equipment

Data processing

Technology and software

FDIC insurance

Professional fees

Other expenses:

Business development

Insurance expense

Director fees

Trust

Consulting fees

Marketing

Low income housing projects amortization

New markets tax credit project amortization and management fees

All other

Total other

Total noninterest expense

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(dollars in thousands, except per share amounts)

Salaries and employee benefits increased in 2025 compared to 2024 primarily due to an increase in incentive compensation related accruals and normal merit increases. Occupancy and equipment expense increased in 2025 compared to 2024, as 2025 was the first full year of occupancy in both the new headquarters building in West Des Moines, Iowa and the new Owatonna, Minnesota office. Insurance expense increased in 2025 due to increased coverage related to these new bank buildings and general increases in insurance costs.

Data processing expense decreased in 2025 compared to 2024 due to contract adjustments. Technology and software expense increased in 2025 compared to 2024 due to ongoing updates in information technology and security solutions. Professional fees increased in 2025 compared to 2024 due to a one-time tax related consulting project. Consulting fees increased in 2025 compared to 2024 primarily due to a one-time contract consulting fee recorded in the fourth quarter of 2025. New markets tax credit project amortization declined with the expiration of the related tax credit.

Income Taxes

The Company records a provision for income tax expense currently payable, along with a provision for those taxes payable or refundable in the future (deferred taxes). Deferred taxes arise from differences in the timing of certain items for financial statement reporting compared to income tax reporting and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Federal income tax expense for 2025 and 2024 was $6,928 and $1,928, respectively, while state income tax expense was $1,930 and $1,465, respectively. The effective rate of income tax expense as a percent of income before income taxes was 21.3 percent and 12.3 percent, respectively, for 2025 and 2024. In 2024, income tax expense included a $1,842 tax benefit for an energy-related investment tax credit associated with the construction of the Company’s new headquarters building. In 2025, the Company recorded an additional tax benefit of $614 due to a change in estimate of this same 2024 energy-related investment tax credit.

The effective income tax rates differ from the federal statutory income tax rates primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, disallowed interest expense, stock compensation, state income taxes and the investment tax credit mentioned above. The effective tax rate for both 2025 and 2024 was also impacted by federal low income housing and new markets tax credits of approximately $660 and $1,508, respectively. The decrease in these federal income tax credits was primarily due to the expiration of the new markets tax credit at the end of 2024. The Company continues to maintain a valuation allowance against the tax effect of state net operating losses carryforwards as management believes it is likely that a portion of such carryforwards will expire without being utilized.

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(dollars in thousands, except per share amounts)

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY; INTEREST RATES; AND INTEREST DIFFERENTIAL

Average Balances and an Analysis of Average Rates Earned and Paid

The following table shows average balances and interest income or interest expense, with the resulting average yield or rate by category of average interest-earning assets or interest-bearing liabilities for the years indicated. Interest income and the resulting net interest income are shown on a fully taxable basis. Interest expense includes the effect of interest rate swaps, if applicable.

Average

Balance

Revenue/

Expense

Yield/

Rate

Average

Balance

Revenue/

Expense

Yield/

Rate

Average

Balance

Revenue/

Expense

Yield/

Rate

Assets

Interest-earning assets:

Loans: (1) (2)

Commercial

Real estate (3)

Consumer and other

Total loans

Securities:

Taxable

Tax-exempt (3)

Total securities

Deposits with banks

Securities purchased under

agreements to resell

Total interest-earning assets (3)

Noninterest-earning assets:

Cash and due from banks

Premises and equipment, net

Other, less allowance for

credit losses

Total noninterest-earning assets

Total assets

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Deposits:

Interest-bearing demand

Savings and money market

Time

Total deposits

Borrowed funds:

Federal funds purchased and

other short-term borrowings

Subordinated notes, net

Federal Home Loan Bank

advances

Long-term debt

Total borrowed funds

Total interest-bearing liabilities

Noninterest-bearing liabilities:

Demand deposits

Other liabilities

Stockholders’ equity

Total liabilities and

stockholders’ equity

Net interest income (4) /net interest spread (3)

Net interest margin (3) (4)

(1) Average loan balances include nonaccrual loans. Interest income recognized on nonaccrual loans has been included.

