West Bancorporation
Annual Report 2012

Plain-text annual report

Building a Strong Reputation 2012 Annual Report Then Building a strong reputation since 1893 West Des Moines has grown quite a bit from the sleepy railroad town established as Valley Junction. In 1893, one of the first businesses to invest in newly formed Valley Junction was a little bank that grew to become West Bank. Founders Herman and Anna Raaz made some of the first loans that allowed families to make Valley Junction their home. West Bank helped many entrepreneurs launch businesses that are still serving the community today. We went on to survive the depression, expand in two of Iowa’s largest markets, and trade on Nasdaq. Our goal was never to be the biggest bank. We simply want to be the kind of community bank that earns our customers’ trust and referrals, while continuing to be recognized as one of the best banks in America by our peers and industry experts. And most of all, just like back in 1893, we want to be a vital part of the community we call home. Now 120 years later… We’re fortunate to be able to boast about our exceptional customer loyalty, but truth be told, we’ve worked hard to earn it. We learned a long time ago that when we help our customers achieve their financial goals, we not only earn their trust but their ongoing business. We’ve consistently produced enviable earnings for our investors. Since the formation of our holding company, West Bancorporation, Inc. in 1984, we have enjoyed profits in 110 of 112 quarters. To be a great community bank, we also need to be a great community partner. Since 2003, our Foundation has granted over $2 million dollars to local charities and our employees serve on over 80 local charitable boards. 120 years after serving our first customer, West Bank is again investing in its West Des Moines roots by building a new branch on Grand Avenue to serve, in some cases, a fifth generation of West Bank customers. It’s this ongoing commitment to our customers, our shareholders and the communities we call home that has earned us our most valuable asset – our reputation. Stockholders’ Letter People like to ask me about our vision for our Company. They like to ask what size we will be and what size we want to be. I don’t want to sound rude but any group of people can make a bank grow. All you have to do is be the cheapest and/or the loosest. Being the biggest can have very little to do with being the best and might even make you the worst. So I let people know our vision is to achieve and sustain a position of industry envy and admiration. Then they ask, “What would that look like?” and “How will you know when you get there?” Here are some of the things we look at to validate our progress: • Customer loyalty & retention. • Customers endorsing us by giving us referrals. • More people choosing us as their bank. • Other bankers in town wanting to join our Team. David D. Nelson • Outperforming other banks in the major performance metrics. • Investment banking firm Sandler O’Neill naming us as one of the best banks in America. • Doug Gulling named CFO of the year by the Des Moines Business Record. • Other banks want to hire our top performing people and our people say, “No thanks.” • Understanding what it means to be a community bank. We remind ourselves that continued improvement is not a destination, it is a journey. It should also be a fun journey and we will get there and stay there as a Team. I like to say, “Things are changing all the time at West Bank,” and that is because each day we get a little better by doing things on purpose. It is fun to be part of something special, and we look forward to the future with a smile. In last year’s letter, we stated that we believed the Company would continue to grow and prosper in spite of the uncertainty that existed. We can report that we were successful. For the year 2012, total loans grew by 11 percent; deposits grew by 19 percent; and net income available to our stockholders increased by 24 percent. Both of our markets; the Des Moines metropolitan area and the Iowa City metropolitan area, contributed to this growth. We also expanded our commercial banking group in both markets in the last half of 2012. We do not believe there is any less uncertainty in 2013, but we do believe we will