UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended June 30, 2009





or





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
transition period from 
to





Commission
File Number 0-49677





WEST BANCORPORATION,
INC.


(Exact
Name of Registrant as Specified in its Charter)





IOWA
                    
                    42-1230603(State
      of Incorporation)
                    
                    (I.R.S.
      Employer Identification No.)





1601
22nd
Street, West Des Moines, Iowa 50266





Telephone
Number (515) 222-2300





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





Yes x    No
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





Yes  ̈    No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated filer
                   ̈
                  
                  Accelerated
      filer
                  xNon-accelerated
      filer
                   ̈
                  
                  Smaller
      reporting company
                   ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes
 ̈    No  x





As of
July 29, 2009, there were 17,403,882 shares of common stock, no par value
outstanding.





PART 1 –
FINANCIAL INFORMATION


Item
1.  Financial Statements





West
Bancorporation, Inc. and Subsidiaries


Consolidated
Balance Sheets


(unaudited)





June
      30,
                                  
                                  
                                  December
      31,(in
      thousands, except per share data)
                                  
                                  2009
                                  
                                  
                                  2008AssetsCash
      and due from banks
                                  
                                  $
                                  23,985
                                  
                                  
                                  $
                                  23,712Federal
      funds sold and other short-term investments
                                  
                                  
                                  64,254
                                  
                                  
                                  
                                  173,257Cash
      and cash equivalents
                                  
                                  
                                  88,239
                                  
                                  
                                  
                                  196,969Securities
      available for sale
                                  
                                  
                                  245,840
                                  
                                  
                                  
                                  181,434Federal
      Home Loan Bank stock, at cost
                                  
                                  
                                  9,756
                                  
                                  
                                  
                                  8,174Loans
      held for sale
                                  
                                  
                                  7,213
                                  
                                  
                                  
                                  1,018Loans
                                  
                                  
                                  1,115,324
                                  
                                  
                                  
                                  1,100,735Allowance
      for loan losses
                                  
                                  
                                  (23,662
                                  )
                                  
                                  
                                  (15,441
                                  )Loans,
      net
                                  
                                  
                                  1,091,662
                                  
                                  
                                  
                                  1,085,294Premises
      and equipment, net
                                  
                                  
                                  5,108
                                  
                                  
                                  
                                  4,916Accrued
      interest receivable
                                  
                                  
                                  7,122
                                  
                                  
                                  
                                  6,415Goodwill
                                  
                                  
                                  1,894
                                  
                                  
                                  
                                  24,930Other
      intangible assets
                                  
                                  
                                  1,095
                                  
                                  
                                  
                                  1,404Bank-owned
      life insurance
                                  
                                  
                                  24,986
                                  
                                  
                                  
                                  25,277Other
      real estate owned
                                  
                                  
                                  6,137
                                  
                                  
                                  
                                  4,352Other
      assets
                                  
                                  
                                  24,849
                                  
                                  
                                  
                                  13,005Total
      assets
                                  
                                  $
                                  1,513,901
                                  
                                  
                                  $
                                  1,553,188Liabilities and Stockholders'
      EquityLiabilitiesDeposits:Noninterest-bearing
      demand
                                  
                                  $
                                  209,893
                                  
                                  
                                  $
                                  174,635Interest-bearing
      demand
                                  
                                  
                                  132,597
                                  
                                  
                                  
                                  97,853Savings
                                  
                                  
                                  348,275
                                  
                                  
                                  
                                  238,058Time
      of $100,000 or more
                                  
                                  
                                  250,202
                                  
                                  
                                  
                                  274,825Other
      time
                                  
                                  
                                  235,927
                                  
                                  
                                  
                                  369,416Total
      deposits
                                  
                                  
                                  1,176,894
                                  
                                  
                                  
                                  1,154,787Federal
      funds purchased and securities sold under agreements to
      repurchase
                                  
                                  
                                  48,938
                                  
                                  
                                  
                                  93,111Other
      short-term borrowings
                                  
                                  
                                  3,262
                                  
                                  
                                  
                                  245Accrued
      expenses and other liabilities
                                  
                                  
                                  10,520
                                  
                                  
                                  
                                  9,363Subordinated
      notes
                                  
                                  
                                  20,619
                                  
                                  
                                  
                                  20,619Long-term
      borrowings
                                  
                                  
                                  125,000
                                  
                                  
                                  
                                  125,000Total
      liabilities
                                  
                                  
                                  1,385,233
                                  
                                  
                                  
                                  1,403,125Stockholders'
      EquityPreferred
      stock, $0.01 par value, with a liquidation preference of $1,000 per share;
      authorized 50,000,000 shares; 36,000 shares issued
      and  outstanding at June 30, 2009 and December 31, 2008,
      respectively
                                  
                                  
                                  33,785
                                  
                                  
                                  
                                  33,548Common
      stock, no par value; authorized 50,000,000 shares; 17,403,882 shares
      issued and outstanding at June 30, 2009 and December 31, 2008,
      respectively
                                  
                                  
                                  3,000
                                  
                                  
                                  
                                  3,000Additional
      paid-in capital
                                  
                                  
                                  34,387
                                  
                                  
                                  
                                  34,452Retained
      earnings
                                  
                                  
                                  62,377
                                  
                                  
                                  
                                  82,793Accumulated
      other comprehensive (loss)
                                  
                                  
                                  (4,881
                                  )
                                  
                                  
                                  (3,730
                                  )Total
      stockholders' equity
                                  
                                  
                                  128,668
                                  
                                  
                                  
                                  150,063Total
      liabilities and stockholders' equity
                                  
                                  $
                                  1,513,901
                                  
                                  
                                  $
                                  1,553,188





See
accompanying Notes to Consolidated Financial Statements.


2


West
Bancorporation, Inc. and Subsidiaries


Consolidated
Statements of Income (Loss)


(unaudited)





Three
      Months Ended June 30,
                            
                            
                            Six
      Months Ended June 30,(in
      thousands, except per share data)
                            
                            2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008Interest
      income:Loans,
      including fees
                            
                            $
                            15,102
                            
                            
                            $
                            15,313
                            
                            
                            $
                            30,124
                            
                            
                            $
                            31,690Securities:U.S
      Treasury, government agencies and corporations
                            
                            
                            607
                            
                            
                            
                            536
                            
                            
                            
                            1,219
                            
                            
                            
                            1,521States
      and political subdivisions
                            
                            
                            1,120
                            
                            
                            
                            967
                            
                            
                            
                            2,220
                            
                            
                            
                            1,910Corporate
      notes and other investments
                            
                            
                            234
                            
                            
                            
                            439
                            
                            
                            
                            359
                            
                            
                            
                            837Federal
      funds sold and other short-term investments
                            
                            
                            208
                            
                            
                            
                            75
                            
                            
                            
                            311
                            
                            
                            
                            235Total
      interest income
                            
                            
                            17,271
                            
                            
                            
                            17,330
                            
                            
                            
                            34,233
                            
                            
                            
                            36,193Interest
      expense:Demand
      deposits
                            
                            
                            671
                            
                            
                            
                            233
                            
                            
                            
                            1,148
                            
                            
                            
                            523Savings
      deposits
                            
                            
                            1,147
                            
                            
                            
                            926
                            
                            
                            
                            1,531
                            
                            
                            
                            2,419Time
      deposits
                            
                            
                            3,487
                            
                            
                            
                            3,379
                            
                            
                            
                            7,891
                            
                            
                            
                            7,568Federal
      funds purchased and securities sold under  agreements to
      repurchase
                            
                            
                            84
                            
                            
                            
                            714
                            
                            
                            
                            175
                            
                            
                            
                            1,978Other
      short-term borrowings
                            
                            
                            -
                            
                            
                            
                            5
                            
                            
                            
                            -
                            
                            
                            
                            34Subordinated
      notes
                            
                            
                            367
                            
                            
                            
                            367
                            
                            
                            
                            730
                            
                            
                            
                            734Long-term
      borrowings
                            
                            
                            1,320
                            
                            
                            
                            1,471
                            
                            
                            
                            2,626
                            
                            
                            
                            2,826Total
      interest expense
                            
                            
                            7,076
                            
                            
                            
                            7,095
                            
                            
                            
                            14,101
                            
                            
                            
                            16,082Net
      interest income
                            
                            
                            10,195
                            
                            
                            
                            10,235
                            
                            
                            
                            20,132
                            
                            
                            
                            20,111Provision
      for loan losses
                            
                            
                            15,000
                            
                            
                            
                            1,000
                            
                            
                            
                            18,500
                            
                            
                            
                            6,600Net
      interest income after provision for loan losses
                            
                            
                            (4,805
                            )
                            
                            
                            9,235
                            
                            
                            
                            1,632
                            
                            
                            
                            13,511Noninterest
      income:Service
      charges on deposit accounts
                            
                            
                            1,073
                            
                            
                            
                            1,250
                            
                            
                            
                            2,042
                            
                            
                            
                            2,296Trust
      services
                            
                            
                            179
                            
                            
                            
                            204
                            
                            
                            
                            359
                            
                            
                            
                            398Gains
      and fees on sales of residential mortgages
                            
                            
                            237
                            
                            
                            
                            135
                            
                            
                            
                            535
                            
                            
                            
                            220Investment
      advisory fees
                            
                            
                            1,593
                            
                            
                            
                            1,960
                            
                            
                            
                            3,009
                            
                            
                            
                            3,898Increase
      in cash value of bank-owned life insurance
                            
                            
                            181
                            
                            
                            
                            257
                            
                            
                            
                            363
                            
                            
                            
                            449Proceeds
      from bank-owned life insurance
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            840
                            
                            
                            
                            -Other
      income
                            
                            
                            527
                            
                            
                            
                            475
                            
                            
                            
                            1,031
                            
                            
                            
                            947Total
      noninterest income
                            
                            
                            3,790
                            
                            
                            
                            4,281
                            
                            
                            
                            8,179
                            
                            
                            
                            8,208Investment
      securities gains (losses), net:Total
      other-than-temporary impairment losses
                            
                            
                            (1,013
                            )
                            
                            
                            -
                            
                            
                            
                            (2,428
                            )
                            
                            
                            -Portion
      of loss recognized in other comphehensive income (loss) before
      taxes
                            
                            
                            738
                            
                            
                            
                            -
                            
                            
                            
                            738
                            
                            
                            
                            -Net
      impairment losses recognized in earnings
                            
                            
                            (275
                            )
                            
                            
                            -
                            
                            
                            
                            (1,690
                            )
                            
                            
                            -Realized
      securities gains, net
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,453
                            
                            
                            
                            5Investment
      securities gains (losses), net
                            
                            
                            (275
                            )
                            
                            
                            -
                            
                            
                            
                            (237
                            )
                            
                            
                            5Noninterest
      expense:Salaries
      and employee benefits
                            
                            
                            3,308
                            
                            
                            
                            3,634
                            
                            
                            
                            6,972
                            
                            
                            
                            7,365Occupancy
                            
                            
                            1,163
                            
                            
                            
                            899
                            
                            
                            
                            2,103
                            
                            
                            
                            1,799Data
      processing
                            
                            
                            579
                            
                            
                            
                            611
                            
                            
                            
                            1,125
                            
                            
                            
                            1,198FDIC
      insurance expense
                            
                            
                            1,283
                            
                            
                            
                            153
                            
                            
                            
                            1,736
                            
                            
                            
                            185Goodwill
      impairment
                            
                            
                            23,036
                            
                            
                            
                            -
                            
                            
                            
                            23,036
                            
                            
                            
                            -Other
      expenses
                            
                            
                            1,781
                            
                            
                            
                            1,764
                            
                            
                            
                            3,681
                            
                            
                            
                            3,279Total
      noninterest expense
                            
                            
                            31,150
                            
                            
                            
                            7,061
                            
                            
                            
                            38,653
                            
                            
                            
                            13,826Income
      (loss) before income taxes
                            
                            
                            (32,440
                            )
                            
                            
                            6,455
                            
                            
                            
                            (29,079
                            )
                            
                            
                            7,898Income
      taxes (benefits)
                            
                            
                            (10,161
                            )
                            
                            
                            1,941
                            
                            
                            
                            (9,741
                            )
                            
                            
                            2,010Net
      income (loss)
                            
                            $
                            (22,279
                            )
                            
                            $
                            4,514
                            
                            
                            $
                            (19,338
                            )
                            
                            $
                            5,888Preferred
      stock dividends and accretion of discount
                            
                            
                            (570
                            )
                            
                            
                            -
                            
                            
                            
                            (1,137
                            )
                            
                            
                            -Net
      income (loss) available to common stockholders
                            
                            $
                            (22,849
                            )
                            
                            $
                            4,514
                            
                            
                            $
                            (20,475
                            )
                            
                            $
                            5,888Earnings
      (loss) per common share, basic
                            
                            $
                            (1.32
                            )
                            
                            $
                            0.26
                            
                            
                            $
                            (1.18
                            )
                            
                            $
                            0.34Earnings
      (loss) per common share, diluted
                            
                            $
                            (1.32
                            )
                            
                            $
                            0.26
                            
                            
                            $
                            (1.18
                            )
                            
                            $
                            0.34Cash
      dividends per common share
                            
                            $
                            0.01
                            
                            
                            $
                            0.16
                            
                            
                            $
                            0.09
                            
                            
                            $
                            0.32





See
accompanying Notes to Consolidated Financial Statements.


