West Bancorporation Inc.

02/26/2026 | Press release | Distributed by Public on 02/26/2026 06:09

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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,
2025 2024 2023
Performance Ratios
Return on average assets 0.81 % 0.61 % 0.66 %
Return on average equity 13.47 % 10.71 % 11.42 %
Efficiency ratio (1)(2)
54.11 % 63.25 % 60.73 %
Nonperforming assets/total assets (1)
0.00 % 0.00 % 0.01 %
Net interest margin(2)
2.35 % 1.91 % 2.01 %
Dividends and Per Share Data
Basic earnings per common share $ 1.92 $ 1.43 $ 1.44
Diluted earnings per common share 1.92 1.42 1.44
Cash dividends per common share 1.00 1.00 1.00
Dividend payout ratio 51.95 % 69.88 % 69.21 %
Dividend yield 4.51 % 4.62 % 4.72 %
Operating Results and Year-End Balances
Net income $ 32,560 $ 24,050 $ 24,137
Total assets 4,142,244 4,014,991 3,825,758
Securities available for sale 468,447 544,565 623,919
Loans 3,001,690 3,004,860 2,927,535
Deposits 3,468,470 3,357,596 2,973,779
Borrowings 376,406 392,629 592,637
Stockholders' equity 265,985 227,875 225,043
Average equity to average assets ratio 6.02 % 5.65 % 5.77 %
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.
(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, MidWestOneFinancial 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 13.47% 3.40%-15.25%
Efficiency ratio(1)
54.11% 45.67%-69.11%
Nonperforming assets to total assets 0.00% 0.10%-1.07%
(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.
(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.
(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
2025 2024 2023
Reconciliation of net interest income and net interest margin on an FTE basis to GAAP:
Net interest income (GAAP) $ 88,981 $ 71,362 $ 69,031
Tax-equivalent adjustment(1)
256 182 491
Net interest income on an FTE basis (non-GAAP)
89,237 71,544 69,522
Average interest-earning assets 3,800,582 3,747,528 3,465,964
Net interest margin on an FTE basis (non-GAAP) 2.35 % 1.91 % 2.01 %
Reconciliation of efficiency ratio on an FTE basis to GAAP:
Net interest income on an FTE basis (non-GAAP) $ 89,237 $ 71,544 $ 69,522
Noninterest income 6,264 8,434 10,066
Adjustment for realized securities losses, net 3,959 1,172 431
Adjustment for losses on disposal of premises and
equipment, net
8 47 29
Adjusted income 99,468 81,197 80,048
Noninterest expense 53,827 51,353 48,611
Efficiency ratio on an adjusted and FTE basis (non-GAAP)(2)
54.11 % 63.25 % 60.73 %
(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.
(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.
(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: 2025 2024 Change Change %
Service charges on deposit accounts $ 1,941 $ 1,843 $ 98 5.3 %
Debit card interchange income 1,894 1,919 (25) (1.3) %
Trust services 3,436 3,449 (13) (0.4) %
Increase in cash value of bank-owned life insurance 1,202 1,126 76 6.7 %
Realized securities losses, net (3,959) (1,172) (2,787) (237.8) %
Other income 1,750 1,269 481 37.9 %
Total noninterest income $ 6,264 $ 8,434 $ (2,170) (25.7) %
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: 2025 2024 Change Change %
Salaries and employee benefits $ 29,383 $ 27,588 $ 1,795 6.5 %
Occupancy and equipment 8,170 7,320 850 11.6 %
Data processing 2,596 2,991 (395) (13.2) %
Technology and software 3,160 2,896 264 9.1 %
FDIC insurance 2,369 2,560 (191) (7.5) %
Professional fees 1,211 1,041 170 16.3 %
Other expenses:
Business development 898 803 95 11.8 %
Insurance expense 925 821 104 12.7 %
Director fees 778 828 (50) (6.0) %
Trust 763 663 100 15.1 %
Consulting fees 608 262 346 132.1 %
Marketing 87 97 (10) (10.3) %
Low income housing projects amortization 526 571 (45) (7.9) %
New markets tax credit project amortization and management fees 267 919 (652) (70.9) %
All other 2,086 1,993 93 4.7 %
Total other 6,938 6,957 (19) (0.3) %
Total noninterest expense $ 53,827 $ 51,353 $ 2,474 4.8 %
(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.
(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.