(2) Interest income on loans includes amortization of loan fees and costs and prepayment penalties collected, which are not material.

(3) Tax-exempt income has been adjusted to a tax-equivalent basis using a federal income tax rate of 21 percent and is adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans.

(4) Net interest income (FTE) and net interest margin (FTE) are non-GAAP financial measures. For further information, refer to the section “Non-GAAP Financial Measures” of this Item.

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(dollars in thousands, except per share amounts)

Net Interest Income

The Company’s largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are also affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and the actions of regulatory authorities. The FOMC decreased the target federal funds interest rate by a total of 100 basis points from September through December of 2024, and an additional 75 basis points from September through December of 2025, which impacted the comparability of the net interest margin between 2025 and 2024.

Net interest margin on an FTE basis, a non-GAAP financial measure, is a measure of the net return on interest-earning assets and is computed by dividing annualized tax-equivalent net interest income by total average interest-earning assets for the period. For the years ended December 31, 2025, 2024 and 2023, the Company’s net interest margin on a tax-equivalent basis was 2.35, 1.91 and 2.01 percent, respectively. Tax-equivalent net interest income increased $17,693 in 2025 compared to 2024.

Rate and Volume Analysis

The rate and volume analysis shown below, on a tax-equivalent basis, is used to determine how much of the change in interest income or expense is the result of a change in volume or a change in interest yield or rate. The change in interest that is due to both volume and rate has been allocated to the change due to volume and the change due to rate in proportion to the absolute value of the change in each.

2025 Compared to 2024

2024 Compared to 2023

Volume

Rate

Total

Volume

Rate

Total

Interest Income

Loans: (1)

Commercial

Real estate (2)

Consumer and other

Total loans (including fees)

Securities:

Taxable

Tax-exempt (2)

Total securities

Deposits with banks

Securities purchased under

agreements to resell

Total interest income (2)

Interest Expense

Deposits:

Interest-bearing demand

Savings and money market

Time

Total deposits

Borrowed funds:

Federal funds purchased and

other short-term borrowings

Subordinated debt, net

Federal Home Loan Bank advances

Long-term debt

Total borrowed funds

Total interest expense

Net interest income (2) (3)

(1) Average balances of nonaccrual loans were included for computational purposes.

(2) Tax-exempt income has been converted to a tax-equivalent basis using a federal income tax rate of 21 percent and is adjusted for the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans.

(3) Net interest income (FTE) is a non-GAAP financial measure. For further information, refer to the section “Non-GAAP Financial Measures” of this Item.

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(dollars in thousands, except per share amounts)

Tax-equivalent interest income and fees on loans increased $650 for the year ended December 31, 2025, compared to 2024. The improvement was driven by a combination of an increase in the average balance of total loans and an increase in the total loan yield in 2025 compared to 2024. The average balance of total loans increased $1,130 in 2025 compared to 2024, while total loan yield increased by 2 basis points in 2025 compared to 2024. Loan originations and renewals for the fixed-rate loan portfolio continued to reprice at prevailing market rates in 2025, which exceeded the current weighted average portfolio rate. This repricing benefit in the fixed-rate loan portfolio was partially offset by a decrease in loan yields on the variable-rate loan portfolio. The decrease in the yield on variable-rate loans was primarily due to reductions in the prime rate and Secured Overnight Financing Rates (SOFR) driven by the reductions in the federal funds target rate that occurred in 2024 and 2025.

The yield on the Company’s loan portfolio is affected by the portfolio’s loan mix, the interest rate environment, the effects of competition, the level of nonaccrual loans and reversals of previously accrued interest on charged-off loans. The yield on the loan portfolio is expected to increase in flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments and maturities of existing loans. In a declining rate environment, the yield on variable-rate loans will decline; however, as long as market rates remain higher than the yield on the fixed-rate portfolio, renewals and originations will continue to increase the yield on the fixed-rate portfolio, which is what we experienced in 2025. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans.