3


West
Bancorporation, Inc. and Subsidiaries


Consolidated
Statements of Stockholders’ Equity


(unaudited)





AccumulatedAdditional
                  
                  
                  
                  
                  
                  OtherComprehensive
                  
                  
                  Preferred
                  
                  
                  Common
                  
                  
                  Paid-in
                  
                  
                  Retained
                  
                  
                  Comprehensive(in
      thousands, except per share
    data)
                  
                  Income
      (Loss)
                  
                  
                  Stock
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  Earnings
                  
                  
                  Income
      (Loss)
                  
                  
                  TotalBalance,
      January 1, 2008
                  
                  
                  
                  
                  $
                  -
                  
                  
                  $
                  3,000
                  
                  
                  $
                  32,000
                  
                  
                  $
                  87,084
                  
                  
                  $
                  (478
                  )
                  
                  $
                  121,606Comprehensive
      income:Net
      income
                  
                  $
                  5,888
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,888
                  
                  
                  
                  -
                  
                  
                  
                  5,888Other
      comprehensive (loss), unrealized (losses) on securities, net of
      reclassification adjustment, net of tax
                  
                  
                  (3,303
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,303
                  )
                  
                  
                  (3,303
                  )Total
      comprehensive income
                  
                  $
                  2,585Shares
      reaquired and retired under the common stock repurchase
    plan
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (788
                  )
                  
                  
                  -
                  
                  
                  
                  (788
                  )Cash
      dividends declared, $0.32 per common share
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (5,570
                  )
                  
                  
                  -
                  
                  
                  
                  (5,570
                  )Balance,
      June 30, 2008
                  
                  
                  
                  
                  
                  $
                  -
                  
                  
                  $
                  3,000
                  
                  
                  $
                  32,000
                  
                  
                  $
                  86,614
                  
                  
                  $
                  (3,781
                  )
                  
                  $
                  117,833Balance,
      January 1, 2009
                  
                  
                  
                  
                  
                  $
                  33,548
                  
                  
                  $
                  3,000
                  
                  
                  $
                  34,452
                  
                  
                  $
                  82,793
                  
                  
                  $
                  (3,730
                  )
                  
                  $
                  150,063Cumulative
      effect accounting adjustment, net of tax (1)
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,625
                  
                  
                  
                  (1,625
                  )
                  
                  
                  -Comprehensive
      (loss):Net
      (loss)
                  
                  $
                  (19,338
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (19,338
                  )
                  
                  
                  -
                  
                  
                  
                  (19,338
                  )Other
      comprehensive income, unrealized gains on securities, net of
      reclassification adjustment, net of tax
                  
                  
                  474
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  474
                  
                  
                  
                  474Total
      comprehensive (loss)
                  
                  $
                  (18,864
                  )Preferred
      stock discount accretion
                  
                  
                  
                  
                  
                  
                  237
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (237
                  )
                  
                  
                  -
                  
                  
                  
                  -Preferred
      stock issuance costs
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (65
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (65
                  )Cash
      dividends declared, $0.09 per common share
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,566
                  )
                  
                  
                  -
                  
                  
                  
                  (1,566
                  )Preferred
      stock dividends
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (900
                  )
                  
                  
                  -
                  
                  
                  
                  (900
                  )Balance,
      June 30, 2009
                  
                  
                  
                  
                  
                  $
                  33,785
                  
                  
                  $
                  3,000
                  
                  
                  $
                  34,387
                  
                  
                  $
                  62,377
                  
                  
                  $
                  (4,881
                  )
                  
                  $
                  128,668





(1)
            Represents
      reclassifications of noncredit-related components of previously recorded
      other-than-temporary losses pursuant to the adoption
      of    FSP 115-2 and 124-2,Recognition and Presentation
      of Other-Than-Temporary
Impairments.





See
accompanying Notes to Consolidated Financial Statements.


4





West
Bancorporation, Inc. and Subsidiaries


Consolidated
Statements of Cash Flows


(unaudited)





Six
      Months Ended June 30,(in
      thousands)
                
                2009
                
                
                2008Cash
      Flows from Operating Activities:Net
      income (loss)
                
                $
                (19,338
                )
                
                $
                5,888Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Provision
      for loan losses
                
                
                18,500
                
                
                
                6,600Goodwill
      impairment
                
                
                23,036
                
                
                
                -Net
      amortization and accretion
                
                
                478
                
                
                
                468Loss
      on disposition of premises and equipment
                
                
                3
                
                
                
                23Securities
      gains, net
                
                
                (1,453
                )
                
                
                (5
                )Investment
      securities impairment losses
                
                
                1,690
                
                
                
                -Proceeds
      from sales of loans held for sale
                
                
                39,043
                
                
                
                16,714Originations
      of loans held for sale
                
                
                (45,238
                )
                
                
                (17,086
                )Proceeds
      from bank-owned life insurance
                
                
                (840
                )
                
                
                -Increase
      in value of bank-owned life insurance
                
                
                (363
                )
                
                
                (449
                )Depreciation
                
                
                437
                
                
                
                457Deferred
      income taxes
                
                
                (9,723
                )
                
                
                (539
                )Change
      in assets and liabilities:(Increase)
      decrease in accrued interest receivable
                
                
                (707
                )
                
                
                1,630Increase
      in other assets
                
                
                (2,417
                )
                
                
                (1,289
                )Increase
      in accrued expenses and other liabilities
                
                
                933
                
                
                
                895Net
      cash provided by operating activities
                
                
                4,041
                
                
                
                13,307Cash
      Flows from Investing Activities:Proceeds
      from sales, calls, and maturities of securities available for
      sale
                
                
                74,486
                
                
                
                104,176Purchases
      of securities available for sale
                
                
                (138,525
                )
                
                
                (47,983
                )Purchases
      of Federal Home Loan Bank stock
                
                
                (1,582
                )
                
                
                (4,929
                )Proceeds
      from redemption of Federal Home Loan Bank stock
                
                
                -
                
                
                
                2,299Net
      change in loans
                
                
                (30,748
                )
                
                
                (79,923
                )Net
      proceeds from the sale of other real estate owned
                
                
                4,092
                
                
                
                144Proceeds
      from sales of premises and equipment
                
                
                2
                
                
                
                10Purchases
      of premises and equipment
                
                
                (634
                )
                
                
                (353
                )Proceeds
      of principal and earnings from bank-owned life insurance
                
                
                1,493
                
                
                
                -Net
      cash used in investing activities
                
                
                (91,416
                )
                
                
                (26,559
                )Cash
      Flows from Financing Activities:Net
      change in deposits
                
                
                22,107
                
                
                
                27,546Net
      change in federal funds purchased and securities sold under agreements to
      repurchase
                
                
                (44,173
                )
                
                
                (44,097
                )Net
      change in other short-term borrowings
                
                
                3,017
                
                
                
                (1,172
                )Proceeds
      from long-term borrowings
                
                
                -
                
                
                
                75,000Principal
      payments on long-term borrowings
                
                
                -
                
                
                
                (25,500
                )Payment
      for shares reacquired under common stock repurchase plan
                
                
                -
                
                
                
                (788
                )Common
      stock cash dividends
                
                
                (1,566
                )
                
                
                (5,570
                )Preferred
      stock dividends paid
                
                
                (675
                )
                
                
                -Preferred
      stock issuance costs
                
                
                (65
                )
                
                
                -Net
      cash provided by (used in) financing activities
                
                
                (21,355
                )
                
                
                25,419Net
      (decrease) increase in cash and cash equivalents
                
                
                (108,730
                )
                
                
                12,167Cash
      and Cash Equivalents:Beginning
                
                
                196,969
                
                
                
                49,943End
                
                $
                88,239
                
                
                $
                62,110


5


Consolidated Statements of Cash Flows(continued)


(unaudited)





Six
      Months Ended June 30,(in
      thousands)
                
                2009
                
                
                2008Supplemental
      Disclosures of Cash Flow InformationCash
      payments for:Interest
                
                $
                13,988
                
                
                $
                16,044Income
      taxes
                
                
                2,276
                
                
                
                3,751Supplemental
      Disclosure of Noncash Investing and Financing ActivitiesTransfer
      of loans to other real estate owned
                
                $
                5,813
                
                
                $
                680





See
accompanying Notes to Consolidated Financial Statements.


6


West
Bancorporation, Inc.


Notes
to Consolidated Financial Statements


(unaudited)


(in
thousands, except per share information)





1.  Basis
of Presentation





The
accompanying consolidated statements of income (loss) for the three and six
months ended June 30, 2009 and 2008, and the consolidated statements of
stockholders’ equity, comprehensive income (loss), and cash flows for the six
months ended June 30, 2009 and 2008, and the consolidated balance sheets as of
June 30, 2009 and December 31, 2008, include the accounts of West
Bancorporation, Inc. (the Company), West Bank, West Bank’s wholly-owned
subsidiary, WB Funding Corporation (which owns an interest in a partnership),
West Bank’s 99.9 percent owned subsidiary, ICD IV, LLC (a community development
partnership), and WB Capital Management Inc. (WB Capital).  All
significant intercompany transactions and balances have been eliminated in
consolidation.  In accordance with Financial Accounting Standards
Board (FASB) Interpretation No. 46, Consolidation of Variable Interest
Entities,a
subsidiary, West Bancorporation Capital Trust I (the Trust) is not consolidated
with the Company.  The results of the Trust are recorded on the books
of the Company using the equity method of accounting.





The
accompanying consolidated financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
management believes that the disclosures are adequate to make the information
presented understandable, it is suggested that these interim consolidated
financial statements be read in conjunction with the Company's most recent
audited financial statements and notes thereto.  In the opinion of
management, the accompanying consolidated financial statements contain all
adjustments necessary to present fairly the financial position as of June 30,
2009, the results of operations for the three and six months ended June 30, 2009
and 2008, and cash flows for the six months ended June 30, 2009 and
2008.  The results for these interim periods may not be indicative of
results for the entire year or for any other period.





Certain
items in the financial statements as of June 30, 2008 were reclassified to be
consistent with the classifications used in the June 30, 2009 financial
statements.  The reclassification has no effect on net income (loss)
or stockholders’ equity.





2.  Use
of Estimates in the Preparation of Financial Statements





The
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles.  In preparing the financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses for the reported period.  Actual
results could differ from those estimates.  Material estimates that
are particularly susceptible to significant change in the near term are the
allowance for loan losses (including the determination of the value of impaired
loans), fair value of financial instruments, and the goodwill impairment
assessment.





3.  Current
Accounting Developments





In April
2009, the Financial Accounting Standards Board (FASB) issued Financial Statement
of Position FAS 115−2 and FAS 124−2, “Recognition and Presentation of
Other−Than−Temporary Impairments” (“FSP FAS 115−2/124−2”).  FSP
FAS 115−2/124−2 requires entities to separate an other−than−temporary impairment
(OTTI) of a debt security into two components when there are credit-related
losses associated with the impaired debt security for which management asserts
that it does not have the intent to sell the security, and it is more likely
than not that it will not be required to sell the security before recovery of
its cost basis.  The amount of the OTTI related to a credit loss is
recognized in earnings, and the amount of the OTTI related to other factors is
recorded in other comprehensive income (loss).  FSP FAS 115−2/124−2 is
effective for periods ending after June 15, 2009.  The Company adopted
FSP FAS 115−2/124−2 effective for the quarter ending June 30,
2009.  The Company recorded a cumulative effect accounting adjustment
that increased retained earnings and decreased accumulated other comprehensive
income (loss) by $2,622 pre-tax or $1,625 after tax, relating to the $4,739 of
impairment losses recorded during 2008.





In April
2009, the FASB issued FSP FAS 157−4, “Determining Fair Value When Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions that are Not Orderly” (“FSP FAS
157−4”).  Under FSP FAS 157−4, if an entity determines that there has
been a significant decrease in the volume and level of activity for the asset or
the liability in relation to the normal market activity for the asset or
liability (or similar assets or liabilities), then transactions or quoted prices
may not accurately reflect fair value.  In addition, if there is
evidence that the transaction for the asset or liability is not orderly; the
entity shall place little, if any weight on that transaction price as an
indicator of fair value.  FSP FAS 157−4 is effective for periods
ending after June 15, 2009.  The Company adopted FSP FAS 157−4
effective for the quarter ending June 30, 2009.  The adoption of this
FSP did not have a material impact on the Company’s financial position or
results of operations.


7





In April
2009, the FASB issued FSP FAS 107−1 and APB 28−1, “Interim Disclosures about Fair
Value of Financial Instruments” (“FSP FAS 107−1 and APB
28−1”).  FSP FAS 107−1 and APB 28−1 require disclosures about fair
value of financial instruments in interim and annual financial
statements.  FSP FAS 107−1 and APB 28−1 is effective for periods
ending after June 15, 2009.  The Company adopted FSP FAS 107−1 and APB
28−1 effective for the quarter ending June 30, 2009.  The adoption did
not have an impact on the Company’s financial position or results of
operations.





In May
2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No.
165”).  SFAS No. 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued.  The Company adopted this statement
for the quarter ending June 30, 2009.





In
June 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets — an amendment of FASB Statement No.140,”to improve the
reporting for the transfer of financial assets resulting from (1) practices that
have developed since the issuance of FASB Statement No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,”that are not consistent
with the original intent and key requirements of that Statement and
(2) concerns of financial statement users that many of the financial assets
(and related obligations) that have been derecognized should continue to be
reported in the financial statements of transferors.  This Statement must
be applied as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter.  Earlier application is prohibited.  The Company will
review the requirements of FASB No. 166 and comply with its requirements.
 The Company does not expect that the adoption of this Statement will have
a material impact on the Company’s consolidated financial
statements.





In
June 2009, the FASB issued Statement of Financial Accounting Standards
No. 167, “Amendments to
FASB Interpretation No.46(R)”to amend certain
requirements of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable
InterestEntities” to improve
financial reporting by enterprises involved with variable interest entities and
to provide more relevant and reliable information to users of financial
statements.  The Statement is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter.  Earlier
application is prohibited.  The Company will review the requirements of
FASB No. 167 and comply with its requirements.  The Company does not
expect that the adoption of this Statement will have a material impact on the
Company’s consolidated financial statements.





In
June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards
CodificationTMand the Hierarchy of Generally
Accepted Accounting Principles—a replacement of FASB Statement No.162.”Under the Statement,
The FASB Accounting
Standards Codification (Codification) will become the source of
authoritative U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied by nongovernmental
entities.  Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants.  On the effective date
of this Statement, the Codification will supersede all then-existing non-SEC
accounting and reporting standards.  All other non-grandfathered non-SEC
accounting literature not included in the Codification will become
non-authoritative.  This Statement is effective for financial statements
issued for interim and annual periods ending after September 15, 2009.
 In the FASB’s view, the issuance of this Statement and the Codification
will not change GAAP, except for those nonpublic nongovernmental entities that
must now apply the American Institute of Certified Public Accountants Technical
Inquiry Service Section 5100, “Revenue Recognition,” paragraphs 38–76.
 The Company does not expect that the adoption of this Statement will have
a material impact on the Company’s consolidated financial
statements.





4.  Critical
Accounting Policies





Management
has identified its most critical accounting policies to be those related to the
allowance for loan losses, goodwill, and fair value of available for sale
investment securities.





The
allowance for loan losses is established through a provision for loan losses
charged to expense.  Loans are charged against the allowance for loan
losses when management believes that collectability of the principal is
unlikely.  The Company has policies and procedures for evaluating the
overall credit quality of its loan portfolio including timely identification of
potential problem loans.  On a quarterly basis, management reviews the
appropriate level for the allowance for loan losses incorporating a variety of
risk considerations, both quantitative and qualitative.  Quantitative
factors include the Company’s historical loss experience, delinquency and
charge-off trends, collateral values, known information about individual loans
and other factors.  Qualitative factors include the general economic
environment in the Company’s market areas and the expected trend of those
economic conditions.  To the extent actual results differ from
forecasts and management’s judgment, the allowance for loan losses may be
greater or less than future charge-offs.