continue our path of growth and prosperity. The capital position of our Company is strong. At December 31, 2012, the capital ratio of tangible net worth to tangible assets was 9.29 percent. Certainly over the past few years it was hard to argue any amount of capital was too much. But we do get asked, and frequently ask ourselves, “What is the appropriate amount of capital?” During 2013, we will continue to evaluate that question and develop strategies for effectively deploying that capital while maintaining a position of strength. West Bank is the oldest business in West Des Moines and during 2013 we are celebrating our 120th anniversary. Our new Grand Avenue branch will be opening this spring. We think that makes us both the oldest and the newest business in West Des Moines. Our Company’s strong performance and positive public reaction are not accidents. They happen because of our employees, our customers, and our community. We look forward to continuing the journey in 2013. David D. Nelson Chief Executive Officer and President Consolidated Condensed Balance Sheets (dollars in thousands, except per share amounts) Assets Cash and due from banks Federal funds sold and other short-term investments Cash and cash equivalents Securities available for sale Federal Home Loan Bank stock, at cost Loans held for sale Loans Allowance for loan losses Loans, net Premises and equipment, net Accrued interest receivable Bank-owned life insurance Other real estate owned Deferred tax assets Other assets Total assets Liabilities and Stockholders’ Equity Liabilities Deposits: Noninterest-bearing demand Interest-bearing demand Savings Time of $100,000 or more Other time Total deposits Federal funds purchased and securities sold under agreements to repurchase Subordinated notes and FHLB advances, net of discount Accrued expenses and other liabilities Total liabilities Stockholders’ Equity Preferred stock, $0.01 par value; authorized 50,000,000 shares; no shares issued and outstanding at December 31, 2012 and 2011 Common stock, no par value; authorized 50,000,000 shares; 17,403,882 shares issued and outstanding at December 31, 2012 and 2011 Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders’ equity Total liabilities and stockholders’ equity December 31, 2012 2011 $ 60,417 111,057 171,474 292,314 11,789 3,363 927,401 (15,529 ) 911,872 5,609 3,652 25,730 8,304 6,991 7,077 $ 1,448,175 $ 35,772 51,332 87,104 283,145 11,352 4,089 838,959 (16,778 ) 822,181 5,396 4,183 25,724 10,967 8,409 6,974 $ 1,269,524 $ 367,281 160,745 428,710 100,627 77,213 1,134,576 55,596 114,509 8,907 1,313,588 $ 268,887 158,141 343,312 98,743 88,290 957,373 55,841 125,619 7,240 1,146,073 - - 3,000 33,805 95,856 1,926 134,587 $ 1,448,175 3,000 33,687 86,110 654 123,451 $ 1,269,524 West Bancorporation, Inc. and Subsidiary | 2012 Annual Report West Bancorporation, Inc. and Subsidiary | 2012 Annual Report Consolidated Condensed Statements of Income (dollars in thousands, except per share amounts) Interest Income Loans, including fees Securities: Taxable securities Tax-exempt securities Federal funds sold and other short-term investments Total interest income Interest Expense Deposits Federal funds purchased and securities sold under agreements to repurchase Other borrowings Total interest expense Net interest income Provision for Loan Losses Net interest income after provision for loan losses Noninterest Income Service charges on deposit accounts Debit card usage fees Trust services Gains and fees on sales of residential mortgages Increase in cash value of bank-owned life insurance Gain from bank-owned life insurance Investment securities impairment losses Realized investment securities gains, net Other income Total noninterest income Noninterest Expense Salaries and employee benefits Occupancy Data processing FDIC insurance expense Other real estate owned expense Other expenses Total noninterest expense Income before income taxes Income Taxes Net income Preferred stock dividends and accretion of discount Years Ended December 31, 2012 2011 2010 $ 44,277 $ 46,640 $ 53,215 4,240 1,954 191 50,662 4,535 114 4,815 9,464 41,198 625 40,573 3,009 1,586 817 3,104 737 841 (203 ) 246 857 10,994 4,193 2,252 234 53,319 6,941 174 4,802 11,917 41,402 550 40,852 3,244 1,453 792 1,454 884 637 (99 ) - 996 