2025 2024 2023
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 $ 512,116 $ 32,985 6.44 % $ 519,568 $ 34,423 6.63 % $ 520,116 $ 32,067 6.17 %
Real estate (3)
2,452,633 132,509 5.40 % 2,451,830 130,829 5.34 % 2,270,662 110,431 4.86 %
Consumer and other 22,204 1,473 6.64 % 14,425 1,065 7.38 % 9,478 665 7.02 %
Total loans 2,986,953 166,967 5.59 % 2,985,823 166,317 5.57 % 2,800,256 143,163 5.11 %
Securities:
Taxable 419,914 10,471 2.49 % 472,351 13,030 2.76 % 516,118 13,696 2.65 %
Tax-exempt(3)
122,480 3,034 2.48 % 141,033 3,306 2.34 % 146,734 3,768 2.57 %
Total securities 542,394 13,505 2.49 % 613,384 16,336 2.66 % 662,852 17,464 2.63 %
Deposits with banks 217,708 9,359 4.30 % 148,321 7,595 5.12 % 2,856 169 5.94 %
Securities purchased under
agreements to resell 53,527 2,650 4.95 % - - - % - - - %
Total interest-earning assets(3)
3,800,582 192,481 5.06 % 3,747,528 190,248 5.08 % 3,465,964 160,796 4.64 %
Noninterest-earning assets:
Cash and due from banks 23,359 23,699 23,139
Premises and equipment, net 109,744 101,413 67,281
Other, less allowance for
credit losses 84,298 99,110 106,194
Total noninterest-earning assets 217,401 224,222 196,614
Total assets $ 4,017,983 $ 3,971,750 $ 3,662,578
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand $ 493,800 7,894 1.60 % $ 466,238 8,684 1.86 % $ 467,174 6,984 1.49 %
Savings and money market 1,752,797 55,450 3.16 % 1,560,136 57,140 3.66 % 1,357,675 43,569 3.21 %
Time 586,022 24,406 4.16 % 639,278 31,460 4.92 % 424,320 16,243 3.83 %
Total deposits 2,832,619 87,750 3.10 % 2,665,652 97,284 3.65 % 2,249,169 66,796 2.97 %
Borrowed funds:
Federal funds purchased and
other short-term borrowings - - - % 75,736 4,248 5.61 % 194,802 9,532 4.89 %
Subordinated notes, net 80,025 4,425 5.53 % 79,760 4,431 5.55 % 79,501 4,442 5.59 %
Federal Home Loan Bank
advances 270,000 9,102 3.37 % 312,363 10,313 3.30 % 265,644 7,694 2.90 %
Long-term debt 39,940 1,967 4.93 % 45,055 2,428 5.39 % 49,938 2,810 5.63 %
Total borrowed funds 389,965 15,494 3.97 % 512,914 21,420 4.18 % 589,885 24,478 4.15 %
Total interest-bearing liabilities 3,222,584 103,244 3.20 % 3,178,566 118,704 3.73 % 2,839,054 91,274 3.21 %
Noninterest-bearing liabilities:
Demand deposits 515,389 528,391 586,903
Other liabilities 38,313 40,308 25,218
Stockholders' equity 241,697 224,485 211,403
Total liabilities and
stockholders' equity $ 4,017,983 $ 3,971,750 $ 3,662,578
Net interest income (4)/net interest spread (3)
$ 89,237 1.86 % $ 71,544 1.35 % $ 69,522 1.43 %
Net interest margin (3) (4)
2.35 % 1.91 % 2.01 %
(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.
(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 $ (489) $ (949) $ (1,438) $ (34) $ 2,390 $ 2,356
Real estate (2)
43 1,637 1,680 9,197 11,201 20,398
Consumer and other 525 (117) 408 364 36 400
Total loans (including fees) 79 571 650 9,527 13,627 23,154
Securities:
Taxable (1,372) (1,187) (2,559) (1,193) 527 (666)
Tax-exempt (2)
(452) 180 (272) (142) (320) (462)
Total securities (1,824) (1,007) (2,831) (1,335) 207 (1,128)
Deposits with banks 3,129 (1,365) 1,764 7,452 (26) 7,426
Securities purchased under
agreements to resell 2,650 - 2,650 - - -
Total interest income (2)
4,034 (1,801) 2,233 15,644 13,808 29,452
Interest Expense
Deposits:
Interest-bearing demand 492 (1,282) (790) (14) 1,714 1,700
Savings and money market 6,599 (8,289) (1,690) 6,969 6,602 13,571
Time (2,479) (4,575) (7,054) 9,731 5,486 15,217
Total deposits 4,612 (14,146) (9,534) 16,686 13,802 30,488
Borrowed funds:
Federal funds purchased and
other short-term borrowings (4,248) - (4,248) (6,514) 1,230 (5,284)
Subordinated debt, net 15 (21) (6) 14 (25) (11)
Federal Home Loan Bank advances (1,424) 213 (1,211) 1,459 1,160 2,619
Long-term debt (262) (199) (461) (267) (115) (382)
Total borrowed funds (5,919) (7) (5,926) (5,308) 2,250 (3,058)
Total interest expense (1,307) (14,153) (15,460) 11,378 16,052 27,430
Net interest income(2) (3)
$ 5,341 $ 12,352 $ 17,693 $ 4,266 $ (2,244) $ 2,022
(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.
(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.
(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)
- % - % 1.86 % 2.05 % 2.04 %
Collateralized mortgage obligations - - - 1.48 1.48
Mortgage-backed securities - 1.20 1.72 1.68 1.66
Collateralized loan obligations - - 5.50 - 5.50
Corporate notes - - 3.26 - 3.26
- % 1.20 % 2.35 % 1.72 % 1.78 %
(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.
(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.