8





Goodwill
is the excess of the cash paid over the net fair value of assets acquired and
liabilities assumed in an acquisition, less the amount of identifiable
intangible assets.  Goodwill is deemed to have an indefinite life, is
not subject to amortization, and is instead tested for impairment at least
annually.  Goodwill is also tested for impairment on an interim basis
if events or circumstances indicate a possible inability to realize the carrying
amount.  Goodwill impairment was reviewed for the interim period
because the Company’s stock traded at a market price of less than its per share
book value.  Therefore, the Company hired a third party valuation firm
to assist management in determining whether goodwill had been
impaired.  The Company’s goodwill consisted of two
pieces.  Goodwill totaling $13,376 was associated with the acquisition
of Hawkeye State Bank in 2003.  Goodwill totaling $11,554 was
associated with the acquisitions of VMF Capital in 2003 and Investors Management
Group, Ltd. in 2005, which combined constitute WB Capital.





With the
assistance of management, the third party valuation firm prepared an estimate of
the fair value of a 100 percent controlling marketable interest in the
outstanding stock of West Bank and of WB Capital as of June 30, 2009, in
accordance with FASB No. 142, “Goodwill and Other IntangibleAssets.”  FASB No. 142 requires the use of fair value
measurements as defined in FASB No. 157.  In determining the fair
value of West Bank a combination of the income and market approaches were
used.  Under the income approach, the primary factor considered was
the ability of West Bank to generate future cash flows.  A discount
rate was estimated by utilizing the build-up method which factors in the
following components:  a risk-free rate of return, an equity risk
premium, an industry risk premium or discount, a size premium and risk
associated specifically with West Bank.  A discount rate of 12.04
percent was then applied to projected future cash flows of West
Bank.  Under the market approach, stock market data regularly
published on publicly traded companies considered to be similar to West Bank
were utilized in determining market value.  The two indicated values
were then weighted to represent the relative importance a market participant
might reasonably be expected to place on the results of each
method.  For WB Capital, a discount rate of 16.66 percent, calculated
under the same methodology as for West Bank, was applied to projected future
cash flows to determine market value.  No weighting was given to the
market approach for WB Capital as identified comparable companies were
significantly larger and more diversified than WB Capital and comparable merger
and acquisition transactions did not sufficiently reflect market conditions as
of June 30, 2009.





Based on
the above analysis, an impairment of $23,036 was recorded in the quarter ending
June 30, 2009.  The impairment represented all of the goodwill of West
Bank and $9,660 of WB Capital’s goodwill.  The impairment charge had
no impact on the Company’s liquidity, cash flows, or tangible capital
ratios.  In addition, goodwill is not included in the calculation of
regulatory capital, so the impairment had a negligible impact on the Company’s
and West Bank’s risk-based capital ratios.  As of June 30, 2009, the
Company and West Bank exceed the regulatory requirements for being
well-capitalized.





Securities
available for sale are reported at fair value, with unrealized gains and losses
reported as a separate component of accumulated other comprehensive income, net
of deferred income taxes.  The Company conducts quarterly reviews to
identify and evaluate each investment that has an unrealized loss, in accordance
with FSP FAS 115-1, “The
Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments.”  In June 2009, the Company adopted FSP FAS
115-2/124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments,” which changed the
accounting requirements for OTTI for debt securities, and in certain
circumstances, separates the amount of total impairment into credit and
noncredit-related amounts.  The review takes into consideration
current market conditions, issuer rating changes and trends, the credit
worthiness of the obligator of the security, current analysts’ evaluations,
failure of the issuer to make scheduled interest or principal payments, the
Company’s intent to not sell the security or whether it is more-likely-than-not
that the Company will be required to sell the debt security before its
anticipated recovery, as well as other qualitative factors.  The term
OTTI is not intended to indicate that the decline is permanent, but indicates
that the prospects for a near-term recovery of value is not necessarily
favorable, or that there is a lack of evidence to support a realizable value
equal to or greater than the carrying value of the
investment.  Declines in the fair value of securities below their
amortized cost basis that are deemed to be OTTI are carried at fair
value.  Any portion of a decline in value associated with credit loss
is recognized in income with the remaining noncredit-related component being
recognized in other comprehensive income.  A credit loss is determined
by assessing whether the amortized cost basis of the security will be recovered,
by comparing the present value of cash flows expected to be collected from the
security, computed using original yield as the discount rate, to the amortized
cost basis of the security. The shortfall of the present value of the cash flows
expected to be collected in relation to the amortized cost basis is considered
to be the “credit loss.”


9


5.  Securities
Available for Sale





For
securities available for sale, the following table shows the amortized cost,
unrealized gains and losses (pre-tax) included in accumulated other
comprehensive income (loss), and estimated fair value by security type as of
June 30, 2009 and December 31, 2008.  Included in gross unrealized
losses as of June 30, 2009, is an OTTI loss of $3,360 relating to a pooled trust
preferred security, which represents the noncredit-related portion of the
overall impairment.





June 30, 2009Gross
                            
                            
                            GrossAmortized
                            
                            
                            Unrealized
                            
                            
                            Unrealized
                            
                            
                            FairCost
                            
                            
                            Gains
                            
                            
                            (Losses)
                            
                            
                            ValueU.S.
      Treasury and government agencies and corporations
                            
                            $
                            100,123
                            
                            
                            $
                            154
                            
                            
                            $
                            (723
                            )
                            
                            $
                            99,554State
      and political subdivisions
                            
                            
                            104,177
                            
                            
                            
                            1,776
                            
                            
                            
                            (2,348
                            )
                            
                            
                            103,605Mortgage-backed
      securities
                            
                            
                            11,184
                            
                            
                            
                            40
                            
                            
                            
                            -
                            
                            
                            
                            11,224Trust
      preferred securities (1)
                            
                            
                            8,952
                            
                            
                            
                            -
                            
                            
                            
                            (5,606
                            )
                            
                            
                            3,346Corporate
      notes and other investments
                            
                            
                            29,277
                            
                            
                            
                            22
                            
                            
                            
                            (1,188
                            )
                            
                            
                            28,111$
                            253,713
                            
                            
                            $
                            1,992
                            
                            
                            $
                            (9,865
                            )
                            
                            $
                            245,840December 31, 2008Gross
                            
                            
                            GrossAmortized
                            
                            
                            Unrealized
                            
                            
                            Unrealized
                            
                            
                            FairCost
                            
                            
                            Gains
                            
                            
                            (Losses)
                            
                            
                            ValueU.S.
      Treasury and government agencies and corporations
                            
                            $
                            58,895
                            
                            
                            $
                            2,155
                            
                            
                            $
                            -
                            
                            
                            $
                            61,050State
      and political subdivisions
                            
                            
                            109,682
                            
                            
                            
                            1,271
                            
                            
                            
                            (3,778
                            )
                            
                            
                            107,175Mortgage-backed
      securities
                            
                            
                            1,234
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,234Trust
      preferred securities (2)
                            
                            
                            8,025
                            
                            
                            
                            -
                            
                            
                            
                            (2,756
                            )
                            
                            
                            5,269Corporate
      notes and other investments
                            
                            
                            9,614
                            
                            
                            
                            3
                            
                            
                            
                            (2,911
                            )
                            
                            
                            6,706$
                            187,450
                            
                            
                            $
                            3,429
                            
                            
                            $
                            (9,445
                            )
                            
                            $
                            181,434





(1)
            During
      the quarter ended June 30, 2009, pursuant to FSP FAS 115-2, which states
      that previously recorded impairment charges which did not relate to credit
      losses should be reclassified from retained earnings to accumulated other
      comprehensive income (loss), the Company recorded a cumulative effect
      adjustment that increased retained earnings and decreased other
      comprehensive income (loss) by $2,622, or $1,625 net of tax,
      respectively.


(2)
            The
      Company recorded OTTI charges in this category of $2,622 for the year
      ending December 31, 2008 related to one pooled trust preferred
      security.  For the security deemed impaired, the amortized cost
      was written down to the fair value of the
  security.





Securities
with an amortized cost of approximately $160,931 and $161,765 as of June 30,
2009 and December 31, 2008, respectively, were pledged as collateral on the
Treasury, Tax, and Loan option notes, securities sold under agreements to
repurchase, and for other purposes as required or permitted by law or
regulation.  Securities sold under agreements to repurchase are held
in safekeeping on behalf of the Company.





The
amortized cost and fair value of securities available for sale as of June 30,
2009, by contractual maturity are shown below.  Expected maturities
will differ from contractual maturities, because issuers may have the right to
call or prepay obligations with or without prepayment penalties.





June 30, 2009Amortized
                  
                  
                  FairCost
                  
                  
                  ValueDue
      in one year or less
                  
                  $
                  12,529
                  
                  
                  $
                  12,424Due
      after one year through five years
                  
                  
                  122,862
                  
                  
                  
                  121,895Due
      after five years through ten years
                  
                  
                  59,094
                  
                  
                  
                  59,069Due
      after ten years
                  
                  
                  59,228
                  
                  
                  
                  52,452$
                  253,713
                  
                  
                  $
                  245,840


10





For the
three and six months ended June 30, 2009, proceeds from the sales of securities
available for sale were $0 and $10,502, respectively.  Gross security
gains of $0 and $1,453 were realized for the three and six months ended June 30,
2009, respectively, and no losses were recognized during these time
periods.  For the three and six months ended June 30, 2008, proceeds
from the sales of securities available for sale were $0 and $3,604,
respectively.  Gross security gains of $0 and $5 were realized for the
three and six months ended June 30, 2008, respectively, and no losses were
recognized during these time periods.  Realized gains and losses on
sales are computed on a specific identification basis based on amortized
cost.





See Note
4 for a discussion of financial reporting for securities with unrealized
losses.





The
following tables show the fair value and gross unrealized losses, aggregated by
investment category and length of time that individual securities have been in a
continuous loss position, as of June 30, 2009 and December 31,
2008.  The table includes one security for which a portion of an OTTI
has been recognized in other comprehensive income (loss).





June 30, 2009Less than 12 months
                          
                          
                          12 months or longer
                          
                          
                          TotalFair
                          
                          
                          Unrealized
                          
                          
                          Fair
                          
                          
                          Unrealized
                          
                          
                          Fair
                          
                          
                          UnrealizedValue
                          
                          
                          (Losses)
                          
                          
                          Value
                          
                          
                          (Losses)
                          
                          
                          Value
                          
                          
                          (Losses)U.S.
      Treasury and government agencies and corporations
                          
                          $
                          71,394
                          
                          
                          $
                          (723
                          )
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          71,394
                          
                          
                          $
                          (723
                          )State
      and political subdivisions
                          
                          
                          29,418
                          
                          
                          
                          (1,372
                          )
                          
                          
                          12,683
                          
                          
                          
                          (976
                          )
                          
                          
                          42,101
                          
                          
                          
                          (2,348
                          )Mortgage-backed
      securities
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Trust
      preferred securities
                          
                          
                          235
                          
                          
                          
                          (515
                          )
                          
                          
                          2,990
                          
                          
                          
                          (5,091
                          )
                          
                          
                          3,225
                          
                          
                          
                          (5,606
                          )Corporate
      notes and other investments
                          
                          
                          13,837
                          
                          
                          
                          (56
                          )
                          
                          
                          4,853
                          
                          
                          
                          (1,132
                          )
                          
                          
                          18,690
                          
                          
                          
                          (1,188
                          )$
                          114,884
                          
                          
                          $
                          (2,666
                          )
                          
                          $
                          20,526
                          
                          
                          $
                          (7,199
                          )
                          
                          $
                          135,410
                          
                          
                          $
                          (9,865
                          )December 31, 2008Less than 12 months
                          
                          
                          12 months or longer
                          
                          
                          TotalFair
                          
                          
                          Unrealized
                          
                          
                          Fair
                          
                          
                          Unrealized
                          
                          
                          Fair
                          
                          
                          UnrealizedValue
                          
                          
                          (Losses)
                          
                          
                          Value
                          
                          
                          (Losses)
                          
                          
                          Value
                          
                          
                          (Losses)U.S.
      Treasury and government agencies and corporations
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -State
      and political subdivisions
                          
                          
                          41,901
                          
                          
                          
                          (3,109
                          )
                          
                          
                          5,937
                          
                          
                          
                          (669
                          )
                          
                          
                          47,838
                          
                          
                          
                          (3,778
                          )Mortgage-backed
      securities
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Trust
      preferred securities
                          
                          
                          2,401
                          
                          
                          
                          (1,799
                          )
                          
                          
                          292
                          
                          
                          
                          (957
                          )
                          
                          
                          2,693
                          
                          
                          
                          (2,756
                          )Corporate
      notes and other investments
                          
                          
                          1,512
                          
                          
                          
                          (488
                          )
                          
                          
                          1,560
                          
                          
                          
                          (2,423
                          )
                          
                          
                          3,072
                          
                          
                          
                          (2,911
                          )$
                          45,814
                          
                          
                          $
                          (5,396
                          )
                          
                          $
                          7,789
                          
                          
                          $
                          (4,049
                          )
                          
                          $
                          53,603
                          
                          
                          $
                          (9,445
                          )





As of
June 30, 2009, the available for sale investment portfolio included 36 municipal
securities, 5 trust preferred securities, and 2 corporate notes with current
unrealized losses that have existed for longer than one year.





The
unrealized losses on the Company’s investments in state and political
subdivisions are due to market conditions, not in estimated cash
flows.  The Company does not have the intent to sell these securities
and does not anticipate that these securities will be required to be sold before
anticipated recovery, and expects full principal and interest to be
collected.  Therefore, the Company does not consider these investments
to be OTTI at June 30, 2009.





The
unrealized losses in four single-issuer trust preferred securities are due to
reduced demand for these securities, and interest rate fluctuations and illiquid
markets, not estimated cash flows.  The Company does not have the
intent to sell these securities and does not anticipate that these securities
will be required to be sold before anticipated recovery, and expects full
principal and interest will be collected.  Therefore, the Company does
not consider these investments to be OTTI at June 30, 2009.


11





For the
year ended December 31, 2008, the Company recorded OTTI on a pooled trust
preferred security, which resulted in a reduction of non-interest income of
$2,622.  Pursuant to FSP FAS 115-2/124-2, which states that previously
recorded impairment charges which did not relate to a credit loss should be
reclassified from retained earnings to other comprehensive income, the Company
recorded a cumulative effect adjustment that increased retained earnings and
decreased other comprehensive income (loss) by $2,622, or $1,625, net of
tax.  None of the previously recorded impairment loss was considered a
credit loss as of April 1, 2009, the date of adoption of this accounting
pronouncement.