9,361 4,330 3,057 541 61,143 13,217 210 5,596 19,023 42,120 6,050 36,070 3,361 1,329 818 1,533 869 422 (305 ) 40 2,320 10,387 14,532 3,519 2,070 672 1,491 6,508 13,194 3,342 1,921 1,298 2,883 6,235 10,996 3,207 1,815 3,082 1,716 6,928 28,792 22,775 6,764 16,011 - 28,873 21,340 6,072 15,268 (2,387 ) 27,744 18,713 5,330 13,383 (2,284 ) Net income available to common stockholders $ 16,011 $ 12,881 $ 11,099 Earnings per Common Share Basic earnings per common share Diluted earnings per common share $ 0.92 $ 0.74 $ 0.64 $ 0.92 $ 0.74 $ 0.64 West Bancorporation, Inc. and Subsidiary | 2012 Annual Report Consolidated Condensed Statements of Stockholders’ Equity (dollars in thousands, except per share amounts) Years Ended December 31, 2012, 2011, and 2010 Preferred Stock Common Stock Balance, December 31, 2009 Net income Other comprehensive income Preferred stock discount accretion Cash dividends declared, $0.05 per common share Preferred stock dividends declared Balance, December 31, 2010 Net income Other comprehensive income Preferred stock discount accretion Redemption of preferred stock Repurchase of common stock warrant Cash dividends declared, $0.17 per common share Preferred stock dividends declared Balance, December 31, 2011 Net income Other comprehensive income Cash dividends declared, $0.36 per common share Stock-based compensation costs $ 34,024 $ 3,000 - - 484 - - 34,508 - - 1,492 (36,000 ) - - - - - - - - - - - - - 3,000 - - - - - - - 3,000 - - - - Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) $ 34,387 - - - $ 65,959 13,383 - (484 ) $ (4,311 ) - 1,664 - - - (2,647 ) - 3,301 - - - - - 654 - 1,272 - - 34,387 - - - - (700 ) - - 33,687 - - - 118 (870 ) (1,800 ) 76,188 15,268 - (1,492 ) - - (2,959 ) (895 ) 86,110 16,011 - (6,265 ) - Total $ 133,059 13,383 1,664 - (870 ) (1,800 ) 145,436 15,268 3,301 - (36,000 ) (700 ) (2,959 ) (895 ) 123,451 16,011 1,272 - - (6,265 ) 118 Balance, December 31, 2012 $ - $ 3,000 $ 33,805 $ 95,856 $ 1,926 $ 134,587 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of West Bancorporation, Inc.: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of West Bancorporation, Inc. and subsidiary as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income (not presented herein), stockholders’ equity, and cash flows (not presented herein) for each of the three years in the period ended December 31, 2012, and in our report dated March 6, 2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements appearing in this report is fairly presented, in all material respects, in relation to the consolidated financial statements from which it has been derived. Des Moines, Iowa | March 6, 2013 West Bancorporation, Inc. and Subsidiary | 2012 Annual Report Stock Information West Bancorporation’s common stock is traded on the Nasdaq Global Select Market and quotations are furnished by the Nasdaq System. We had 220 common stockholders of record on December 31, 2012, and an estimated 950 additional nonobjecting beneficial holders whose stock was held in street name by brokerage houses. Market and Dividend Information (1) 2012 2011 1st quarter 2nd quarter 3rd quarter 4th quarter Total 1st quarter 2nd quarter 3rd quarter 4th quarter Total High $ 10.46 10.22 12.35 12.29 $ 8.00 8.89 10.00 10.39 Low $ 8.71 9.02 9.38 9.75 $ 6.75 6.94 7.31 7.92 Dividends $0.08 0.08 0.10 0.10 $ 0.36 $ - 0.05 0.05 0.07 $ 0.17 (1) The prices shown are the high and low sale prices for the Company’s common stock. The market quotations, reported by Nasdaq, do not include retail markup, markdown, or commissions. Form 10-K A copy of the Company’s annual report to the Securities and Exchange Commission on Form 10-K will be available on the Securities and Exchange Commission’s Web site at http://www.sec.gov and through a link on the Company’s Web site, www.westbankiowa.com, at Investor Relations, SEC Filings. A copy of the annual report can also be obtained upon request to Alice Jensen at 515-222-2300 or ajensen@westbankiowa.com. Transfer Agent/Dividend Paying Agent ist Shareholder Services 433 S. Carlton Ave. Wheaton, Illinois 60187 800-757-5755 www.ilstk.com Forward-Looking Statements Certain statements in this report about the Company’s future financial performance constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements include the words “believe,” “hope