Tax-equivalent interest income on securities decreased $2,831 for the year ended December 31, 2025, compared to 2024. The average balance of securities available for sale in 2025 was $70,990 lower than in 2024, primarily due to principal paydowns and sales of securities. The proceeds from principal paydowns and sales of securities have increased liquidity and improved balance sheet flexibility to allow for improvement in our long-term earnings profile. Additionally, the yield on available for sale securities decreased by 17 basis points in 2025 compared to 2024.

Interest income on deposits with banks increased $1,764 in 2025 compared to 2024. This was primarily due to the increase in the average balances of interest-earning deposits with banks, partially offset by a decline in rates. This increase in balance sheet liquidity was driven by the growth in average customer deposit balances and the decline in average balance of securities available for sale. Additionally, the Company began investing in securities purchased under agreements to resell in 2025. These produced interest income of $2,650 in 2025.

Interest expense on deposits decreased $9,534 for the year ended December 31, 2025, compared to 2024. The rates paid on deposits decreased 55 basis points in 2025 compared to 2024, while the average balance of interest-bearing deposits increased $166,967. The decrease in cost of deposits was primarily driven by the reductions in the federal funds target rate since September 2024.

Interest expense on borrowed funds decreased $5,926 for the year ended December 31, 2025, compared to 2024, due to a combination of lower average balances of borrowed funds and lower average rate paid on borrowed funds. The average balance of borrowed funds decreased $122,949 in 2025 compared to 2024. The average balance of federal funds purchased and other short-term borrowings decreased $75,736 in 2025 compared to 2024 primarily due to increases in average customer deposits and decline in average balance of securities available for sale. The average balance of FHLB advances declined by $42,363 in 2025 compared to 2024. This decline in average balances was primarily due to FHLB advances with a total balance of $45,000 maturing in the fourth quarter of 2024.

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(dollars in thousands, except per share amounts)

SECURITIES PORTFOLIO

The balance of securities available for sale decreased by $76,118 as of December 31, 2025, compared to December 31, 2024. This decrease was primarily due to principal paydowns on securities and the sale of $63,690 of securities in the fourth quarter of 2025, partially offset by a decrease in unrealized losses on securities since December 31, 2024. The proceeds from the sale in December 2025 improve balance sheet flexibility and will be used to improve our long-term earnings profile through redeployment of the net proceeds into higher-earning assets or repayment of higher-cost borrowings.

As of December 31, 2025, approximately 62 percent of the available for sale securities portfolio consisted of government agency guaranteed collateralized mortgage obligations and mortgage-backed securities. We believe those securities have little to no credit risk and provide cash flows for liquidity and repricing opportunities. All collateralized mortgage obligations and mortgage-backed securities consist of residential and commercial mortgage pass-through securities and collateralized mortgage obligations guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA), or the Small Business Administration (SBA). The securities issued by state and political subdivisions are diversified among municipalities in 25 states.

The following table sets forth the weighted average yield by contractual maturity by security type as of December 31, 2025. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. The collateralized mortgage obligations and mortgage-backed securities have monthly paydowns that are not reflected in the table.

Within one

year

After one year

but within five

years

After five years

but within ten

years

After ten years

Total

Securities available for sale:

State and political subdivisions (1)

Collateralized mortgage obligations

Mortgage-backed securities

Collateralized loan obligations

Corporate notes

(1)    Yields on tax-exempt obligations have been computed on a tax-equivalent basis using a federal income tax rate of 21 percent and are adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt investment securities.

Total gross unrealized losses in the securities available for sale portfolio were $93,270 at December 31, 2025 compared to $128,838 at December 31, 2024. As of December 31, 2025, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the securities in an unrealized loss position prior to recovery. As of December 31, 2025, the Company also determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. Management concluded that the unrealized losses in the portfolio are the result of increases in risk-free market interest rates since the securities were purchased and are not an indication of declining credit quality. Unrealized losses are recorded in accumulated other comprehensive loss, net of tax.

For additional information regarding the Company’s securities portfolio, see Note 3 and Note 18 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

LOAN PORTFOLIO

The Company seeks to create growth in commercial lending, which primarily includes commercial real estate, multi-family, and commercial and industrial lending, by offering customer-focused products and competitive pricing and by capitalizing on the positive trends in its market areas. It is the objective of the Company’s credit policies to diversify the commercial loan portfolio to limit concentrations in any single industry. As of December 31, 2025, total loans were approximately 86.5 percent of total deposits and 72.5 percent of total assets.