The
Company engaged an independent consulting firm to assist in the valuation of
this security as of June 30, 2009.  Based on the consulting firm’s
findings, management determined the security had an estimated market value of
$1,266 which resulted in $3,635 of total impairment, or an additional impairment
of $1,013 in the second quarter of 2009.  To determine the credit loss
on this security, the investment consulting firm projected cash flows for the
security and discounted the cash flows at the original purchased
yield.  The consulting firm analyzed each underlying bank or insurance
company and assigned a probability of default.  Those default
assumptions were then used to determine the projected cash flows of the
security.  In addition, the consulting firm assumed no prepayments of
the underlying debt.  If the net present value of the cash flows was
less than the cost basis of the security, the difference was considered
credit-related and recorded through earnings.  Based on this
calculation, $275 of the total impairment was considered to be a credit loss
which was recognized in the 2009 second quarter income statement and the
remaining amortized cost of the security was reduced to create a new cost
basis.  The remaining change in fair market value of $3,360 is
reflected in other comprehensive income (loss), net of taxes of
$1,277.  The Company will continue to estimate the present value of
cash flows expected to be collected over the life of the security.





For the
first quarter of 2009, the Company recognized an OTTI of $1,380 on two trust
preferred securities.  The carrying values of these securities were
written down to $120 as of March 31, 2009, and were considered credit
losses.  There were no changes to the credit-related component during
the second quarter of 2009.





The
Company’s unrealized loss on investments in corporate bonds is due to market
conditions, not in estimated cash flows.  The Company does not have
the intent to sell these securities and does not anticipate that these
securities will be required to be sold before anticipated recovery, and expects
full principal and interest to be collected.  Therefore, the Company
does not consider these investments to be OTTI at June 30, 2009.





The
following table provides a roll forward of the amount of credit-related losses
recognized in earnings for which a portion of OTTI has been recognized in other
comprehensive income (loss) through June 30, 2009:





Beginning
      balance as of December 31, 2008
                        
                        $
                        -Current
      period credit loss recognized in earnings
                        
                        
                        275Reductions
      for securities sold during the period
                        
                        
                        -Reductions
      for securities where there is an intent to sellor
      requirement to sell
                        
                        
                        -Reductions
      for increases in cash flows expected to be collected
                        
                        
                        -Balance
      as of June 30, 2009
                        
                        $
                        275





6.  Impaired
Loans and Allowance for Loan Losses





A loan is
impaired when it is probable that West Bank will be unable to collect all
contractual principal and interest payments due in accordance with the terms of
the loan agreement.  Impaired loans are measured based on the present
value of expected future cash flows discounted at the loan’s effective interest
rate or at the fair value of the collateral if the loan is collateral
dependent.  The amount of the impairment is included in the allowance
for loan losses.  The following is a recap of impaired loans at the
dates shown:





June 30, 2009
                    
                    
                    December 31, 2008Impaired
      loans without an allowance
                    
                    $
                    14,136
                    
                    
                    $
                    18,067Impaired
      loans with an allowance
                    
                    
                    51,671
                    
                    
                    
                    23,044Total
      impaired loans
                    
                    $
                    65,807
                    
                    
                    $
                    41,111Allowance
      for loan losses related to impaired loans
                    
                    $
                    9,761
                    
                    
                    $
                    3,590


12
 
 The
following table reconciles the balance of non-accrual loans with impaired loans
carried at fair value as of the dates shown below.
 
 June 30, 2009
                    
                    
                    December 31, 2008Non-accrual
      loans
                    
                    $
                    29,591
                    
                    
                    $
                    21,367Restructured
      loans
                    
                    
                    12,855
                    
                    
                    
                    7,376Other
      impaired loans still accruing interest
                    
                    
                    23,361
                    
                    
                    
                    12,368Total
      impaired loans
                    
                    $
                    65,807
                    
                    
                    $
                    41,111
 
 Changes
in the allowance for loan losses were as follows for the periods shown
below:
 
 Three Months Ended June 30,
                        
                        
                        Six Months Ended June 30,2009
                        
                        
                        2008
                        
                        
                        Change
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        ChangeBalance
      at beginning of period
                        
                        $
                        18,015
                        
                        
                        $
                        14,260
                        
                        
                        $
                        3,755
                        
                        
                        $
                        15,441
                        
                        
                        $
                        8,935
                        
                        
                        $
                        6,506Charge-offs
                        
                        
                        (9,366
                        )
                        
                        
                        (4,740
                        )
                        
                        
                        (4,626
                        )
                        
                        
                        (10,553
                        )
                        
                        
                        (5,121
                        )
                        
                        
                        (5,432
                        )Recoveries
                        
                        
                        13
                        
                        
                        
                        37
                        
                        
                        
                        (24
                        )
                        
                        
                        274
                        
                        
                        
                        143
                        
                        
                        
                        131Net
      charge-offs
                        
                        
                        (9,353
                        )
                        
                        
                        (4,703
                        )
                        
                        
                        (4,650
                        )
                        
                        
                        (10,279
                        )
                        
                        
                        (4,978
                        )
                        
                        
                        (5,301
                        )Provision
      charged to operations
                        
                        
                        15,000
                        
                        
                        
                        1,000
                        
                        
                        
                        14,000
                        
                        
                        
                        18,500
                        
                        
                        
                        6,600
                        
                        
                        
                        11,900Balance
      at end of period
                        
                        $
                        23,662
                        
                        
                        $
                        10,557
                        
                        
                        $
                        13,105
                        
                        
                        $
                        23,662
                        
                        
                        $
                        10,557
                        
                        
                        $
                        13,105
 
 7.  Fair
Value Measurements
 
 Statement
of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements,requires disclosure for those assets and liabilities carried in the
balance sheet on a fair value basis.  Effective January 1, 2009, the
Company adopted the nonfinancial assets and liabilities portion of SFAS No. 157,
which requires recognition at fair value of nonfinancial assets and liabilities
on a nonrecurring basis.  The Company adopted FSP FAS 157-4, which was
discussed in Note 3, in June 2009, and has applied its guidance in estimating
fair values for securities where the market volume and level of activity have
significantly decreased.  The application of FSP FAS 157-4 did not
result in a change in valuation technique or related inputs.
 
 The
Company’s balance sheet contains securities available for sale that are recorded
at fair value on a recurring basis.  SFAS No. 157 establishes a
three-level valuation hierarchy for disclosure of fair value.  The
three levels for determining fair value are 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.  These may be internally developed, using the Company’s best
information and assumptions that a market participant would
consider.
 
 When
available, quoted market prices are used to determine the fair value of
investment securities and such items are classified within Level 1 of the fair
value hierarchy.  An example is U.S. Treasury
securities.  For other securities, 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.  Securities measured at fair value by such methods are
classified as Level 2.  Certain securities are not valued based on
observable transactions and are, therefore, classified as Level
3.  The fair value of these securities is based on management’s best
estimates.
  13
 
 The
following table presents the balances of assets and liabilities measured at fair
value on a recurring basis by level as of June 30, 2009:
 
 Quoted Pricesin Active Markets
                          
                          
                          Significant Other
                          
                          
                          Significantfor Identical Assets
                          
                          
                          Observable Inputs
                          
                          
                          Unobservable InputsDescription
                          
                          Total
                          
                          
                          (Level 1)
                          
                          
                          (Level 2)
                          
                          
                          (Level 3)Assets:U.S.
      Treasury and governmentagencies
      and corporations
                          
                          $
                          99,554
                          
                          
                          $
                          2,029
                          
                          
                          $
                          97,525
                          
                          
                          $
                          -State
      and political subdivisions
                          
                          
                          103,605
                          
                          
                          
                          -
                          
                          
                          
                          103,605
                          
                          
                          
                          -Mortgage-backed
      securities
                          
                          
                          11,224
                          
                          
                          
                          -
                          
                          
                          
                          11,224
                          
                          
                          
                          -Trust
      preferred securities
                          
                          
                          3,346
                          
                          
                          
                          -
                          
                          
                          
                          2,030
                          
                          
                          
                          1,316Corporate
      notes and other investments
                          
                          
                          28,111
                          
                          
                          
                          -
                          
                          
                          
                          28,111
                          
                          
                          
                          -Total
                          
                          $
                          245,840
                          
                          
                          $
                          2,029
                          
                          
                          $
                          242,495
                          
                          
                          $
                          1,316
 
 The
following table presents changes in securities available for sale with
significant unobservable inputs (Level 3) for the three and six months ended
June 30, 2009:
 
 3 Months Ended
                            
                            
                            Six Months EndedSecurities available for sale:
                            
                            June 30, 2009
                            
                            
                            June 30, 2009Beginning
      balance
                            
                            $
                            2,344
                            
                            
                            $
                            2,325Transfer
      into Level 3
                            
                            
                            -
                            
                            
                            
                            250Total
      gains or losses:Included
      in earnings
                            
                            
                            (275
                            )
                            
                            
                            (275
                            )Included
      in other comprehensive income
                            
                            
                            (738
                            )
                            
                            
                            (938
                            )Principal
      payments
                            
                            
                            (15
                            )
                            
                            
                            (46
                            )Ending
      balance
                            
                            $
                            1,316
                            
                            
                            $
                            1,316
 
 The table
above includes one pooled trust preferred security which was transferred to
Level 3 during 2008.  Market pricing for this security varies widely
from one pricing service to another based on a lack of trading so it was
considered to no longer have readily observable market data.  The fair
value as of June 30, 2009, was determined by discounting the expected cash flows
over the life of the security.  The discount rate included an estimate
for illiquidity, credit risk, and the time value of money.  One
additional trust preferred security, with a carrying value of $250, was
transferred to Level 3 during the first quarter of 2009.  The bank
holding company that issued the trust preferred security is not a public
company, had been deferring interest payments on the trust preferred securities,
and has been losing money for over a year.Subsequent to June 30,
2009, deferred interest payments have been received.  This security
was estimated by management to have a fair market value of $50 at June 30,
2009.
 
 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).  The following table presents the
assets carried on the balance sheet by caption and by level within the SFAS No.
157 valuation hierarchy as of June 30, 2009:
 
 Quoted Pricesin Active Markets
                                    
                                    
                                    Significant Other
                                    
                                    
                                    Significantfor Identical Assets
                                    
                                    
                                    Observable Inputs
                                    
                                    
                                    Unobservable InputsDescription
                                    
                                    Total
                                    
                                    
                                    (Level 1)
                                    
                                    
                                    (Level 2)
                                    
                                    
                                    (Level 3)Assets:Loans
                                    
                                    $
                                    41,910
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    41,910Goodwill
                                    
                                    
                                    1,894
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,894Other
      real estate owned
                                    
                                    
                                    6,137
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    6,137Total
                                    
                                    $
                                    49,941
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    49,941
  14
 
 Loans in
the table above consist of impaired loans held for investment less the portion
of the allowance for loan losses related to these loans. Impaired loans are
evaluated and valued at the time the loan is identified as impaired, at the
lower of cost or fair value and are classified as a Level 3 in the fair value
hierarchy.  Fair value is measured based on the value of the
collateral securing these loans.  Collateral may be real estate and/or
business assets including equipment, inventory and/or accounts receivable and is
determined based on appraisals by qualified licensed appraisers hired by the
Company.  Appraised and reported values may be discounted based on
management’s historical knowledge, changes in market conditions from the time of
valuation, and/or management’s expertise and knowledge of the client and
client’s business.  Other real estate owned in the table above
consists of property acquired through foreclosures and settlements of
loans.  Property acquired is carried at the lower of the principal
amount of loans outstanding, or the estimated fair value of the property, less
disposal costs, and is classified as a Level 3 in the fair value
hierarchy.
 
 SFAS 107,
“Disclosures about Fair Value
of Financial Instruments,” requires disclosure of the fair value of
financial assets and financial liabilities, including those financial assets and
financial liabilities that are not measured and reported at fair value on a
recurring basis or non-recurring basis.  The methodologies for
estimating the fair value of financial assets and financial liabilities that are
measured at fair value on a recurring or non-recurring basis are discussed
above.  The methodologies for other financial assets and financial
liabilities are discussed below:
 
 Cash and due from
banks:  The carrying amount approximates fair
value.
 
 Federal funds sold and other
short-term investments:  The carrying amount approximates fair
value.
 
 Federal Home Loan Bank
stock:  The fair value of this restricted stock is estimated at
its carrying value and redemption price of $100 per share.
 
 Loans held for
sale:  The fair values of loans held for sale are based on
estimated selling prices.
 
 Loans:  Fair
values of loans are estimated using discounted cash flow analysis based on
observable market interest rates currently being offered for loans with similar
terms to borrowers with similar credit quality.
 
 Deposits:  The
carrying amounts for demand and savings deposits, which represent the amounts
payable on demand, approximate their fair values.  Fair values for
fixed-rate and variable-rate certificates of deposit are estimated using
discounted cash flow analysis, based on observable market interest rates
currently being offered on certificates with similar terms.
 
 Accrued interest receivable
and payable:  The fair values of both accrued interest
receivable and payable approximate their carrying amounts.
 
 Short-term and long-term
borrowings:  The carrying amounts of federal funds purchased
and securities sold under agreements to repurchase and certain other short-term
borrowings approximate their fair values.  Fair values of long-term
borrowings including subordinated notes are estimated using discounted cash flow
analysis, based on observable market interest rates currently being offered with
similar terms.
 