(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
2025 2024
Balance % of Non-owner Occupied CRE Weighted Average LTV Balance % of Non-owner Occupied CRE Weighted Average LTV
Non-owner occupied:
Multifamily $ 581,106 31.2 % 67 % $ 542,322 28.5 % 69 %
Medical & senior care facilities 129,870 7.0 62 180,144 9.5 64
Warehouse & trucking 170,673 9.2 62 160,783 8.4 60
Hotels 252,962 13.6 63 253,939 13.3 64
Mixed use 106,494 5.7 68 98,988 5.2 67
Offices 107,512 5.8 63 126,270 6.6 68
Land for development 97,942 5.2 55 89,974 4.7 56
All other 415,410 22.3 not available 452,772 23.8 not available
$ 1,861,969 100.0 % $ 1,905,192 100.0 %
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 1-3 4 5 6 7 8
Non-owner occupied:
Multifamily $ 581,106 $ 40,863 $ 433,049 $ 95,793 $ 11,401 $ - $ -
Medical & senior care facilities 129,870 17,796 95,715 16,359 - - -
Warehouse & trucking 170,673 96,281 63,426 10,966 - - -
Hotel 252,962 - 195,956 57,006 - - -
Mixed use 106,494 27,517 52,997 25,980 - - -
Offices 107,512 8,824 89,577 9,111 - - -
Land for development 97,942 7,515 88,924 1,503 - - -
All other 415,410 81,432 237,349 96,629 - - -
$ 1,861,969 $ 280,228 $ 1,256,993 $ 313,347 $ 11,401 $ - $ -
(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 $ 174,094 $ 267,526 $ 63,439 $ - $ 505,059
Real estate:
Construction, land and land development 276,777 147,975 2,081 - 426,833
1-4 family residential first mortgages 23,573 69,273 276 - 93,122
Home equity 10,555 15,533 - - 26,088
Commercial 382,944 1,226,597 298,040 22,185 1,929,766
Consumer and other 8,281 15,093 - - 23,374
$ 876,224 $ 1,741,997 $ 363,836 $ 22,185 $ 3,004,242
After one but
within five years 		After five but
within 15 years 		After 15 years
Loan maturities after one year with:
Fixed rates
Commercial $ 201,049 $ 13,057 $ -
Real estate:
Construction, land and land development 11,699 - -
1-4 family residential first mortgages 67,323 276 -
Home equity 4,981 - -
Commercial 1,056,813 118,523 -
Consumer and other 14,389 - -
Total fixed-rate loans 1,356,254 131,856 -
Variable rates
Commercial 66,477 50,382 -
Real estate:
Construction, land and land development 136,276 2,081 -
1-4 family residential first mortgages 1,950 - -
Home equity 10,552 - -
Commercial 169,784 179,517 22,185
Consumer and other 704 - -
Total variable-rate loans 385,743 231,980 22,185
$ 1,741,997 $ 363,836 $ 22,185
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.
(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
2025 2024 2023
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 0.00 % 0.00 % 0.00 %
Ratio of allowance for credit losses to total
loans at the end of period 1.02 % 1.01 % 0.97 %
Ratio of nonaccrual loans to total loans at
end of period 0.00 % 0.00 % 0.01 %
Ratio of allowance for credit losses to total
nonaccrual loans at the end of period N/A 22,881.20 % 9,575.00 %
Ratio of net (charge-offs) recoveries to total
loans at end of period 0.00 % 0.00 % 0.00 %
(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
2025 2024 2023
Amount %* Amount %* Amount %*
Balance at end of
period applicable to:
Commercial $ 5,700 16.81 % $ 5,489 17.10 % $ 5,291 18.13 %
Real estate:
Construction, land
and land development 3,744 14.21 4,354 16.89 3,668 14.11
1-4 family residential
first mortgages 687 3.10 650 2.92 704 3.64
Home equity 274 0.87 200 0.64 142 0.50
Commercial 19,795 64.23 19,544 61.88 18,420 63.25
Consumer and other 325 0.78 195 0.57 117 0.37
$ 30,525 100.00 % $ 30,432 100.00 % $ 28,342 100.00 %
* 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.
(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
2025 2024 2023
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Noninterest-bearing demand $ 515,389 - % $ 528,391 - % $ 586,903 - %
Interest-bearing demand:
Insured cash sweep 188,737 2.78 150,774 3.44 137,027 2.48
Other interest-bearing demand 305,063 0.87 315,464 1.11 330,147 1.09
Money market:
Insured cash sweep 272,709 3.33 241,444 4.00 249,574 3.58
Other money market 1,294,197 3.34 1,161,566 3.85 973,853 3.47
Savings 185,891 1.66 157,126 1.73 134,248 0.61
Time 586,022 4.16 639,278 4.92 424,320 3.83
$ 3,348,008 $ 3,194,043 $ 2,836,072
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 $ 165,091
Over 3 through 6 months 153,292
Over 6 through 12 months 160,234
Over 12 months 1,224
$ 479,841
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.
(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 $ 72,426
Over 3 through 6 months 47,797
Over 6 through 12 months 81,774
$ 201,997
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.
(dollars in thousands, except per share amounts)
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.
(dollars in thousands, except per share amounts)
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