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West Bank to add $100M in growth capital with subordinated debt, credit agreement


West Bancorporation is raising an additional $100 million of capital to support continued growth of the regional banking operations of West Des Moines-based West Bank.

In a regulatory filing on Monday with the U.S. Securities and Exchange Commission, West Bancorporation released details of its proposed $60 million offering of 10-year, subordinated notes. The debt issuance is expected to be bid on beginning Wednesday by institutional buyers, primarily other banks. Additionally, the company has secured $40 million in capital through a credit agreement with a Wisconsin-based bank.

Although West Bank has purchased other banks’ subordinated notes in the past, this is the first time the bank is issuing its own subordinated notes as a means of raising additional regulatory capital, said Dave Nelson, president and CEO of West Bancorporation and chairman and CEO of West Bank.

“We’re doing it for all the right reasons, which is because of growth,” Nelson said in a phone interview with the Business Record. “Our asset size and loan value has been growing faster than our equity. So we thought it was a good idea to raise more money” by issuing subordinated notes.

West Bank last year was named by S&P Global as one of America’s top 50 performing banks, with a ranking of No. 13 nationally among large community banks.  

Nelson said the additional capital will enable West Bank to continue its trajectory of asset growth and to maintain its status as a well-capitalized bank. He noted that the bank has long held a policy of being at least 100 basis points in excess of the minimum amount of regulatory capital needed to be considered well-capitalized.

Subordinated notes are similar in nature to an unsecured loan or corporate bond, in that an investing institution or individual is repaid subordinate to the claims of secured creditors. West Bancorporation and West Bank have been rated A- and BBB+, respectively, by rating agencies for this issuance, Nelson said.

Wilmington Trust, a Delaware corporation, is the trustee for the subordinated notes issuance; Sandler O’Neill is the book runner for orders.

Nelson noted that as a publicly traded company, West Bancorporation could have issued additional shares of stock, but raising capital through subordinated debt was more cost-efficient for the company, and will not dilute the value of shareholders’ current shares. The 10-year notes are structured to pay a fixed rate for the initial five years, after which they will transition to a floating rate.

West Bancorporation also disclosed on Monday that it has borrowed $40 million through a term loan with National Exchange Bank & Trust, based in Fond du Lac, Wis. The loan’s maturity date is Feb. 5, 2027. Under the agreement, entered into on Dec. 15, West Bancorporation will make quarterly interest payments until May 5, 2023, and then quarterly principal payments beginning on that date, with the balance due on the maturity date. The loan is secured by a first priority security interest in all of the capital stock of West Bank.

West Bancorporation in April reported first-quarter net income of $13.2 million and declared a regular quarter stock dividend of 25 cents per share. Its stock closed Monday at $25.15 per share, up 1.29% for the day. Total assets as of March 31 were more than $3.547 billion, up from $3.5 billion on Dec. 31.

The company in March opened a newly constructed bank building in St. Cloud, Minn., a market it entered three years ago, and has several new bank building projects in various stages of planning and development, including a new corporate headquarters in West Des Moines near Valley West Mall.

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