 Commitments to extend credit
and standby letters of credit:  The approximate fair values of
commitments and standby letters of credit are based on the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and creditworthiness of the
counterparties.
  15
 
 The
carrying amounts and approximate fair values are as follows as of June 30, 2009
and December 31, 2008:
 
 June 30, 2009
                      
                      
                      December 31, 2008Carrying
                      
                      
                      Approximate
                      
                      
                      Carrying
                      
                      
                      ApproximateAmount
                      
                      
                      Fair Value
                      
                      
                      Amount
                      
                      
                      Fair ValueFinancial
      assets:Cash
      and due from banks
                      
                      $
                      23,985
                      
                      
                      $
                      23,985
                      
                      
                      $
                      23,712
                      
                      
                      $
                      23,712Federal
      funds sold and othershort-term
      investments
                      
                      
                      64,254
                      
                      
                      
                      64,254
                      
                      
                      
                      173,257
                      
                      
                      
                      173,257Securities
      available for sale
                      
                      
                      245,840
                      
                      
                      
                      245,840
                      
                      
                      
                      181,434
                      
                      
                      
                      181,434Federal
      Home Loan Bank stock
                      
                      
                      9,756
                      
                      
                      
                      9,756
                      
                      
                      
                      8,174
                      
                      
                      
                      8,174Loans
      held for sale
                      
                      
                      7,213
                      
                      
                      
                      7,224
                      
                      
                      
                      1,018
                      
                      
                      
                      1,022Loans,
      net
                      
                      
                      1,091,662
                      
                      
                      
                      1,101,017
                      
                      
                      
                      1,085,294
                      
                      
                      
                      1,091,071Accrued
      interest receivable
                      
                      
                      7,122
                      
                      
                      
                      7,122
                      
                      
                      
                      6,415
                      
                      
                      
                      6,415Financial
      liabilities:Deposits
                      
                      
                      1,176,894
                      
                      
                      
                      1,180,140
                      
                      
                      
                      1,154,787
                      
                      
                      
                      1,160,620Federal
      funds purchased and securitiessold
      under agreements to repurchase
                      
                      
                      48,938
                      
                      
                      
                      48,938
                      
                      
                      
                      93,111
                      
                      
                      
                      93,111Other
      short-term borrowings
                      
                      
                      3,262
                      
                      
                      
                      3,262
                      
                      
                      
                      245
                      
                      
                      
                      245Accrued
      interest payable
                      
                      
                      4,112
                      
                      
                      
                      4,112
                      
                      
                      
                      3,995
                      
                      
                      
                      3,995Subordinated
      notes
                      
                      
                      20,619
                      
                      
                      
                      14,902
                      
                      
                      
                      20,619
                      
                      
                      
                      21,026Long-term
      borrowings
                      
                      
                      125,000
                      
                      
                      
                      124,877
                      
                      
                      
                      125,000
                      
                      
                      
                      127,053Off-balance-sheet
      financial instruments:Commitments
      to extend credit
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Standby
      letters of credit
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
 
 8.  Segment
Information
 
 An
operating segment is generally defined as a component of a business for which
discrete financial information is available and whose operating results are
regularly reviewed by the chief operating decision-maker.  The
Company’s primary business segments are banking and investment advisory
services.  The banking segment generates revenue through interest and
fees on loans, interest on investment securities, service charges on deposit
accounts, gains and fees on sale of residential mortgages, and fees for trust
services.  The banking segment includes West Bank, the Company, and
related elimination entries between the two, as the Company’s operation is
similar to that of West Bank.  The investment advisory segment
generates revenue by providing investment portfolio management services to
individuals, retirement plans, corporations, foundations, endowments, and public
entities.  The investment advisory segment consists of WB Capital
Management Inc.  The “Other” column represents the elimination of
intercompany balances.  Selected financial information on the
Company’s segments is presented below for the three and six months ended June
30, 2009 and 2008.
  16
 
 Three Months Ended June 30,2009
                          
                          
                          2008Segments
                          
                          
                          SegmentsInvestment
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          InvestmentBanking
                          
                          
                          Advisory
                          
                          
                          Other
                          
                          
                          Consolidated
                          
                          
                          Banking
                          
                          
                          Advisory
                          
                          
                          Other
                          
                          
                          ConsolidatedInterest
      income
                          
                          $
                          17,271
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          17,271
                          
                          
                          $
                          17,330
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          17,330Interest
      expense
                          
                          
                          7,076
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          7,076
                          
                          
                          
                          7,095
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          7,095Net
      interest income
                          
                          
                          10,195
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          10,195
                          
                          
                          
                          10,235
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          10,235Provision
      for loan losses
                          
                          
                          15,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          15,000
                          
                          
                          
                          1,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,000Net
      interest income afterprovision
      for loan losses
                          
                          
                          (4,805
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (4,805
                          )
                          
                          
                          9,235
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,235Noninterest
      income
                          
                          
                          1,922
                          
                          
                          
                          1,634
                          
                          
                          
                          (41
                          )
                          
                          
                          3,515
                          
                          
                          
                          2,321
                          
                          
                          
                          2,007
                          
                          
                          
                          (47
                          )
                          
                          
                          4,281Noninterest
      expense
                          
                          
                          20,204
                          
                          
                          
                          10,987
                          
                          
                          
                          (41
                          )
                          
                          
                          31,150
                          
                          
                          
                          5,341
                          
                          
                          
                          1,767
                          
                          
                          
                          (47
                          )
                          
                          
                          7,061Income
      (loss) before income taxes
                          
                          
                          (23,087
                          )
                          
                          
                          (9,353
                          )
                          
                          
                          -
                          
                          
                          
                          (32,440
                          )
                          
                          
                          6,215
                          
                          
                          
                          240
                          
                          
                          
                          -
                          
                          
                          
                          6,455Income
      taxes (benefits)
                          
                          
                          (9,344
                          )
                          
                          
                          (817
                          )
                          
                          
                          -
                          
                          
                          
                          (10,161
                          )
                          
                          
                          1,840
                          
                          
                          
                          101
                          
                          
                          
                          -
                          
                          
                          
                          1,941Net
      income (loss)
                          
                          $
                          (13,743
                          )
                          
                          $
                          (8,536
                          )
                          
                          $
                          -
                          
                          
                          $
                          (22,279
                          )
                          
                          $
                          4,375
                          
                          
                          $
                          139
                          
                          
                          $
                          -
                          
                          
                          $
                          4,514Depreciation
      and amortization
                          
                          $
                          239
                          
                          
                          $
                          141
                          
                          
                          $
                          -
                          
                          
                          $
                          380
                          
                          
                          $
                          238
                          
                          
                          $
                          176
                          
                          
                          $
                          -
                          
                          
                          $
                          414Goodwill
      impairment includedin
      noninterest expense
                          
                          $
                          13,376
                          
                          
                          $
                          9,660
                          
                          
                          $
                          -
                          
                          
                          $
                          23,036
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
 
 Six Months Ended June 30,2009
                              
                              
                              2008Segments
                              
                              
                              SegmentsInvestment
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              InvestmentBanking
                              
                              
                              Advisory
                              
                              
                              Other
                              
                              
                              Consolidated
                              
                              
                              Banking
                              
                              
                              Advisory
                              
                              
                              Other
                              
                              
                              ConsolidatedInterest
      income
                              
                              $
                              34,233
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              34,233
                              
                              
                              $
                              36,193
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              36,193Interest
      expense
                              
                              
                              14,101
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              14,101
                              
                              
                              
                              16,082
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              16,082Net
      interest income
                              
                              
                              20,132
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              20,132
                              
                              
                              
                              20,111
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              20,111Provision
      for loan losses
                              
                              
                              18,500
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              18,500
                              
                              
                              
                              6,600
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              6,600Net
      interest income afterprovision
      for loan losses
                              
                              
                              1,632
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,632
                              
                              
                              
                              13,511
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              13,511Noninterest
      income
                              
                              
                              4,933
                              
                              
                              
                              3,093
                              
                              
                              
                              (84
                              )
                              
                              
                              7,942
                              
                              
                              
                              4,312
                              
                              
                              
                              3,996
                              
                              
                              
                              (95
                              )
                              
                              
                              8,213Noninterest
      expense
                              
                              
                              26,298
                              
                              
                              
                              12,439
                              
                              
                              
                              (84
                              )
                              
                              
                              38,653
                              
                              
                              
                              10,398
                              
                              
                              
                              3,523
                              
                              
                              
                              (95
                              )
                              
                              
                              13,826Income
      (loss) before income taxes
                              
                              
                              (19,733
                              )
                              
                              
                              (9,346
                              )
                              
                              
                              -
                              
                              
                              
                              (29,079
                              )
                              
                              
                              7,425
                              
                              
                              
                              473
                              
                              
                              
                              -
                              
                              
                              
                              7,898Income
      taxes (benefits)
                              
                              
                              (8,927
                              )
                              
                              
                              (814
                              )
                              
                              
                              -
                              
                              
                              
                              (9,741
                              )
                              
                              
                              1,811
                              
                              
                              
                              199
                              
                              
                              
                              -
                              
                              
                              
                              2,010Net
      income (loss)
                              
                              $
                              (10,806
                              )
                              
                              $
                              (8,532
                              )
                              
                              $
                              -
                              
                              
                              $
                              (19,338
                              )
                              
                              $
                              5,614
                              
                              
                              $
                              274
                              
                              
                              $
                              -
                              
                              
                              $
                              5,888Depreciation
      and amortization
                              
                              $
                              465
                              
                              
                              $
                              281
                              
                              
                              $
                              -
                              
                              
                              $
                              746
                              
                              
                              $
                              468
                              
                              
                              $
                              349
                              
                              
                              $
                              -
                              
                              
                              $
                              817Goodwill
      impairment includedin
      noninterest expense
                              
                              $
                              13,376
                              
                              
                              $
                              9,660
                              
                              
                              $
                              -
                              
                              
                              $
                              23,036
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -Goodwill
                              
                              $
                              -
                              
                              
                              $
                              1,894
                              
                              
                              $
                              -
                              
                              
                              $
                              1,894
                              
                              
                              $
                              13,376
                              
                              
                              $
                              11,554
                              
                              
                              $
                              -
                              
                              
                              $
                              24,930Total
      assets
                              
                              $
                              1,510,229
                              
                              
                              $
                              4,555
                              
                              
                              $
                              (883
                              )
                              
                              $
                              1,513,901
                              
                              
                              $
                              1,355,443
                              
                              
                              $
                              14,219
                              
                              
                              $
                              (795
                              )
                              
                              $
                              1,368,867
 
 9.  Earnings
(Loss) per Common Share
 
 Basic
earnings (loss) per common share is computed by dividing income (loss) available
to common stockholders by the weighted average number of common shares
outstanding for the period.  Income (loss) available to common
stockholders is net income (loss) less preferred stock dividends and accretion
of discount on preferred stock, treated as preferred stock
dividends.  Diluted earnings (loss) per common share reflects the
potential dilution that could occur if the Company’s outstanding stock warrant
was exercised and converted into common stock.  The dilutive effect is
computed using the treasury stock method, which assumes all outstanding warrants
are exercised.  The incremental shares, to the extent they would have
been dilutive, are included in the denominator of the diluted earnings (loss)
per common share calculation.  The calculation of earnings (loss) per
common share and diluted earnings (loss) per common share for the three and six
months ended June 30, 2009 and 2008 is presented below.
  17
 
 Three Months Ended June 30,
                  
                  
                  Six Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Basic
      earnings (loss) per common share:Net
      income (loss)
                  
                  $
                  (22,279
                  )
                  
                  $
                  4,514
                  
                  
                  $
                  (19,338
                  )
                  
                  $
                  5,888Preferred
      stock dividends*
                  
                  
                  (450
                  )
                  
                  
                  -
                  
                  
                  
                  (900
                  )
                  
                  
                  -Preferred
      stock discount accretion*
                  
                  
                  (120
                  )
                  
                  
                  -
                  
                  
                  
                  (237
                  )
                  
                  
                  -Net
      income (loss) available to common stockholders
                  
                  $
                  (22,849
                  )
                  
                  $
                  4,514
                  
                  
                  $
                  (20,475
                  )
                  
                  $
                  5,888Weighted
      average common shares outstanding
                  
                  
                  17,404
                  
                  
                  
                  17,404
                  
                  
                  
                  17,404
                  
                  
                  
                  17,406Basic
      earnings (loss) per common share
                  
                  $
                  (1.32
                  )
                  
                  $
                  0.26
                  
                  
                  $
                  (1.18
                  )
                  
                  $
                  0.34Diluted
      earnings (loss) per common share:Net
      income (loss) available to common stockholders
                  
                  $
                  (22,849
                  )
                  
                  $
                  4,514
                  
                  
                  $
                  (20,475
                  )
                  
                  $
                  5,888Weighted
      average common shares outstanding
                  
                  
                  17,404
                  
                  
                  
                  17,404
                  
                  
                  
                  17,404
                  
                  
                  
                  17,406Effect
      of dilutive securities:Common
      stock warrant**
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      diluted average common shares issued and outstanding
                  
                  
                  17,404
                  
                  
                  
                  17,404
                  
                  
                  
                  17,404
                  
                  
                  
                  17,406Diluted
      earnings (loss) per common share
                  
                  $
                  (1.32
                  )
                  
                  $
                  0.26
                  
                  
                  $
                  (1.18
                  )
                  
                  $
                  0.34
 
 * Preferred stock
and the common stock warrant were issued on December 31, 2008, and therefore had
no effect in 2008.
 ** The
average closing price of the Company’s common stock for the three and six months
ended June 30, 2009, was $7.03 and $7.68, respectively.  This was less
than the $11.39 exercise price of the common stock warrant to purchase 474,100
shares of common stock; therefore, the warrant was not dilutive.
 
 10.  Other
Comprehensive Income (Loss)
 
 Under FSP
FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other–Than-Temporary Impairments,” credit-related losses on debt
securities with OTTI are recorded in current earnings, while the
noncredit-related portion of the reduction in fair value is recorded in other
comprehensive income (loss).  The Company’s other component of other
comprehensive income (loss) consists of the unrealized holding gains and losses
on available for sale investment securities which are considered temporary in
nature.
 