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(dollars in thousands, except per share amounts)

Loans outstanding at the end of 2025 decreased 0.1 percent compared to the end of 2024. Changes in the loan portfolio during 2025 included decreases of $81,314 in construction, land and land development loans and $9,173 in commercial and industrial loans and an increase of $68,571 in commercial real estate loans. The Company continues to focus on business development efforts in all of its markets. The political and economic environments could influence the volume of future loan originations and the mix of variable-rate versus fixed-rate loans.

For a description of the loan segments, see Note 4 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K. The interest rates charged on loans vary with the degree of risk and the amount and terms of the loan. Competitive pressures, the creditworthiness of the borrower, market interest rates, the availability of funds, and government regulations further influence the rate charged on a loan.

The Company follows a loan policy approved by West Bank’s Board of Directors. The loan policy is reviewed at least annually and is updated as considered necessary. The policy establishes lending limits, review criteria and other guidelines for loan administration and the allowance for credit losses, among other things. Loans are approved in accordance with the applicable guidelines and underwriting policies. Loans to any one borrower are limited by state banking laws. Loan officer lending authorities vary according to the individual loan officer’s experience and expertise.

As of December 31, 2025 and 2024, there were no loans that were past due 30 days or more.

Nonperforming loans declined to $0 at December 31, 2025, compared to $133 at December 31, 2024. The decrease was due to a full payoff on the single loan included in nonperforming loans as of December 31, 2024.

The watch classification of loans increased to $52,227 as of December 31, 2025 from $8,349 as of December 31, 2024. The increase in the balance of watch classification loans was primarily due to additions of loans within the commercial and commercial real estate loan segments and associated with the transportation and trucking industry.

Loans Secured by Real Estate

The commercial real estate market continues to be a significant source of business for West Bank. Management places a strong emphasis on monitoring the composition of the Company’s commercial real estate loan portfolio. The Company has an established lending policy which includes a number of underwriting factors to be considered in making a commercial real estate loan, including, but not limited to, location, loan-to-value ratio (LTV), cash flow and debt service coverage, collateral and the credit history and expertise of the borrower. The lending policy also includes guidelines for real estate appraisals and evaluations, including minimum appraisal and evaluation standards.

Although repayment risk exists on all loans, different factors influence repayment risk for each type of loan. The primary risks associated with commercial real estate loans are the quality of the borrower’s management and the health of the national and regional economies. Underwriting on commercial properties is primarily based on the economic viability of the project with heavy consideration given to the creditworthiness and experience of the borrower. Recognizing that debt is paid via cash flow, the projected cash flows of the project are critical in underwriting because these determine the ultimate value of the property and the ability to service debt. Therefore, in most commercial real estate projects, we generally require a minimum stabilized debt service coverage ratio of 1.20 to 1.35, depending on the real estate type. Exceptions to this policy can be made for certain borrowers that exhibit other credit quality strengths. Exceptions to the policy are monitored by management. Our strategy with respect to the management of these types of risks is to consistently follow prudent loan policies and underwriting practices.

The Company recognizes that a diversified loan portfolio contributes to reducing risk. The specific loan portfolio mix is subject to change based on loan demand, the business environment and various economic factors. The Company actively monitors concentrations within the loan portfolio to ensure appropriate diversification is maintained. In addition, management tracks the level of owner occupied commercial real estate loans versus non-owner occupied commercial real estate loans. Owner occupied commercial real estate loans are generally considered to have less risk than non-owner occupied commercial real estate loans.

In accordance with regulatory guidelines, the Company exercises heightened risk management practices when non-owner occupied commercial real estate lending exceeds 300 percent of total risk-based capital or construction, land development, and other land loans exceed 100 percent of total risk-based capital. Although the Company’s loan portfolio is heavily concentrated in real estate and its real estate portfolio levels exceed these regulatory guidelines, it has established risk management policies and procedures to regularly monitor the commercial real estate portfolio.