to,” “look forward,” or similar references. These statements are based on underlying assumptions, risks, and uncertainties that may not materialize as expected. Actual results may differ significantly from the forward-looking statements due to, among other things, changes in competition, economic conditions, regulatory requirements or costs, loan or investment performance, and interest rates. The Company undertakes no obligation to revise any statements to reflect future circumstances. West Bancorporation, Inc. and Subsidiary | 2012 Annual Report Boards of Directors West Bancorporation, Inc. and Subsidiary Frank Berlin* Thomas Carlstrom* Joyce Chapman* Steven Gaer* Douglas Gulling** Kaye Lozier* David Milligan* George Milligan* David Nelson* James Noyce* Harlee Olafson ** Robert Pulver* * Director of West Bancorporation, Inc. and West Bank ** Director of West Bank Lou Ann Sandburg* Brad Winterbottom ** Jason Worth ** Central Iowa Community Board Chad Airhart Mary Cownie Darin Ferguson Ryan Flynn Kevin Grimm Greg LaMair Eastern Iowa Community Board Gene Loffredo Kirk Tyler Victoria Veiock Mark Wackerbarth Nancy Williams Phillip Yurgae Jill Armstrong Kevin Digmann William Meardon Mark Mysnyk William Nusser, Jr. Charles Skaugstad, Jr. Anna Moyer-Stone Branch Locations Central Iowa Main Bank 1601 - 22nd St. West Des Moines Grand Branch 125 Grand Ave. West Des Moines East Branch 2440 East Euclid Des Moines North Branch 3839 Merle Hay Des Moines City Center Branch 809 - 6th Ave. Des Moines South Branch 3920 SW 9th Street Des Moines Urbandale Branch 3255 - 99th St. Urbandale Eastern Iowa Downtown Branch 229 S. Dubuque Street Iowa City Waukee Branch 955 East Hickman Rd. Waukee Lower Muscatine Branch 1910 Lower Muscatine Rd Iowa City Coralville Branch 1150 5th Street Suite 170 Coralville Financial Highlights (dollars in thousands, except per share amounts) Year-End Balances Assets Investment securities Loans Nonperforming loans Other real estate owned Deposits Stockholders’ equity Average Balances Assets Investment securities Loans Deposits Stockholders’ equity Results of Operations Net interest income Provision for loan losses Noninterest income Noninterest expense Income (loss) before income taxes from continuing operations Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) Net income (loss) available to common stockholders Per Common Share Net income (loss) – basic Net income (loss) – diluted Dividends Book value Closing price Ratios Return on average equity Return on average assets Texas ratio Efficiency ratio Net interest margin Average equity as % of average assets Allowance for loan losses as % of loans Net charge-offs as % of average loans Nonperforming loans as % of loans Tangible common equity to tangible assets 2012 2011 2010 2009 2008 $ 1,448,175 304,103 927,401 7,256 8,304 1,134,576 134,587 $ 1,269,524 294,497 838,959 10,693 10,967 957,373 123,451 $ 1,305,463 267,537 888,649 12,930 19,193 972,072 145,436 $ 1,575,054 351,269 1,020,710 26,317 25,350 1,246,617 133,059 $ 1,554,276 189,558 1,100,735 28,835 4,352 1,155,132 150,063 $ 1,326,408 317,615 854,860 995,694 129,795 $ 1,295,313 266,031 850,833 961,488 135,520 $ 1,558,461 301,124 961,977 1,218,997 141,079 $ 1,618,557 230,821 1,100,045 1,231,597 143,163 $ 1,371,401 189,206 1,054,558 954,423 118,090 $ 41,198 625 10,994 28,792 $ 41,402 550 9,361 28,873 $ 42,120 6,050 10,387 27,744 $ 41,094 24,500 8,904 37,905 $ 41,101 16,600 4,301 20,105 22,775 21,340 18,713 (12,407 ) 8,697 16,011 15,268 13,383 (5,051 ) 7,311 - 16,011 - 15,268 - 13,383 (9,566 ) (14,617 ) 325 7,636 16,011 12,881 11,099 (16,893 ) 7,636 $ 0.92 0.92 0.36 7.73 10.78 $ 0.74 0.74 0.17 7.09 9.58 $ 0.64 0.64 0.05 6.37 7.79 $ (0.97 ) (0.97 ) 0.09 5.69 4.93 $ 0.44 0.44 0.64 6.69 12.25 12.34 % 1.21 % 11.25 % 50.83 % 3.42 % 9.79 % 1.67 % 0.22 % 0.78 % 9.29 % 11.27 % 1.18 % 16.33 % 49.27 % 3.58 % 10.46 % 2.00 % 0.34 % 1.27 % 9.72 % 9.49 % 0.86 % 25.76 % 47.28 % 3.04 % 9.05 % 2.15 % 0.63 % 1.46 % 8.49 % (10.21 )% (0.90 )% 44.91 % 45.30 % 2.86 % 8.85 % 1.87 % 1.89 % 2.58 % 6.27 % 6.47 % 0.56 % 33.81 % 38.24 % 3.38 % 8.61 % 1.40 % 0.96 % 2.62 % 5.91 % West Bancorporation, Inc. and Subsidiary | 2012 Annual Report West Bancorporation, Inc. and Subsidiary | 2012 Annual Report 

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