Q1 2024 West Bancorporation Inc Earnings Call
Okay.
Monday: Thank you for standing by my name is Monday, and I'll be your conference operator today at this time I would like to welcome everyone to the west.
Monday: Bancorporation, Inc, Q1, 2024 earnings call.
Monday: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Monday: To withdraw your question Press Star one again, thank you I would now like to turn the conference over to Jane Funk CFO.
Jane M. Funk: CFO you may begin.
Jane M. Funk: Thank you welcome everybody and thank you for joining us today on our earnings call today, I've got Dave Nelson, Our CEO, Harley Olafson, Chief Risk Officer, Brad Winterbottom Bank, President and Brad Peter's, Our Minnesota Group President today for the call and will be making a comment.
CFO: I'll start off by reading, our fair disclosure statement during today's conference call, we may make projections or other forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
CFO: Regarding future events or the future financial performance of the company, we caution that such statements are predictions and that actual results may differ materially. Please see the forward looking statement disclosures in our 2024 first quarter earnings release for more information about risks and uncertainties, which may affect us. The information we will provide today is accurate as of March.
Jane M. Funk: 31 2024.
Jane M. Funk: Undertakes no duty to update the information and at this point I'll turn it over to Dave for opening comments. Thank you Jane welcome everyone. Good afternoon, and thank you for joining US and also thank you for your interest in our company our quarter window is expected actually a bit better than forecasted Jane will speak more.
Dave: This would hopefully we have found the bottom in terms of our margin and Harley will speak in more detail to our credit quality, but it continues to be pristine with essentially no problem loans and no past due loans over 30 days at quarter end.
David D. Nelson: Exciting news at West Bank is that we have just moved into our new main office headquarter facility and this has generated a lot of excitement and community attention we.
Jane M. Funk: Completed a redevelopment for our new headquarters turning a rather high profile avoided site into something very special.
Jane M. Funk: We declared a regular quarterly dividend 25 sets payment date of may 22nd to shareholders of record as of May eight.
Jane M. Funk: Those are the extent of my prepared comments I would like to turn the call over to Chief risk Officer, Mr. Early Olafson.
Harlee N. Olafson: Thanks, Dave.
Harlee N. Olafson: As Dave's earlier stated credit quality is very strong at West Bank.
Harlee N. Olafson: Our watch list on our almost $3 billion portfolio is only $431000.
Harlee N. Olafson: We have no past due loans at quarter end over 30 days.
Harlee N. Olafson: Quarterly we stress test our portfolio and have seen improving trends in total loan to value and debt service coverage.
Harlee N. Olafson: We have looked closely at our office portfolio the office portfolio.
Harlee N. Olafson: Portfolio totals about $180 million.
Harlee N. Olafson: The average loan to value was 68% and the debt service coverage of the non owner occupied office properties is 141 to one.
Harlee N. Olafson: About half of our office portfolio consists of owner occupied properties.
Harlee N. Olafson: The remainder of our commercial real estate portfolio is strong and seasons.
Harlee N. Olafson: We have stress tested commercial real estate loans that will be repricing in the next year. It appears that most will still have enough net operating income to cover the increased payments.
Harlee N. Olafson: With rising interest rates, there have not been a lot of significant new projects added to the portfolio.
Harlee N. Olafson: Our continuing focus is to provide the best service to our customers that have a comprehensive relationship with US we are not providing financing to applicants just want us to do a deal.
Harlee N. Olafson: Our bankers have been doing a good job capturing more of our customers' business.
Harlee N. Olafson: The economy in our markets remains strong.
Harlee N. Olafson: We keep looking for cracks in areas of concern.
Harlee N. Olafson: With having to increase our deposit rates to maintain our customer base, we keep prospecting those relationships that add to both sides of the balance sheet.
Harlee N. Olafson: With that I will turn it over to our bank President Brad Winterbottom.
Brad Lee Winterbottom: Thank you my comments will be brief.
Brad Lee Winterbottom: For the quarter ended March 31.
Brad Lee Winterbottom: Our loan portfolio grew to $2 98 billion in Outstandings or a one 8% increase from year end 2023.
Brad Lee Winterbottom: Our growth in the portfolio was primarily driven by vertical construction draws on previously committed transactions.
Brad Lee Winterbottom: We have roughly $150 million in unfunded commitments on vertical construction draws.
Brad Lee Winterbottom: That will take place over the next 12 months.
Brad Lee Winterbottom: And these loans are primarily variable rate price.
Harlee N. Olafson: Deposit gathering remains a priority with our sales staff comp.
Harlee N. Olafson: Competition is stiff, but we're in a we are winning our fair share of the battles what we're seeing is slightly.
Harlee N. Olafson: Reduction in existing customers balances from a year ago, but we have picked that up with with new deposit gathering we remain confident in our ability to create and maintain positive relationships with our customers and prospects and prospects that were pursuing.
Harlee N. Olafson: With that Mr. Peters failures, thanks, Brad and good afternoon, everyone I'm going to provide a brief update on our progress in Minnesota.
Bradley P. Peters: We continue to navigate through a challenging environment due to the rapid rise in interest rates.
Bradley P. Peters: In spite of those challenges, we are growing new business and enhancing existing relationships. Our focus has been on C&I growth and deposit growth and our bankers have been intentional on their calling efforts to draw new deposits and Treasury management business.
Bradley P. Peters: We are also focusing on our business owners and key executives to grow high value in retail deposits.
Bradley P. Peters: Maintain market has now opened their new facility as with our other locations the new bankers designed for relationship building.
Bradley P. Peters: Our new facilities have serves as a great tool to attract new business and enhance existing relationships.
