WEST BANCORPORATION INCWTBA
WEST BANCORPORATION INC Fair Value Disclosure
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business. The Company’s balance sheet contains securities available for sale and derivative instruments that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows:
Level 1 uses quoted market prices in active markets for identical assets or liabilities.
Level 2 uses observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 uses unobservable inputs that are not corroborated by market data.
The Company’s policy is to recognize transfers between levels at the end of each reporting period, if applicable. There were no transfers between levels of the fair value hierarchy during 2025 or 2024.
The following is a description of valuation methodologies used for financial assets and liabilities recorded at fair value on a recurring basis.
Securities available for sale: When available, quoted market prices are used to determine the fair value of securities (Level 1). If quoted market prices are not available, the Company determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable (Level 2). The fair values of these securities are determined by pricing models that consider observable market data such as interest rate volatilities, yield curves, credit spreads, prices from market makers and live trading systems.
Management obtains the fair value of securities at the end of each reporting period via a third-party pricing service. Management reviewed the valuation process used by the third party and believed the process was valid as of December 31, 2025. On a quarterly basis, management corroborates the fair values of the portfolio by obtaining pricing from an independent financial market data vendor and compares the two sets of fair values. Any significant variances are reviewed and investigated. For a sample of securities, the fair values are further validated by management, by obtaining details of the inputs used by the pricing service. Those inputs were independently tested, and management concluded the fair values were consistent with GAAP requirements and the securities were properly classified in the fair value hierarchy.
Derivative instruments: The Company’s derivative instruments consist of interest rate swaps and interest rate collars accounted for as cash flow hedges, as well as interest rate swaps which are accounted for as non-hedging derivatives. The Company’s derivative positions are classified within Level 2 of the fair value hierarchy and are valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or nonbinding broker-dealer quotations. The fair value of the derivatives are determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.
The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis by level as of December 31, 2025 and 2024.
| 2025 | ||||||||||||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||
| State and political subdivisions | $ | 163,264 | $ | — | $ | 163,264 | $ | — | ||||||||||||||||||
| Collateralized mortgage obligations | 193,683 | — | 193,683 | — | ||||||||||||||||||||||
| Mortgage-backed securities | 96,142 | — | 96,142 | — | ||||||||||||||||||||||
| Collateralized loan obligations | 2,307 | — | 2,307 | — | ||||||||||||||||||||||
| Corporate notes | 13,051 | — | 13,051 | — | ||||||||||||||||||||||
| Derivative instruments | 12,785 | — | 12,785 | — | ||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||
| Derivative instruments | $ | 10,916 | $ | — | $ | 10,916 | $ | — | ||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||
| State and political subdivisions | $ | 174,145 | $ | — | $ | 174,145 | $ | — | ||||||||||||||||||
| Collateralized mortgage obligations | 219,264 | — | 219,264 | — | ||||||||||||||||||||||
| Mortgage-backed securities | 119,819 | — | 119,819 | — | ||||||||||||||||||||||
| Collateralized loan obligations | 18,965 | — | 18,965 | — | ||||||||||||||||||||||
| Corporate notes | 12,372 | — | 12,372 | — | ||||||||||||||||||||||
| Derivative instruments | 24,181 | — | 24,181 | — | ||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||
| Derivative instruments | $ | 14,554 | $ | — | $ | 14,554 | $ | — | ||||||||||||||||||
Certain assets are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Individually evaluated loans that are deemed to have impairment are classified within Level 3 of the fair value hierarchy and are recorded at fair value, which is based on the value of the collateral securing these loans. As of both December 31, 2025 and 2024, there were no individually evaluated loans with a fair value adjustment.
In determining the estimated net realizable value of the underlying collateral of individually evaluated loans, the Company primarily uses third-party appraisals or broker opinions which may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and include consideration of variations in location, size, and income production capacity of the property. Additionally, the appraisals are periodically further adjusted by the Company in consideration of charges that may be incurred in the event of foreclosure and are based on management’s historical knowledge, changes in business factors and changes in market conditions. Because of the high degree of judgment required in estimating the fair value of collateral underlying individually evaluated loans and because of the relationship between fair value and general economic conditions, the Company considers the fair value of individually evaluated loans to be highly sensitive to changes in market conditions.
GAAP requires disclosure of the fair value of financial assets and liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis. The following table presents the carrying amounts and approximate fair values of financial assets and liabilities as of December 31, 2025 and 2024.
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Carrying Amount | Approximate Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 25,171 | $ | 25,171 | $ | 25,171 | $ | — | $ | — | ||||||||||||||||||||||
| Interest-bearing deposits with banks | 324,502 | 324,502 | 324,502 | — | — | |||||||||||||||||||||||||||
| Securities purchased under agreements to resell | 121,413 | 121,413 | — | 121,413 | — | |||||||||||||||||||||||||||
| Securities available for sale | 468,447 | 468,447 | — | 468,447 | — | |||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 15,167 | 15,167 | — | 15,167 | — | |||||||||||||||||||||||||||
| Loans, net | 2,971,165 | 2,953,867 | — | 2,953,867 | — | |||||||||||||||||||||||||||
| Accrued interest receivable | 11,982 | 11,982 | 11,982 | — | ||||||||||||||||||||||||||||
| Derivative instruments | 12,785 | 12,785 | — | 12,785 | — | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 3,468,470 | $ | 3,468,215 | $ | — | $ | 3,468,215 | $ | — | ||||||||||||||||||||||
| Subordinated notes, net | 80,156 | 74,660 | — | 74,660 | — | |||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 270,000 | 270,000 | — | 270,000 | — | |||||||||||||||||||||||||||
| Long-term debt | 26,250 | 26,250 | — | 26,250 | — | |||||||||||||||||||||||||||
| Accrued interest payable | 5,319 | 5,319 | 5,319 | — | ||||||||||||||||||||||||||||
| Derivative instruments | 10,916 | 10,916 | — | 10,916 | — | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Carrying Amount | Approximate Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 28,750 | $ | 28,750 | $ | 28,750 | $ | — | $ | — | ||||||||||||||||||||||
| Interest-bearing deposits with banks | 214,728 | 214,728 | 214,728 | — | — | |||||||||||||||||||||||||||
| Securities available for sale | 544,565 | 544,565 | — | 544,565 | — | |||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 15,129 | 15,129 | — | 15,129 | — | |||||||||||||||||||||||||||
| Loans, net | 2,974,428 | 2,905,574 | — | 2,905,574 | — | |||||||||||||||||||||||||||
| Accrued interest receivable | 12,825 | 12,825 | 12,825 | — | — | |||||||||||||||||||||||||||
| Derivative instruments | 24,181 | 24,181 | — | 24,181 | — | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 3,357,596 | $ | 3,357,219 | $ | — | $ | 3,357,219 | $ | — | ||||||||||||||||||||||
| Subordinated notes, net | 79,893 | 68,522 | — | 68,522 | — | |||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 270,000 | 270,000 | — | 270,000 | — | |||||||||||||||||||||||||||
| Long-term debt | 42,736 | 42,736 | — | 42,736 | — | |||||||||||||||||||||||||||
| Accrued interest payable | 8,396 | 8,396 | 8,396 | — | — | |||||||||||||||||||||||||||
| Derivative instruments | 14,554 | 14,554 | — | 14,554 | — | |||||||||||||||||||||||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Mar 3, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.