 The
components of other comprehensive income (loss), presented net of taxes for the
six months ended June 30, 2009 and 2008, are as follows:
 
 Six Months Ended June 30,2009
                    
                    
                    2008Net
      income (loss)
                    
                    $
                    (19,338
                    )
                    
                    $
                    5,888Other
      comprehensive income (loss):Securities
      for which a portion of an other-than-temporary impairment has been
      recorded in earnings:Unrealized
      holding losses
                    
                    
                    (1,013
                    )
                    
                    
                    -Loss
      recognized in earnings
                    
                    
                    275
                    
                    
                    
                    -Net
      unrealized (losses) on securities with other-than-temporary impairment
      before tax benefit
                    
                    
                    (738
                    )
                    
                    
                    -Tax
      benefit
                    
                    
                    280
                    
                    
                    
                    -Net
      unrealized (losses) on securities with other-than-temporary impairment,
      net of tax in other comprehensive income (loss)
                    
                    
                    (458
                    )
                    
                    
                    -Other
      securities:Unrealized
      holding gains (losses) arising during the period
                    
                    
                    2,957
                    
                    
                    
                    (5,329
                    )Realized
      net (gains) recognized into net income (loss)
                    
                    
                    (1,453
                    )
                    
                    
                    (5
                    )Net
      unrealized gains (losses) on other securities before tax (expense)
      benefit
                    
                    
                    1,504
                    
                    
                    
                    (5,334
                    )Tax
      (expense) benefit
                    
                    
                    (572
                    )
                    
                    
                    2,031Net
      unrealized gains (losses) on other securities, net of tax in other
      comprehensive income (loss)
                    
                    
                    932
                    
                    
                    
                    (3,303
                    )Other
      comprehensive income (loss)
                    
                    $
                    (18,864
                    )
                    
                    $
                    2,585
  18
  The
components of accumulated other comprehensive income (loss), presented net of
taxes, as of June 30, 2009, are shown in the following table:
 
 June 30, 2009Accumulated
      other comprehensive (loss):Unrealized
      (losses) on available for sale securities for which a portion
      ofother-than-temporary
      impairment has been recorded in earnings
                          
                          $
                          (2,084
                          )Unrealized
      (losses) on available for sale securities which are not
    otherother-than-temporarily
      impaired
                          
                          
                          (2,797
                          )$
                          (4,881
                          )
 
 11.  Deferred
Income Taxes
 
 Tax
effects of temporary differences that give rise to net deferred tax assets
consist of the following as of June 30, 2009, and December 31,
2008:
 
 June 30, 2009
                    
                    
                    December 31, 2008Allowance
      for loan losses
                    
                    $
                    8,991
                    
                    
                    $
                    5,868Intangibles
                    
                    
                    3,388
                    
                    
                    
                    (2,676
                    )Net
      unrealized losses on securities available for sale
                    
                    
                    2,991
                    
                    
                    
                    2,286Other
                    
                    
                    (77
                    )
                    
                    
                    383Total
      deferred taxes
                    
                    $
                    15,293
                    
                    
                    $
                    5,861
 
 The
significant increase in deferred tax assets since December 31, 2008, is the
result of the increase in the allowance for loan losses from $15,441 to $23,662
at June 30, 2009, and recording impairment of goodwill of $23,036 in the quarter
ended June 30, 2009.
 
 Based
upon the Company’s level of anticipated future taxable income over the periods
which the deferred tax assets are deductible, management believes it is more
likely than not the Company will realize the benefits of these net deductible
differences.  Management believes the deferred tax asset related to
unrealized losses on securities available for sale is recoverable because the
Company has the intent to not sell the related securities and it is
more-likely-than-not the Company will not be required to sell the securities
until recovery of the unrealized loss amounts.
 
 12.  Commitments
 
 In the
normal course of business, the Company enters into commitments to extend credit
in the form of loan commitments and standby letters of credit to meet the
financing needs of its customers.  These commitments expose the
Company to varying degrees of credit and market risk and are subject to the same
credit policies as are loans recorded on the balance sheet.  For
additional information on credit extension commitments and the characteristics
of these obligations, see Note 13 of the Company’s 2008 consolidated financial
statements (pages 54-56 of Appendix to Proxy Statement).  The
Company’s commitments as of the dates shown are approximately as
follows:
 
 June 30, 2009
                    
                    
                    December 31, 2008Commitments
      to extend credit
                    
                    $
                    221,454
                    
                    
                    $
                    301,214Standby
      letters of credit
                    
                    
                    18,598
                    
                    
                    
                    19,788$
                    240,052
                    
                    
                    $
                    321,002
 
 13.  Subsequent
Events
 
 Subsequent
events have been evaluated through July 30, 2009, the date financial statements
are filed with the Securities and Exchange Commission.  Through that
date, there were no events requiring disclosure.
  19
 
 Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations.
 
 "SAFE
HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT
 
 The
information contained in this report may contain forward-looking statements
about the Company’s growth and acquisition strategies, new products and
services, and future financial performance, including earnings and dividends per
share, return on average assets, return on average equity, efficiency ratio and
capital ratios.  Certain statements in this report constitute
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements preceded by, followed by or
that include the words “believes,” “expects,” “intends,” “should,” or
“anticipates,” or similar references or references to estimates or similar
expressions.  Such forward-looking statements are based upon certain
underlying assumptions, risks and uncertainties.  Because of the
possibility of change in the underlying assumptions, actual results could differ
materially from these forward-looking statements.  Risks and
uncertainties that may affect future results include: interest rate risk;
competitive pressures; pricing pressures on loans and deposits; changes in
credit and other risks posed by the Company’s loan and investment portfolios,
including declines in commercial or residential real estate values or changes in
the allowance for loan losses dictated by new market conditions or regulatory
requirements; actions of bank and non-bank competitors; changes in local and
national economic conditions; changes in regulatory requirements, including
actions of the Securities and Exchange Commission and/or the Federal Reserve
Board; changes in the Treasury’s Capital Purchase Program; and customers’
acceptance of the Company’s products and services.  The Company
undertakes no obligation to revise or update such forward-looking statements to
reflect current events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
 
 THREE AND
SIX MONTHS ENDED JUNE 30, 2009
 (dollars
in thousands, except per share amounts)
 
 OVERVIEW
 
 The
following discussion describes the consolidated operations of the Company,
including West Bank, West Bank’s wholly-owned subsidiary, WB Funding
Corporation, West Bank’s 99.9 percent owned subsidiary ICD IV, LLC, and WB
Capital Management Inc. (WB Capital).  Consolidated results of
operations for the three and six months ended June 30, 2009, are compared to the
results for the same periods in 2008 and the consolidated financial condition of
the Company at June 30, 2009, is compared to the December 31, 2008,
position.
 
 Net loss
for the three months ended June 30, 2009, was $(22,279) compared to net income
of $4,514 for the three months ended June 30, 2008.  Basic and diluted
earnings (loss) per common share were ($1.32) and $0.26, respectively, for the
same periods.  The Company’s annualized return on average equity and
return on average assets for the three months ended June 30, 2009, were (58.33)
percent and (5.10) percent, respectively, compared to 15.23 percent and 1.39
percent, respectively, for the three months ended June 30, 2008.
 
 Results
for the three months ended June 30, 2009, were $26,793 lower than the same
period last year due to goodwill impairment of $23,036 ($16,997 net of tax) and
a $14,000 increase in provision for loan losses.  Goodwill impairment
was reviewed during the second quarter of 2009 because the Company’s stock
traded at a market price of less than it’s per share book value.  The
analysis resulted in management’s decision to record a goodwill impairment
charge of $13,376 for all of West Bank’s goodwill balance and a charge of $9,660
for WB Capital.  The increase in provision for loan losses was
attributed to $9,353 of net charge-offs during the second quarter of 2009 and
the continued economic downturn which has negatively affected West Bank’s
customers.   In addition, other noninterest expenses were $1,053
higher than in the three months ended June 30, 2008, primarily due to increased
FDIC insurance expenses, including a special assessment of $695.
 
 For the
first six months of 2009, net loss was $(19,338) compared to net income of
$5,888 for the first six months of 2008.  Basic and diluted earnings
(loss) per common share were ($1.18) and $0.34, respectively.  The
annualized return on average equity and return on average assets for the six
months ended June 30, 2009, were (25.54) percent and (2.34) percent,
respectively, compared to 9.83 percent and 0.90 percent, respectively, for the
six months ended June 30, 2008.
 
 The
difference between the year-to-date net loss in 2009 and the 2008 net income was
due in substantial part to the goodwill impairment discussed above and the
$11,900 increase in provision for loan losses.
 
 Year-to-date
noninterest income was $29 lower than last year due to declines in investment
advisory fees of $889 and a $254 decline in service charges on deposit
accounts.  Offsetting these reductions was $840 of proceeds received
in the first quarter of 2009 from a bank-owned life insurance policy due to the
death of a West Bank officer, an increase of $315 in gains and fees on the sale
of residential mortgages sold into the secondary market, and a $117 increase in
debit card fees.
  20
  Noninterest
expense (exclusive of goodwill impairment) increased $1,791, or 13.0 percent in
the first six months of 2009 compared to 2008.  The growth in
noninterest expense included a $1,551 increase in FDIC insurance expense, a $304
increase in occupancy expense, and a $339 increase in deposit operations
expense.  The increases were somewhat offset by a $393 decline in
salaries and benefits and a $131 reduction in marketing expenses.
 
 WB
Capital’s year-to-date net loss was $(8,532) for the six months ended June 30,
2009 compared to net income of $274 for the same period in 2008.  The
loss was the result of $9,660 (net of tax $8,720) of goodwill impairment
recorded at WB Capital during the 2009 second quarter.  Revenues were
lower than a year ago because of the severe decline in stock values and lower
levels of assets under management.  Operating expenses (exclusive of
goodwill impairment) were $744 lower during the first half of 2009 compared to
the same 2008 period.  This was accomplished through a concerted
effort to reduce operating costs.  WB Capital’s net loss for the three
months ended June 30, 2009, was $(8,536) compared to net income of $139 in the
same period of 2008 due to the reasons mentioned previously.
 
 RESULTS
OF OPERATIONS
 
 The
following table shows selected financial results and measures for the three and
six months ended June 30, 2009, compared with the same periods in
2008.
 
 Three Months Ended June 30,
                          
                          
                          Six Months Ended June 30,2009
                          
                          
                          2008
                          
                          
                          Change
                          
                          
                          Change %
                          
                          
                          2009
                          
                          
                          2008
                          
                          
                          Change
                          
                          
                          Change %Net
      income (loss)
                          
                          $
                          (22,279
                          )
                          
                          $
                          4,514
                          
                          
                          $
                          (26,793
                          )
                          
                          
                          -593.6
                          %
                          
                          $
                          (19,338
                          )
                          
                          $
                          5,888
                          
                          
                          $
                          (25,226
                          )
                          
                          
                          -428.4
                          %Average
      assets
                          
                          
                          1,753,534
                          
                          
                          
                          1,302,161
                          
                          
                          
                          451,373
                          
                          
                          
                          34.7
                          %
                          
                          
                          1,668,246
                          
                          
                          
                          1,312,684
                          
                          
                          
                          355,562
                          
                          
                          
                          27.1
                          %Average
      stockholders' equity
                          
                          
                          153,203
                          
                          
                          
                          119,178
                          
                          
                          
                          34,025
                          
                          
                          
                          28.5
                          %
                          
                          
                          152,673
                          
                          
                          
                          120,444
                          
                          
                          
                          32,229
                          
                          
                          
                          26.8
                          %Return
      on assets
                          
                          
                          -5.10
                          %
                          
                          
                          1.39
                          %
                          
                          
                          -6.49
                          %
                          
                          
                          
                          
                          
                          
                          -2.34
                          %
                          
                          
                          0.90
                          %
                          
                          
                          -3.24
                          %Return
      on equity
                          
                          
                          -58.33
                          %
                          
                          
                          15.23
                          %
                          
                          
                          -73.56
                          %
                          
                          
                          
                          
                          
                          
                          -25.54
                          %
                          
                          
                          9.83
                          %
                          
                          
                          -35.37
                          %Efficiency
      ratio
                          
                          
                          212.65
                          %
                          
                          
                          47.05
                          %
                          
                          
                          165.60
                          %
                          
                          
                          
                          
                          
                          
                          130.59
                          %
                          
                          
                          47.25
                          %
                          
                          
                          83.34
                          %Dividend
      payout ratio
                          
                          
                          -0.78
                          %
                          
                          
                          61.69
                          %
                          
                          
                          -62.47
                          %
                          
                          
                          
                          
                          
                          
                          -8.10
                          %
                          
                          
                          94.59
                          %
                          
                          
                          -102.69
                          %Average
      equity to averageassets
      ratio
                          
                          
                          8.74
                          %
                          
                          
                          9.15
                          %
                          
                          
                          -0.41
                          %
                          
                          
                          
                          
                          
                          
                          9.15
                          %
                          
                          
                          9.18
                          %
                          
                          
                          -0.03
                          %Equity
      to assets ratio -at
      end of period
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          8.50
                          %
                          
                          
                          8.61
                          %
                          
                          
                          -0.11
                          %Tangible
      common equity ratio -end
      of period
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          6.08
                          %
                          
                          
                          6.79
                          %
                          
                          
                          -0.71
                          %
 
 Definitions
of ratios:
 
 Return
      on assets – annualized net income (loss) divided by average
      assets.
 Return
      on equity – annualized net income (loss) divided by average stockholders’
      equity.
 Efficiency
      ratio – noninterest expense divided by noninterest income (excluding
      securities gains) plus taxable equivalent net interest
    income.
 Dividend
      payout ratio – dividends paid divided by net income
  (loss).
 Equity
      to assets ratio – equity divided by
assets.
 Tangible
      common equity ratio – common equity less intangible assets divided by
      tangible assets.
 
 Net
Interest Income
 
 The
following tables show average balances and related interest income or interest
expense, with the resulting average yield or rate by category of
interest-earning assets or interest-bearing liabilities.  Interest
income and the resulting net interest income are shown on a fully taxable
basis.
  21
 
 Data for
the three months ended June 30:
 Average Balance
                                      
                                      
                                      Interest Income/Expense
                                      
                                      
                                      Yield/Rate2009
                                      
                                      
                                      2008
                                      
                                      
                                      Change
                                      
                                      
                                      Change-%
                                      
                                      
                                      2009
                                      
                                      
                                      2008
                                      
                                      
                                      Change
                                      
                                      
                                      Change-%
                                      
                                      
                                      2009
                                      
                                      
                                      2008
                                      
                                      
                                      ChangeInterest-earning
      assets:Loans:Commercial
                                      
                                      $
                                      411,466
                                      
                                      
                                      $
                                      367,983
                                      
                                      
                                      $
                                      43,483
                                      
                                      
                                      
                                      11.82
                                      %
                                      
                                      $
                                      4,967
                                      
                                      
                                      $
                                      5,175
                                      
                                      
                                      $
                                      (208
                                      )
                                      
                                      
                                      -4.02
                                      %
                                      
                                      
                                      4.84
                                      %
                                      
                                      
                                      5.66
                                      %
                                      
                                      
                                      -0.82
                                      %Real
      estate
                                      
                                      
                                      707,689
                                      
                                      
                                      
                                      641,854
                                      
                                      
                                      
                                      65,835
                                      
                                      
                                      
                                      10.26
                                      %
                                      
                                      
                                      10,151
                                      
                                      
                                      
                                      10,034
                                      
                                      
                                      
                                      117
                                      
                                      
                                      
                                      1.17
                                      %
                                      
                                      
                                      5.75
                                      %
                                      
                                      
                                      6.29
                                      %
                                      
                                      
                                      -0.54
                                      %Consumer
      and other
                                      
                                      
                                      10,840
                                      
                                      
                                      
                                      14,537
                                      
                                      
                                      
                                      (3,697
                                      )
                                      
                                      
                                      -25.43
                                      %
                                      
                                      
                                      172
                                      
                                      
                                      
                                      219
                                      
                                      
                                      
                                      (47
                                      )
                                      