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(dollars in thousands, except per share amounts)

The Bank’s Executive Loan Committee (ELC), which is made up of the Chief Executive Officer, Bank President, Chief Risk Officer, Minnesota Group President, Chief Credit Officer and Credit Department Manager, approves all commercial loan relationships in excess of $500 in total credit exposure and annually reviews all commercial loan relationships of $1,000 and greater. Credit approval authorities for individual officers are reviewed, at least annually, by the ELC and approved by the Board of Directors.

Executive management regularly reviews available market data. Commercial real estate portfolio monitoring practices include quarterly stress testing and quarterly trend analysis of underwriting exceptions, average loan-to-value and average debt service coverage for significant real estate segments.

The Company maintains an annual independent loan review program. The Company engages a third party to evaluate credit quality, assigned risk ratings, underwriting standards and collateral documentation. The review covers a significant portion of the loan portfolio and is carried out on a semi-annual basis. Findings are reported to the ELC and the Board of Directors. The Company also maintains an internal loan audit department that performs certain pre- and post-closing procedural and documentation reviews. The internal findings are reported quarterly to the ELC.

Commercial loans secured by real estate, including construction, land and land development, totaled $2,356,599, or 78.4 percent of total loans, at December 31, 2025. Non-owner occupied commercial real estate loan concentrations and the weighted average LTV by property type as of December 31, 2025 and 2024 are shown in the following table. LTV is determined using the maximum credit exposure of the loan compared to the most recent appraisal data on the property obtained in accordance with the Company’s lending policies.

As of December 31

Balance

% of Non-owner Occupied CRE

Weighted Average LTV

Balance

% of Non-owner Occupied CRE

Weighted Average LTV

Non-owner occupied:

Multifamily

Medical & senior care facilities

Warehouse & trucking

Hotels

Mixed use

Offices

Land for development

All other

not available

not available

The following table summarizes non-owner occupied commercial real estate loans by property type and risk rating as of December 31, 2025. Risk ratings are defined in Note 4 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

As of December 31, 2025

Risk Rating

Total

Non-owner occupied:

Multifamily

Medical & senior care facilities

Warehouse & trucking

Hotel

Mixed use

Offices

Land for development

All other

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(dollars in thousands, except per share amounts)

As of December 31, 2025, there were no non-owner occupied commercial real estate loans that were past due 30 days or more.

Maturities of Loans

The contractual maturities of the Company’s loan portfolio are shown in the following tables. Actual repayments may differ from contractual maturities because individual borrowers may have the right to prepay loans with or without prepayment penalties.

As of December 31, 2025

Within one

year

After one but

within five years

After five but

within 15 years

After 15 years

Total

Commercial

Real estate:

Construction, land and land development

1-4 family residential first mortgages

Home equity

Commercial

Consumer and other

After one but

within five years

After five but

within 15 years

After 15 years

Loan maturities after one year with:

Fixed rates

Commercial

Real estate:

Construction, land and land development

1-4 family residential first mortgages

Home equity

Commercial

Consumer and other

Total fixed-rate loans

Variable rates

Commercial

Real estate:

Construction, land and land development

1-4 family residential first mortgages

Home equity

Commercial

Consumer and other

Total variable-rate loans

SUMMARY OF THE ALLOWANCE FOR CREDIT LOSSES

The credit loss expense recorded on the income statement includes charges made to earnings to maintain an adequate allowance for credit losses. The adequacy of the allowance for credit losses is evaluated quarterly by management and reviewed by the Board. The allowance for credit losses is management’s estimate of expected lifetime losses in the loan portfolio as of the balance sheet date.

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(dollars in thousands, except per share amounts)

Factors considered by management in establishing an appropriate allowance include: the borrower’s financial condition; the value and adequacy of loan collateral; the condition of the local economy and the borrower’s specific industry; the levels and trends of loans by segment; and a review of delinquent and classified loans. The quarterly evaluation focuses on factors such as specific loan reviews, changes in the components of the loan portfolio given economic conditions, and historical loss experience. Any one of the following conditions may result in the review of a specific loan: concern about whether the borrower’s cash flow or net worth is sufficient to repay the loan; delinquency status; criticism of the loan in a regulatory examination; the suspension of interest accrual; or other factors, including whether the loan has other special or unusual characteristics that suggest special monitoring is warranted. The Company’s concentration risks include geographic concentration in central and eastern Iowa and southern Minnesota. The local economies are composed primarily of major financial services companies, healthcare providers, educational institutions, technology and agribusiness companies, and state and local governments.

