West Bancorporation, Inc.
Q1 2017 Earnings Call Transcript

Published: 30 Apr 2017

[Operator:]

Good morning and welcome to the West Bancorporation Quarterly Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions [Operator Instructions]. Please also note that this event is being recorded. I would now like to turn the conference over to Mr. Doug Gulling. Please go ahead.

[Doug Gulling:]

Thank you, Andrea, and welcome, good morning. We appreciate you joining us this morning. With me are, Brad Winterbottom, West Bank President; Dave Nelson, our CEO; Marie Roberts, our Chief Accounting Officer; and Harlee Olafson, our Chief Risk Officer. Let me get our fair disclosure statement out of the way. Comments made during this conference call may contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans, and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes to circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in the company’s periodic filings with the Securities and Exchange Commission, including the company’s 10-K, for the year ended December 31, 2016. Any forward-looking statement made by us during this call is based only solely on information currently available to us and speaks only as of today’s date. The company undertakes no obligation to revise or update such statements to reflect current events or circumstances after this call or to reflect the occurrence of anticipated events. I’d like to turn it over to Dave Nelson to start.

[Dave Nelson:]

Thank you, Doug, and good morning, everyone. Thank you for joining us. We appreciate both your interest and support in our company. We had a record first quarter which is now our 11th consecutive record quarter and we are off to a very good start for the year. Our good growth continues with exceptional credit quality. All appears to be well at West Bank. Our Board declared an increase to our quarterly dividend to $0.18 per share, which represents the highest quarterly dividend ever paid by our company. This dividend will be payable, May 24, to shareholders of record as of May 10. We now have record earnings and record dividends. I’d like to turn the call over to Brad Winterbottom, our Bank President to discuss more details.

[Brad Winterbottom:]

Thanks Dave. The loan balances increased from roughly 1.4 billion to 1.45 billion for the first quarter. Our commercial C&I fees of this, I would say that we have picked up a handful of really nice relationships over the last few months and those new relationships are kind of replacing a couple of long-time customers that ended up selling to private equity companies and so we have lost a couple of customers as well. Our construction in land development and that’s mostly construction activity has increased for the first quarter. I think the mild winter kept the construction companies busy, and we’ve had advances on construction notes and I would anticipate that number to continue to increase probably through the fall as we have about a couple of handful of very large construction projects that are in midstream. I will also tell you that we anticipate converting those to term bases at the end of construction, so that will be amortizing probably by the end of the year. Our commercial real estate numbers have also increased, but those would be primarily some owner occupied transactions that have taken place. But in all three markets we’ve seen growth. Our pipeline is full, we’re pleased with the pipeline and with that we are chasing a lot of deposits to help fund this growth and I’m pleased to report that that progress is doing very well also. Those would be my comments. I’ll turn it over to Harlee to talk about assets quality and any might have a few more comments about Rochester and Iowa City markets.

[Harlee Olafson:]

Thanks Brad. I’ll brief here on our credit quality since it is very good. One statistic is that for both year-end ’15, year-end ’16 and the first quarter of ’17 we have been in a net recovery position in both years and first quarter. Our watch list is at a historically low level. Past dues this last quarter in our portfolio of $1.450 billion were a total $70,000 over 30 days past due. So I think both of those were barely over 30 days past due in our current. We have no yield, we a have possession ending. So the credit trends are very good and appear to be sustainable and strong. Rochester and Iowa City both have good pipelines. In fact combined have over $100 million in our commercial pipelines right now between the two. Rochester Bank is open for business. The new bank is up and running, it looks real nice, and I think it’s getting strong results right now. They are working very diligently to continue to sell through our commercial customers; they are personal banking services and having good results doing that. And on a combined basis we continue to implement proper pricing and fees to properly support our products and services that we are providing. The increase in short-term rates has changed our cost a bid on our savings products, but is also increasing on our lines of credit the earnings there. So with that I’d turn it back over to Doug.

[Doug Gulling:]

Thanks Harlee. Just to have one follow-up comment, just to comment on the provision. As you noticed we did not take provision for loan loss this quarter, but as I mentioned we’ve been in a recovery mode really for quite some time. And in the first quarter we had net recoveries of $315,000 and so when we analyze the allowance at the end of the quarter, we felt that was appropriate increase in the allowance to cover the loan growth for the first quarter, so we did not add anymore into allowance. With that, we’ll stop and ask if there are any questions.

[Operator:]

[Operator Instructions] our first question comes from Andrew Liesch of Sandler O’Neill. Please go ahead.

[Andrew Liesch:]

Just a question on the securities book, looks like its holding pretty close to this 260 million or so. Is that kind of the level that you want to manage it to going forward, or do you look at it as a percentage of assets?

[Doug Gulling:]

I think we looked at it more just an absolute number. It would probably won’t’ drop much lower than it is right now.

[Andrew Liesch:]

So if it stays around here and you get the loan growth coming on presumably improved growing asset mix, better loan yield, maybe offset by some higher funding costs and you could see the margin move up from this 348 level, does that seem reasonable?

[Doug Gulling:]

Well, that’s possible. I guess I wouldn’t expect it to move significantly from where it is right now, but I think your points are valid.

[Andrew Liesch:]

And then just curious what tax rate we should be using to forecast? Is it going to bounce back to the normal level this quarter?

[Doug Gulling:]

Congress won’t do anything this quarter, will they?

[Andrew Liesch:]

No I was thinking related to stock based compensation.

[Doug Gulling:]

I think we’re talking around 32%.

[Andrew Liesch:]

Thanks where I’m at.

[Operator:]

[Operator Instructions] And next question comes from Sam [Carlstrom] of West Bank. Please go ahead.

[Unidentified Analyst:]

It’s Sam Calstrom just checking in, and I don’t have a question, just want to tell you, keep up the good work, it’s nice to watch from a distance and nice to know that I’ve got a little in the game. Thanks again.

[Operator:]

[Operator Instructions]. There appear to be no further questions at this time. I would like to turn the conference back over to Mr. Dough Gulling for any closing remarks.

[Doug Gulling:]

Well, just like to thank you again for joining us this morning, and again we appreciate your interest in our company. And we will do this again at the end of July. So thank you.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.