                                      
                                      -21.46
                                      %
                                      
                                      
                                      6.37
                                      %
                                      
                                      
                                      6.07
                                      %
                                      
                                      
                                      0.30
                                      %Total
      loans
                                      
                                      
                                      1,129,995
                                      
                                      
                                      
                                      1,024,374
                                      
                                      
                                      
                                      105,621
                                      
                                      
                                      
                                      10.31
                                      %
                                      
                                      
                                      15,290
                                      
                                      
                                      
                                      15,428
                                      
                                      
                                      
                                      (138
                                      )
                                      
                                      
                                      -0.89
                                      %
                                      
                                      
                                      5.43
                                      %
                                      
                                      
                                      6.06
                                      %
                                      
                                      
                                      -0.63
                                      %Investment
      securities:Taxable
                                      
                                      
                                      107,770
                                      
                                      
                                      
                                      84,022
                                      
                                      
                                      
                                      23,748
                                      
                                      
                                      
                                      28.26
                                      %
                                      
                                      
                                      935
                                      
                                      
                                      
                                      1,070
                                      
                                      
                                      
                                      (135
                                      )
                                      
                                      
                                      -12.62
                                      %
                                      
                                      
                                      3.47
                                      %
                                      
                                      
                                      5.09
                                      %
                                      
                                      
                                      -1.62
                                      %Tax-exempt
                                      
                                      
                                      97,650
                                      
                                      
                                      
                                      87,808
                                      
                                      
                                      
                                      9,842
                                      
                                      
                                      
                                      11.21
                                      %
                                      
                                      
                                      1,503
                                      
                                      
                                      
                                      1,249
                                      
                                      
                                      
                                      254
                                      
                                      
                                      
                                      20.34
                                      %
                                      
                                      
                                      6.15
                                      %
                                      
                                      
                                      5.69
                                      %
                                      
                                      
                                      0.46
                                      %Total
      investment securities
                                      
                                      
                                      205,420
                                      
                                      
                                      
                                      171,830
                                      
                                      
                                      
                                      33,590
                                      
                                      
                                      
                                      19.55
                                      %
                                      
                                      
                                      2,438
                                      
                                      
                                      
                                      2,319
                                      
                                      
                                      
                                      119
                                      
                                      
                                      
                                      5.13
                                      %
                                      
                                      
                                      4.75
                                      %
                                      
                                      
                                      5.40
                                      %
                                      
                                      
                                      -0.65
                                      %Federal
      funds sold andshort-term
      investments
                                      
                                      
                                      320,865
                                      
                                      
                                      
                                      13,565
                                      
                                      
                                      
                                      307,300
                                      
                                      
                                      
                                      2265.39
                                      %
                                      
                                      
                                      208
                                      
                                      
                                      
                                      75
                                      
                                      
                                      
                                      133
                                      
                                      
                                      
                                      177.33
                                      %
                                      
                                      
                                      0.26
                                      %
                                      
                                      
                                      2.23
                                      %
                                      
                                      
                                      -1.97
                                      %Total
      interest-earning assets
                                      
                                      $
                                      1,656,280
                                      
                                      
                                      $
                                      1,209,769
                                      
                                      
                                      $
                                      446,511
                                      
                                      
                                      
                                      36.91
                                      %
                                      
                                      
                                      17,936
                                      
                                      
                                      
                                      17,822
                                      
                                      
                                      
                                      114
                                      
                                      
                                      
                                      0.64
                                      %
                                      
                                      
                                      4.34
                                      %
                                      
                                      
                                      5.92
                                      %
                                      
                                      
                                      -1.58
                                      %Interest-bearing
      liabilities:Deposits:Checking
      with interest, savingsand
      money markets
                                      
                                      $
                                      555,565
                                      
                                      
                                      $
                                      324,312
                                      
                                      
                                      $
                                      231,253
                                      
                                      
                                      
                                      71.31
                                      %
                                      
                                      
                                      1,818
                                      
                                      
                                      
                                      1,159
                                      
                                      
                                      
                                      659
                                      
                                      
                                      
                                      56.86
                                      %
                                      
                                      
                                      1.31
                                      %
                                      
                                      
                                      1.44
                                      %
                                      
                                      
                                      -0.13
                                      %Time
      deposits
                                      
                                      
                                      580,781
                                      
                                      
                                      
                                      354,778
                                      
                                      
                                      
                                      226,003
                                      
                                      
                                      
                                      63.70
                                      %
                                      
                                      
                                      3,486
                                      
                                      
                                      
                                      3,379
                                      
                                      
                                      
                                      107
                                      
                                      
                                      
                                      3.17
                                      %
                                      
                                      
                                      2.41
                                      %
                                      
                                      
                                      3.83
                                      %
                                      
                                      
                                      -1.42
                                      %Total
      deposits
                                      
                                      
                                      1,136,346
                                      
                                      
                                      
                                      679,090
                                      
                                      
                                      
                                      457,256
                                      
                                      
                                      
                                      67.33
                                      %
                                      
                                      
                                      5,304
                                      
                                      
                                      
                                      4,538
                                      
                                      
                                      
                                      766
                                      
                                      
                                      
                                      16.88
                                      %
                                      
                                      
                                      1.87
                                      %
                                      
                                      
                                      2.69
                                      %
                                      
                                      
                                      -0.82
                                      %Other
      borrowed funds
                                      
                                      
                                      250,197
                                      
                                      
                                      
                                      309,531
                                      
                                      
                                      
                                      (59,334
                                      )
                                      
                                      
                                      -19.17
                                      %
                                      
                                      
                                      1,772
                                      
                                      
                                      
                                      2,557
                                      
                                      
                                      
                                      (785
                                      )
                                      
                                      
                                      -30.70
                                      %
                                      
                                      
                                      2.84
                                      %
                                      
                                      
                                      3.32
                                      %
                                      
                                      
                                      -0.48
                                      %Total
      interest-bearing liabilities
                                      
                                      $
                                      1,386,543
                                      
                                      
                                      $
                                      988,621
                                      
                                      
                                      $
                                      397,922
                                      
                                      
                                      
                                      40.25
                                      %
                                      
                                      
                                      7,076
                                      
                                      
                                      
                                      7,095
                                      
                                      
                                      
                                      (19
                                      )
                                      
                                      
                                      -0.27
                                      %
                                      
                                      
                                      2.05
                                      %
                                      
                                      
                                      2.89
                                      %
                                      
                                      
                                      -0.84
                                      %Tax-equivalent
      net interest income
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      $
                                      10,860
                                      
                                      
                                      $
                                      10,727
                                      
                                      
                                      $
                                      133
                                      
                                      
                                      
                                      1.24
                                      %Net
      interest spread
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      2.29
                                      %
                                      
                                      
                                      3.03
                                      %
                                      
                                      
                                      -0.74
                                      %Net
      interest margin
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      2.63
                                      %
                                      
                                      
                                      3.56
                                      %
                                      
                                      
                                      -0.93
                                      %
 
 Data for
the six months ended June 30:
 
 Average Balance
                                  
                                  
                                  Interest Income/Expense
                                  
                                  
                                  Yield/Rate2009
                                  
                                  
                                  2008
                                  
                                  
                                  Change
                                  
                                  
                                  Change-%
                                  
                                  
                                  2009
                                  
                                  
                                  2008
                                  
                                  
                                  Change
                                  
                                  
                                  Change-%
                                  
                                  
                                  2009
                                  
                                  
                                  2008
                                  
                                  
                                  ChangeInterest-earning
      assets:Loans:Commercial
                                  
                                  $
                                  404,177
                                  
                                  
                                  $
                                  364,130
                                  
                                  
                                  $
                                  40,047
                                  
                                  
                                  
                                  11.00
                                  %
                                  
                                  $
                                  9,718
                                  
                                  
                                  $
                                  11,048
                                  
                                  
                                  $
                                  (1,330
                                  )
                                  
                                  
                                  -12.04
                                  %
                                  
                                  
                                  4.85
                                  %
                                  
                                  
                                  6.10
                                  %
                                  
                                  
                                  -1.25
                                  %Real
      estate
                                  
                                  
                                  707,643
                                  
                                  
                                  
                                  634,060
                                  
                                  
                                  
                                  73,583
                                  
                                  
                                  
                                  11.61
                                  %
                                  
                                  
                                  20,403
                                  
                                  
                                  
                                  20,412
                                  
                                  
                                  
                                  (9
                                  )
                                  
                                  
                                  -0.04
                                  %
                                  
                                  
                                  5.81
                                  %
                                  
                                  
                                  6.47
                                  %
                                  
                                  
                                  -0.66
                                  %Consumer
      and other
                                  
                                  
                                  11,284
                                  
                                  
                                  
                                  14,113
                                  
                                  
                                  
                                  (2,829
                                  )
                                  
                                  
                                  -20.05
                                  %
                                  
                                  
                                  356
                                  
                                  
                                  
                                  455
                                  
                                  
                                  
                                  (99
                                  )
                                  
                                  
                                  -21.76
                                  %
                                  
                                  
                                  6.36
                                  %
                                  
                                  
                                  6.49
                                  %
                                  
                                  
                                  -0.13
                                  %Total
      loans
                                  
                                  
                                  1,123,104
                                  
                                  
                                  
                                  1,012,303
                                  
                                  
                                  
                                  110,801
                                  
                                  
                                  
                                  10.95
                                  %
                                  
                                  
                                  30,477
                                  
                                  
                                  
                                  31,915
                                  
                                  
                                  
                                  (1,438
                                  )
                                  
                                  
                                  -4.51
                                  %
                                  
                                  
                                  5.47
                                  %
                                  
                                  
                                  6.34
                                  %
                                  
                                  
                                  -0.87
                                  %Investment
      securities:Taxable
                                  
                                  
                                  97,163
                                  
                                  
                                  
                                  101,825
                                  
                                  
                                  
                                  (4,662
                                  )
                                  
                                  
                                  -4.58
                                  %
                                  
                                  
                                  1,766
                                  
                                  
                                  
                                  2,547
                                  
                                  
                                  
                                  (781
                                  )
                                  
                                  
                                  -30.66
                                  %
                                  
                                  
                                  3.63
                                  %
                                  
                                  
                                  5.00
                                  %
                                  
                                  
                                  -1.37
                                  %Tax-exempt
                                  
                                  
                                  96,413
                                  
                                  
                                  
                                  86,802
                                  
                                  
                                  
                                  9,611
                                  
                                  
                                  
                                  11.07
                                  %
                                  
                                  
                                  2,967
                                  
                                  
                                  
                                  2,442
                                  
                                  
                                  
                                  525
                                  
                                  
                                  
                                  21.50
                                  %
                                  
                                  
                                  6.15
                                  %
                                  
                                  
                                  5.63
                                  %
                                  
                                  
                                  0.52
                                  %Total
      investment securities
                                  
                                  
                                  193,576
                                  
                                  
                                  
                                  188,627
                                  
                                  
                                  
                                  4,949
                                  
                                  
                                  
                                  2.62
                                  %
                                  
                                  
                                  4,733
                                  
                                  
                                  
                                  4,989
                                  
                                  
                                  
                                  (256
                                  )
                                  
                                  
                                  -5.13
                                  %
                                  
                                  
                                  4.89
                                  %
                                  
                                  
                                  5.29
                                  %
                                  
                                  
                                  -0.40
                                  %Federal
      funds sold andshort-term
      investments
                                  
                                  
                                  257,725
                                  
                                  
                                  
                                  18,403
                                  
                                  
                                  
                                  239,322
                                  
                                  
                                  
                                  1300.45
                                  %
                                  
                                  
                                  311
                                  
                                  
                                  
                                  235
                                  
                                  
                                  
                                  76
                                  
                                  
                                  
                                  32.34
                                  %
                                  
                                  
                                  0.24
                                  %
                                  
                                  
                                  2.57
                                  %
                                  
                                  
                                  -2.33
                                  %Total
      interest-earning assets
                                  
                                  $
                                  1,574,405
                                  
                                  
                                  $
                                  1,219,333
                                  
                                  
                                  $
                                  355,072
                                  
                                  
                                  
                                  29.12
                                  %
                                  
                                  
                                  35,521
                                  
                                  
                                  
                                  37,139
                                  
                                  
                                  
                                  (1,618
                                  )
                                  
                                  
                                  -4.36
                                  %
                                  
                                  
                                  4.54
                                  %
                                  
                                  
                                  6.12
                                  %
                                  
                                  
                                  -1.58
                                  %Interest-bearing
      liabilities:Deposits:Checking
      with interest, savingsand
      money markets
                                  
                                  $
                                  449,106
                                  
                                  
                                  $
                                  325,787
                                  
                                  
                                  $
                                  123,319
                                  
                                  
                                  
                                  37.85
                                  %
                                  
                                  
                                  2,679
                                  
                                  
                                  
                                  2,942
                                  
                                  
                                  
                                  (263
                                  )
                                  
                                  
                                  -8.94
                                  %
                                  
                                  
                                  1.20
                                  %
                                  
                                  
                                  1.82
                                  %
                                  
                                  
                                  -0.62
                                  %Time
      deposits
                                  
                                  
                                  617,138
                                  
                                  
                                  
                                  365,820
                                  
                                  
                                  
                                  251,318
                                  
                                  
                                  
                                  68.70
                                  %
                                  
                                  
                                  7,891
                                  
                                  
                                  
                                  7,568
                                  
                                  
                                  
                                  323
                                  
                                  
                                  
                                  4.27
                                  %
                                  
                                  
                                  2.58
                                  %
                                  
                                  
                                  4.16
                                  %
                                  
                                  
                                  -1.58
                                  %Total
      deposits
                                  
                                  
                                  1,066,244
                                  
                                  
                                  
                                  691,607
                                  
                                  
                                  
                                  374,637
                                  
                                  
                                  
                                  54.17
                                  %
                                  
                                  
                                  10,570
                                  
                                  
                                  
                                  10,510
                                  
                                  
                                  
                                  60
                                  
                                  
                                  
                                  0.57
                                  %
                                  
                                  
                                  2.00
                                  %
                                  
                                  
                                  3.06
                                  %
                                  
                                  
                                  -1.06
                                  %Other
      borrowed funds
                                  
                                  
                                  246,252
                                  
                                  
                                  
                                  307,957
                                  
                                  
                                  
                                  (61,705
                                  )
                                  
                                  
                                  -20.04
                                  %
                                  
                                  
                                  3,531
                                  
                                  
                                  
                                  5,572
                                  
                                  
                                  
                                  (2,041
                                  )
                                  
                                  
                                  -36.63
                                  %
                                  
                                  
                                  2.89
                                  %
                                  
                                  
                                  3.64
                                  %
                                  
                                  
                                  -0.75
                                  %Total
      interest-bearing liabilities
                                  