West Bank has a significant portion of its loan portfolio in commercial real estate loans, commercial lines of credit, commercial term loans, and construction and land development loans. West Bank’s typical commercial borrower is a small- or medium-sized, privately owned business entity. Compared to residential mortgages or consumer loans, commercial loans typically have larger balances and repayment usually depends on the borrowers’ successful business operations. Commercial loans also generally are not fully repaid over the loan period and, thus, may require refinancing or a large payoff at maturity. When the general economy turns downward, commercial borrowers may not be able to repay their loans, and the value of their assets, which are usually pledged as collateral, may decrease rapidly and significantly.

While management uses available information to recognize credit losses, further reduction in the carrying amounts of loans may be necessary based on changes in circumstances, changes in the overall economy in the markets we currently serve, or later acquired information. Identifiable sectors within the general economy are subject to additional volatility, which at any time may have a substantial impact on the loan portfolio. In addition, regulatory agencies, as integral parts of their examination processes, periodically review the credit quality of the loan portfolio and the level of the allowance for credit losses. Such agencies may require West Bank to recognize additional charge-offs or provisions for credit losses based on such agencies’ review of information available to them at the time of their examinations.

The following table shows the ratio of net (charge-offs) recoveries to loans outstanding, broken out by loan segment, along with ratios of the allowance and nonaccrual loans to total loans at the end of the period.

Analysis of the Allowance for Credit Losses for the Years Ended December 31

Ratio of net (charge-offs) recoveries during the

period to average loans outstanding by segment:

Commercial

Real estate:

Construction, land and land development

1-4 family residential first mortgages

Home equity

Commercial

Consumer and other

Total

Ratio of allowance for credit losses to total

loans at the end of period

Ratio of nonaccrual loans to total loans at

end of period

Ratio of allowance for credit losses to total

nonaccrual loans at the end of period

Ratio of net (charge-offs) recoveries to total

loans at end of period

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(dollars in thousands, except per share amounts)

Nonperforming loans at December 31, 2025 totaled $0, a slight decrease from $133, or 0.00 percent of total loans, at December 31, 2024. The decrease in nonperforming loans at December 31, 2025, compared to December 31, 2024, was due to a full payoff on the single loan included in the nonaccrual balance on December 31, 2024. Nonperforming loans include loans on nonaccrual status, loans past due 90 days or more and still accruing interest, and loans that have been considered to be loan restructurings made to borrowers experiencing financial difficulty. The Company held no other real estate owned properties as of December 31, 2025 or 2024.

The following table sets forth information concerning the Company’s allocation of the allowance for credit losses by loan segment as of the dates indicated.

As of December 31

Amount

Amount

Amount

Balance at end of

period applicable to:

Commercial

Real estate:

Construction, land

and land development

1-4 family residential

first mortgages

Home equity

Commercial

Consumer and other

* Percent of loans in each category to total loans.

As of December 31, 2025 and 2024, there was no allowance for credit losses related to loans individually evaluated for credit losses. The portion of the allowance for credit losses related to loans collectively evaluated for credit losses increased to $30,525, or 1.02 percent of outstanding loans as of December 31, 2025, compared to $30,432, or 1.01 percent of outstanding loans as of December 31, 2024. The increase was primarily due to net recoveries for the year ended December 31, 2025. Management believed the allowance for credit losses as of December 31, 2025 was adequate to absorb the expected losses in the portfolio as of that date.

DEPOSITS

Deposits totaled $3,468,470 as of December 31, 2025, which was an increase of 3.3 percent compared to December 31, 2024. Deposit growth in 2025 included a mix of public funds and commercial and consumer deposits. Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions, and fluctuations in our business customers’ own liquidity needs.

At December 31, 2025, the Company had $154,564 in brokered deposits, compared to $266,418 at December 31, 2024. Brokered deposits included fixed-rate time deposits with maturities through September 2026 and variable-rate deposits with terms through February 2027. The decrease in brokered deposits during 2025 was primarily due to core deposit growth. When necessary, brokered deposits are utilized, along with other wholesale funding sources, to fund loan growth and offset core deposit outflows.