Bradley P. Peters: The new facility in our auto market is under construction and we anticipate we will be occupying the new bank in the fourth quarter of this year.
Bradley P. Peters: Those are the end of my comments I'll now turn it back over to Jamie.
Jamie: Thanks, Brad.
Speaker Change: Net income for the quarter was $5 8 million compared to $4 five.
Jamie: $5 million in the fourth quarter of 2023, and $7 8 million in the first quarter of 2023. There is no provision for loan losses recorded in the first quarter as compared to a small provision of 500000 in the fourth quarter of 2023 as previously mentioned, our credit quality or quality remains pristine net interest in.
Jamie: <unk> was up 389000 in the first quarter compared to the fourth quarter of 2023, and our net interest margin increased one basis point quarter over quarter net.
Jamie: Net interest margin has ranged from 187% to 191% for the last three quarters loan and investment cash flows the maturities continue to reprice at higher prevailing market rates, however competition for deposits and extended inverted yield curve and higher for longer rate expectations continue to put upward pressure on <unk>.
Jamie: Posit rates market rate volatility our customers cash flow activities and competition for deposits continues to create uncertainty in any forecasting of net interest margin.
Speaker Change: With that those are the end of our prepared remarks, and we will take any question.
Jamie: Okay.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue if you'd like to withdraw your question simply press Star. One again, if you are called upon to ask your question and our listening via loud speaker on your device. Please pick up your <unk>.
Jamie: Handset and ensure that your phone is not on mute when asking your question.
Jamie: Again press star one to join the queue.
Jamie: Your first question comes from the line of Andrew Liesch with Piper Sandler. Please go ahead.
Andrew Brian Liesch: Hey, good afternoon, everyone.
Andrew Brian Liesch: Jamie just on the margin comes from Great resiliency here.
Andrew Brian Liesch: And then I know, it's pretty tough to forecast out just given that you could see some upward pressure.
Jamie: For longer environment, but.
Jamie: With that said I mean.
Jamie: It seems like you have now found a place where it can finally level out, but given that there wasn't as much upward pressure on deposit costs this quarter like a subsiding.
Jamie: You are getting better yields on new loans.
Jamie: I guess is this a good level to build off of or maybe.
Jamie: Steady forward.
Jamie: I would say that our the yield on the loan portfolio is improving at a little bit.
Jamie: Faster pace than what we had originally projected for this year. So that's a good thing but at the same time the deposit costs have also gone up but they have slowed.
Jamie: To a much more manageable pace. So we really hate to give any forecast of margin. We do have some interest rate swaps that are going to be repricing in second and third quarter that were at some pretty low rates and so they'll reprice.
Jamie: On the cost side and more market rates.
Jamie: So while we're seeing good movement in the right direction at this point in time, we know that there's going to be other things re pricing throughout the year that could continue to give us challenges, but like Dave said, we hope we've kind of reached the bottom.
Speaker Change: Got it.
Speaker Change: That's really helpful commentary thanks, so much.
Speaker Change: In my notes here that you have about $800 million.
Speaker Change: Index to deposits is that correct on that number.
Speaker Change: Yeah.
Speaker Change: It's been running.
Jamie: Pretty steady at that level.
Speaker Change: Okay got it.
Speaker Change: And then.
Jamie: On the loan growth side.
Jamie: Good construction it sounds like the pipeline there is solid CRE, maybe a little more challenging but you also had some good.
Jamie: C&I growth in the pipeline, there and I guess, where is that growth coming from.
Jamie: I would say our.
Jamie: Our emphasis is more on deposit gathering yes, we are.
Jamie: Picked up.
Jamie: A few customers but.
Jamie: A little bit more than the left side.
Speaker Change: Does that makes sense.
Speaker Change: Yes, certainly.
Speaker Change: I guess along those lines how is that deposit pipeline here looking at as you go throughout the year.
Speaker Change: It can be pretty tough to grow commercial deposits.
Speaker Change: And same with April Budd.
Speaker Change: The rest of the year on the funding side.
Speaker Change: I think.
Speaker Change: We have.
Speaker Change: A handful of fairly significant.
Speaker Change: Relationships that we're chasing right now and we think that.
Speaker Change: We're going to be successful on the majority of those so.
Speaker Change: Our fingers are crossed but.
Speaker Change: It's good.
Speaker Change: Great.
Speaker Change: And then.
Speaker Change: Yeah, Joe they're very helpful.
Speaker Change: And then last.
Speaker Change: All right last question for you just on the expense base. Some good cost control here came in.
Joe: Lower than I was expecting is this a good run rate to build off of or is there anything that might affect operating costs. We are heading this quarter that could push us higher.
Speaker Change: Well I think.
Speaker Change: Yes.
Speaker Change: Essentially we know occupancy is going to go up with our addition of the new building.
Speaker Change: Yet to be determined what the cost that we will have some onetime expenses in the second quarter just for the logistics of the physical move and things like that but other than that we're.
Speaker Change: We're not expecting any.
Speaker Change: Significant shifts in the expense side.
Speaker Change: Okay, great. Thank you for taking all the questions that covers everything I'll step back.
Speaker Change: Thank you.
Speaker Change: Again, if you'd like to ask a question press Star then the number one on your telephone keypad.
Speaker Change: Okay.
Speaker Change: That does conclude our Q&A session I will now turn the conference back over to Jane Funk for closing remarks.
Jane M. Funk: Again, we just want to thank everybody for joining us on our call today and.
Jane M. Funk: And we look forward to talking to you again next quarter. Thank you.
Jane M. Funk: This concludes today's conference call you may now disconnect.
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