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(dollars in thousands, except per share amounts)

The following table sets forth the average balances for each major category of deposits and the weighted average interest rate paid for those deposits during the years indicated.

Years ended December 31

Average

Average

Average

Average

Average

Average

Balance

Rate

Balance

Rate

Balance

Rate

Noninterest-bearing demand

Interest-bearing demand:

Insured cash sweep

Other interest-bearing demand

Money market:

Insured cash sweep

Other money market

Savings

Time

Management reduced interest rates on deposits in 2024 and 2025 as a result of the reductions in the target federal funds rate by the Federal Reserve in 2024 and 2025. Any deposit rate changes in 2026 will be dependent on market rates, liquidity needs and competition for deposit balances. To limit the Company’s exposure to market interest rate changes, interest rate swaps are in place on $70,000 of deposit balances that effectively convert certain customer deposits with variable rates to fixed-rate instruments.

Additionally, in 2025, the Company entered into three interest rate collar agreements with a total notional amount of $100,000 to mitigate interest rate risk on certain customer deposits. The structure of the interest rate collars is such that the Company pays the counterparty an incremental amount if the index rate falls below the floor rate. Conversely, the Company receives an incremental amount if the index rate rises above the cap rate.

Approximately 99 percent of the total time deposits issued by West Bank mature in the next year, including brokered time deposits. It is anticipated that a significant portion of the core time deposits will be renewed. In the event a substantial volume of core time deposits are not renewed, management believes the Company has sufficient liquid assets and funding sources to offset the potential runoff.

The following table shows the amounts and remaining maturities of time deposits with balances of $100 or more as of December 31, 2025.

3 months or less

Over 3 through 6 months

Over 6 through 12 months

Over 12 months

West Bank participates in a reciprocal deposit network, which enables depositors to receive FDIC insurance coverage on deposits otherwise exceeding the maximum insurable amount. We consider these reciprocal deposits to be in-market deposits as distinguished from traditional out-of-market brokered deposits. Time deposits as of December 31, 2025 and 2024, included $155,150 and $162,148, respectively, of reciprocal deposits. Included in total deposits as of December 31, 2025 and 2024, were $244,476 and $220,627, respectively, of reciprocal interest-bearing checking and $264,033 and $273,126, respectively, of reciprocal money market deposits.

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(dollars in thousands, except per share amounts)

Total estimated uninsured deposits were $1,744,989, $1,562,981 and $1,435,406 as of December 31, 2025, 2024 and 2023, respectively. The uninsured deposit amounts are estimated based on the methodologies and assumptions used for regulatory reporting requirements and include collateralized public unit deposits. The following table shows the amount of time deposits in excess of the insurance limit by maturity.

3 months or less

Over 3 through 6 months

Over 6 through 12 months

BORROWED FUNDS

The Company had $270,000 of FHLB advances outstanding at December 31, 2025, and 2024. As of December 31, 2025, all FHLB advances were hedged with long-term interest rate swaps as part of the Company’s rolling funding program. These interest rate swaps have maturity dates ranging from July 2026 through June 2029 and fixed rates ranging from 1.86 percent to 4.32 percent. This strategy of hedging short-term rolling funding effectively provides fixed cost wholesale funding through the maturity dates of the various interest rate swaps.

The Company has a credit agreement with an unaffiliated commercial bank. As of December 31, 2025, this borrowing had a balance of $26,250. Interest is payable quarterly. Required quarterly principal payments are $1,250, with the remaining balance due February 2027. The Company may make additional principal payments without penalty. The interest rate is variable at the Wall Street Journal Prime Rate minus 1.00 percent, which was 5.75 percent as of December 31, 2025. The Company has an interest rate swap contract that effectively converts $20,000 of this borrowing to a fixed rate of 6.40 percent through its maturity date.

In June 2022, the Company issued $60,000 of subordinated notes (Notes). The Notes initially bear interest at 5.25 percent per annum, with interest payable semi-annually for the first five years of the Notes. Beginning June 15, 2027, the interest rate will reset quarterly to a floating rate per annum that will be three-month term SOFR plus 2.41 percent, with payments due quarterly. The Company may redeem the Notes, in whole or in part, on and after June 15, 2027 at a price equal to 100 percent of the principal amount of the Notes being redeemed plus accrued and unpaid interest. The Notes will mature on June 15, 2032 if they are not earlier redeemed.

The Company has $20,619 in junior subordinated debentures which mature in 2033 and carry a variable interest rate. The Company has an interest rate swap with a notional amount of $20,000 which converts the variable-rate subordinated debentures to fixed-rate debt based on the 3-month term SOFR plus 0.26161 percent tenor spread adjustment plus 3.05 percent. This interest rate swap has a fixed rate of 4.81 percent and matures in September 2026.

OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of business, West Bank commits to extend credit in the form of loan commitments and standby letters of credit in order to meet the financing needs of its customers. These commitments expose West Bank to varying degrees of credit and market risks in excess of the amounts recognized in the consolidated balance sheets and are subject to the same credit policies as are the loans recorded on the balance sheets.

West Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. West Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to lend are subject to borrowers’ continuing compliance with existing credit agreements. Off-balance sheet commitments are more fully discussed in Note 17 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

As of December 31, 2025, the allowance for credit losses related to off-balance sheet commitments was $1,544, which was unchanged from December 31, 2024. The allowance for credit losses for off-balance-sheet credit exposures is presented in the “Accrued expenses and other liabilities” line of the Consolidated Balance Sheets.

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LIQUIDITY AND CAPITAL RESOURCES

The objectives of liquidity management are to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. The Company’s principal source of funds is deposits. Other sources include loan principal repayments, proceeds from the maturity and sale of securities, principal payments on amortizing securities, federal funds purchased, advances from the FHLB, other wholesale funding and funds provided by operations. Liquidity management is conducted on both a daily and a long-term basis. Investments in liquid assets are adjusted based on expected loan demand, projected loan and securities maturities and payments, expected deposit flows and the objectives set by West Bank’s asset-liability management policy. The Company had liquid assets (cash and cash equivalents) of $471,086 as of December 31, 2025 compared with $243,478 as of December 31, 2024.

Our deposit growth strategy emphasizes core deposit growth. Deposit inflows and outflows can vary widely and are influenced by prevailing market interest rates, competition, local and national economic conditions, operating cycles of public fund deposits and fluctuations in our business customers’ own liquidity needs. The Company utilizes brokered deposits and other wholesale funding to supplement core deposit fluctuations and loan growth. Brokered deposits are obtained through various programs with third party brokers. At December 31, 2025, the Company had $154,564 in brokered deposits, which included fixed-rate time deposits with maturities through September 2026 and variable-rate deposits with terms through February 2027.

As of December 31, 2025, West Bank had additional borrowing capacity available from the FHLB of approximately $649,000, as well as approximately $38,341 through the Federal Reserve discount window and $75,000 through unsecured federal funds lines of credit. Net cash from continuing operating activities contributed $46,479, $39,808 and $25,249 to liquidity for the years ended December 31, 2025, 2024 and 2023, respectively. Management believed that the combination of high levels of liquid and potentially liquid assets, unencumbered securities, cash flows from operations and additional borrowing capacity provided the Company with sufficient liquidity as of December 31, 2025.

The Company’s total stockholders’ equity increased to $265,985 as of December 31, 2025 from $227,875 as of December 31, 2024. The increase was primarily the result of growth in retained earnings and the increase in the market value of our available for sale investment portfolio. While accumulated other comprehensive losses reduce tangible common equity, they have no impact on regulatory capital. At December 31, 2025, tangible common equity as a percent of tangible assets was 6.42 percent compared to 5.68 percent as of December 31, 2024. As of December 31, 2025 and 2024, the Company had no intangible assets.

The Company and West Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Capital requirements are more fully discussed under the heading “Supervision and Regulation” included in Item 1 and in Note 16 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K. As of December 31, 2025, the Company and West Bank met all capital adequacy requirements to which they were subject, and the Company’s and West Bank’s capital ratios were in excess of the requirements to be considered well-capitalized under capital regulations. Also, as of December 31, 2025, the ratios for the Company and West Bank were sufficient to meet the capital conservation buffer.

EFFECTS OF NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

A discussion of the effects of new financial accounting standards and developments as they relate to the Company is located in Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

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