                                  $
                                  1,312,496
                                  
                                  
                                  $
                                  999,564
                                  
                                  
                                  $
                                  312,932
                                  
                                  
                                  
                                  31.31
                                  %
                                  
                                  
                                  14,101
                                  
                                  
                                  
                                  16,082
                                  
                                  
                                  
                                  (1,981
                                  )
                                  
                                  
                                  -12.32
                                  %
                                  
                                  
                                  2.17
                                  %
                                  
                                  
                                  3.24
                                  %
                                  
                                  
                                  -1.07
                                  %Tax-equivalent
      net interest income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  21,420
                                  
                                  
                                  $
                                  21,057
                                  
                                  
                                  $
                                  363
                                  
                                  
                                  
                                  1.72
                                  %Net
      interest spread
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  2.37
                                  %
                                  
                                  
                                  2.88
                                  %
                                  
                                  
                                  -0.51
                                  %Net
      interest margin
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  2.74
                                  %
                                  
                                  
                                  3.47
                                  %
                                  
                                  
                                  -0.73
                                  %
  22


Fluctuations
in net interest income can result from the combination of changes in the
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 action of regulatory
authorities.  Net interest margin is a measure of the net return on
interest-earning assets and is computed by dividing annualized tax-equivalent
net interest income by the average of total interest-earning assets for the
period.  The net interest margin for the three months ended June 30,
2009, was 2.63 percent, a decline of 93 basis points compared to the same
quarter last year and 24 basis points lower than the first quarter of
2009.  The decrease from the prior quarter was due to a significant
increase in the second quarter of 2009 in the average amount of assets held in
low-yielding federal funds sold due to maintaining a high level of liquidity
during the current uncertain economy and a temporary significant influx of money
market deposits by two commercial customers.  Late in the quarter the
deposits flowed back out and additional investments securities were purchased,
which should help improve the margin in future quarters.  The decline
in the net interest margin for the second quarter of 2009 compared to 2008 was
caused by the yield on earning assets declining more than the rates paid on
interest-bearing liabilities.  The Company’s tax-equivalent net
interest income for the three months ended June 30, 2009, increased slightly
compared to the three months ended June 30, 2008, due to growth in
interest-earning assets.





For the
six months ended June 30, 2009, the net interest margin declined to 2.74
percent, which was a 73 basis point decline compared to the six months ended
June 30, 2008.  Despite the drop in the net interest margin,
tax-equivalent net interest income for the six months ended June 30, 2009,
increased $363 as growth in earning assets exceeded growth in interest-bearing
liabilities when compared to the six months ended June 30, 2008.  The
high level of competition in the local markets, the Federal Reserves’ targeted
federal funds rate of zero to 25 basis points, and the high level of non-accrual
loans are expected to keep pressure on the net interest margin of the
Company.





Tax-equivalent
interest income and fees on loans declined $1,438 in the first six months of
2009 compared to the same period in 2008, as the combination of lower rates, and
a higher volume of non-accrual loans exceeded the positive impact of the $111
million increase in the average volume of outstanding loans.  The
average yield on loans declined to 5.47 percent for the first six months of
2009, compared to 6.34 percent for the same period in 2008.  The yield
on the Company’s loan portfolio is affected by the mix of the portfolio, the
effects of competition, the interest rate environment, the amount of non-accrual
loans, and reversals of previously accrued interest on charged-off
loans.  The interest rate environment can influence the volume of new
loan originations and the mix of variable rate versus fixed rate
loans.  Loan pricing in the Company’s market areas remains
competitive, while the level of demand for new loans has declined as business
customers assess the long-term effects of the recession.





For the
first six months of 2009, the average balance of investment securities was $5
million higher than in the first six months of 2008, and the yield declined 40
basis points.  The decline in yield was caused by reversing $117 of
interest on securities deemed impaired during the first quarter of
2009.  Investment securities totaling approximately $74 million were
sold, called or matured in the first six months of 2009 and approximately $140
million of investment securities were purchased during the same
period.





The
average balance of federal funds sold and short-term investments increased over
$239 million during the first six months of 2009 compared to the same time
period in 2008.  Despite the significant increase in volume, net
interest income on these assets increased only $76 due to the 233 basis point
drop in rates.  As mentioned above, this high level of federal funds
sold was reduced by the end of the quarter in order to enhance net interest
income in the coming months.





The
average rate paid on deposits for the first six months of 2009 declined to 2.00
percent from 3.06 percent for the same period last year.  Despite the
significant drop in rates paid, interest expense increased by $60 due to a
sizable increase in average balances.  The average balance of
interest-bearing demand and savings accounts grew due to the temporary spike of
$50 million in average money market balances mentioned above, as well as an
additional $54 million in average Reward Me Checking product balances, which
currently are paid a rate in excess of certificate of deposit rates, and a $37
million increase in average SmartyPig savings account balances.  The
average balance of time deposits increased $251 million in the first six months
of 2009 compared to the same time period in 2008 with all of that increase in
brokered time deposits.  The balance is expected to remain higher as
more customers are participating in the Certificate of Deposit Account Registry
Service (CDARS) program in order to obtain FDIC insurance on their
deposits.  CDARS is a program that coordinates a network of banks to
spread deposits exceeding the FDIC insurance coverage limits out to numerous
institutions in order to provide insurance coverage for all participating
deposits.  Even though these depositors are customers of West Bank,
banking regulations currently require these deposits to be classified as
brokered.





The
average rate paid on other borrowings declined by 75 basis points compared to
the first six months of 2008.  The average balance of borrowings for
the first six months of 2009 was $62 million lower than a year
ago.  Overnight borrowings in the form of federal funds purchased from
correspondent banks and securities sold under agreements to repurchase averaged
$43 million less than during the first six months of last year.  The
average rate paid on overnight borrowings declined 244 basis points in 2009
compared to the first six months of 2008.  Average long-term
borrowings declined $17 million, while the average rates paid on borrowings
increased 24 basis points compared to 2008.




23




Provision
for Loan Losses and the Related Allowance for Loan Losses





The
provision for loan losses represents charges made to earnings to maintain an
adequate allowance for loan losses.  The allowance for loan losses is
management’s best estimate of probable losses inherent in the loan portfolio as
of the balance sheet date.  Factors considered in establishing an
appropriate allowance include: an assessment of the financial condition of the
borrower; a realistic determination of value and adequacy of underlying
collateral; the condition of the local economy and the condition of the specific
industry of the borrower; an analysis of the levels and trends of loan
categories; and a review of delinquent and classified loans.





The
adequacy of the allowance for loan losses is evaluated quarterly by management
and reviewed by West Bank’s Board of Directors.  This evaluation
focuses on factors such as specific loan reviews, changes in the components of
the loan portfolio given the current and forecasted 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 customer’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 reasons, including whether the loan has other special or
unusual characteristics that suggest special monitoring is
warranted.





While
management uses available information to recognize potential losses on loans,
further reduction in the carrying amounts of loans may be necessary based on
changes in circumstances or later acquired information.  Furthermore,
changes in future economic activity are always
uncertain.  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 an
integral part of their examination process, periodically review the estimated
losses on loans.  Such agencies may require West Bank to recognize
additional losses based on their judgment about information available to them at
the time of their examination.





West
Bank’s policy is to charge off loans when, in management’s opinion, the loan is
deemed uncollectible, although concerted efforts are made to maximize future
recoveries.  The following table summarizes the activity in the
allowance for loan losses for the three and six months ended June 30, 2009 and
2008, as well as common ratios related to the allowance for loan
losses.





Three Months Ended June 30,
                        
                        
                        Six Months Ended June 30,2009
                        
                        
                        2008
                        
                        
                        Change
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        ChangeBalance
      at beginning of period
                        
                        $
                        18,015
                        
                        
                        $
                        14,260
                        
                        
                        $
                        3,755
                        
                        
                        $
                        15,441
                        
                        
                        $
                        8,935
                        
                        
                        $
                        6,506Charge-offs
                        
                        
                        (9,366
                        )
                        
                        
                        (4,740
                        )
                        
                        
                        (4,626
                        )
                        
                        
                        (10,553
                        )
                        
                        
                        (5,121
                        )
                        
                        
                        (5,432
                        )Recoveries
                        
                        
                        13
                        
                        
                        
                        37
                        
                        
                        
                        (24
                        )
                        
                        
                        274
                        
                        
                        
                        143
                        
                        
                        
                        131Net
      charge-offs
                        
                        
                        (9,353
                        )
                        
                        
                        (4,703
                        )
                        
                        
                        (4,650
                        )
                        
                        
                        (10,279
                        )
                        
                        
                        (4,978
                        )
                        
                        
                        (5,301
                        )Provision
      charged to operations
                        
                        
                        15,000
                        
                        
                        
                        1,000
                        
                        
                        
                        14,000
                        
                        
                        
                        18,500
                        
                        
                        
                        6,600
                        
                        
                        
                        11,900Balance
      at end of period
                        
                        $
                        23,662
                        
                        
                        $
                        10,557
                        
                        
                        $
                        13,105
                        
                        
                        $
                        23,662
                        
                        
                        $
                        10,557
                        
                        
                        $
                        13,105Average
      loans outstanding
                        
                        $
                        1,129,995
                        
                        
                        $
                        1,024,374
                        
                        
                        
                        
                        
                        
                        $
                        1,123,104
                        
                        
                        $
                        1,012,303Ratio
      of net charge-offs during the period to average loans
      outstanding
                        
                        
                        0.83
                        %
                        
                        
                        0.46
                        %
                        
                        
                        
                        
                        
                        
                        0.92
                        %
                        
                        
                        0.49
                        %Ratio
      of allowance for loan losses to average loans outstanding
                        
                        
                        2.09
                        %
                        
                        
                        1.03
                        %
                        
                        
                        
                        
                        
                        
                        2.11
                        %
                        
                        
                        1.04
                        %




The
provision for loan losses was increased to $15 million for the second quarter of
2009.  The provision increased due to higher charge-offs, including
$4.6 million for a loan to one customer, and continued deterioration in
collateral values on certain loans.  The 2009 year-to-date provision
is also higher than historic levels as a result of the economy remaining in a
recession with significant difficulty being experienced in the construction and
real estate development, commercial real estate, and commercial business
sectors.





Net
charge-offs during the first six months of 2009 were $5.3 million higher than in
the same period in 2008.  The majority of the 2009 year-to-date
charge-offs were related to seven customers.





The
allowance for loan losses represented 41.9 percent of non-performing loans at
June 30, 2009, compared to 53.5 percent at December 31, 2008.  The
ratio has declined primarily due to the significant increase in non-performing
loans.  However, a significant portion of non-accrual loans are
collateralized by real estate which means it is unlikely those loans would
suffer a total loss of principal amount.




24




Noninterest
Income





The
following table shows the variance from the prior year in the noninterest income
categories shown in the Consolidated Statements of Income.  In
addition, accounts within the “Other income” category that represent significant
variances are shown.





Three Months Ended June 30,2009
                              
                              
                              2008
                              
                              
                              Change
                              
                              
                              Change %Noninterest income:Service
      charges on deposit accounts
                              
                              $
                              1,073
                              
                              
                              $
                              1,250
                              
                              
                              $
                              (177
                              )
                              
                              
                              -14.2
                              %Trust
      services
                              
                              
                              179
                              
                              
                              
                              204
                              
                              
                              
                              (25
                              )
                              
                              
                              -12.3
                              %Gains
      and fees on sales of residential mortgages
                              
                              
                              237
                              
                              
                              
                              135
                              
                              
                              
                              102
                              
                              
                              
                              75.6
                              %Investment
      advisory fees
                              
                              
                              1,593
                              
                              
                              
                              1,960
                              
                              
                              
                              (367
                              )
                              
                              
                              -18.7
                              %Increase
      in cash value of bank-ownedlife
      insurance
                              
                              
                              181
                              
                              
                              
                              257
                              
                              
                              
                              (76
                              )
                              
                              
                              -29.6
                              %Proceeds
      from bank-owned life insurance
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              N/AOther:Debit
      card usage fees
                              
                              
                              281
                              
                              
                              
                              222
                              
                              
                              
                              59
                              
                              
                              
                              26.6
                              %All
      other
                              
                              
                              246
                              
                              
                              
                              253
                              
                              
                              
                              (7
                              )
                              
                              
                              -2.8
                              %Total
      other
                              
                              
                              527
                              
                              
                              
                              475
                              
                              
                              
                              52
                              
                              
                              
                              10.9
                              %Total
      noninterest income
                              
                              $
                              3,790
                              
                              
                              $
                              4,281
                              
                              
                              $
                              (491
                              )
                              
                              
                              -11.5
                              %





Six Months Ended June 30,2009
                          
                          
                          2008
                          
                          
                          Change
                          
                          
                          Change %Noninterest income:Service
      charges on deposit accounts
                          
                          $
                          2,042
                          
                          
                          $
                          2,296
                          
                          
                          $
                          (254
                          )
                          
                          
                          -11.1
                          %Trust
      services
                          
                          
                          359
                          
                          
                          
                          398
                          
                          
                          
                          (39
                          )
                          
                          
                          -9.8
                          %Gains
      and fees on sales of residential mortgages
                          
                          
                          535
                          
                          
                          
                          220
                          
                          
                          
                          315
                          
                          
                          
                          143.2
                          %Investment
      advisory fees
                          
                          
                          3,009
                          
                          
                          
                          3,898
                          
                          
                          
                          (889
                          )
                          
                          
                          -22.8
                          %Increase
      in cash value of bank-ownedlife
      insurance
                          
                          
                          363
                          
                          
                          
                          449
                          
                          
                          
                          (86
                          )
                          
                          
                          -19.2
                          %Proceeds
      from bank-owned life insurance
                          
                          
                          840
                          
                          
                          
                          -
                          
                          
                          
                          840
                          
                          
                          
                          N/AOther:Debit
      card usage fees
                          
                          
                          529
                          
                          
                          
                          412
                          
                          
                          
                          117
                          
                          
                          
                          28.4
                          %All
      other
                          
                          
                          502
                          
                          
                          
                          535
                          
                          
                          
                          (33
                          )
                          
                          
                          -6.2
                          %Total
      other
                          
                          
                          1,031
                          
                          
                          
                          947
                          
                          
                          
                          84
                          
                          
                          
                          8.9
                          %Total
      noninterest income
                          
                          $
                          8,179
                          
                          
                          $
                          8,208
                          
                          
                          $
                          (29
                          )
                          
                          
                          -0.4
                          %




Service
charges on deposit accounts declined for the second quarter of 2009 as return
check charges dropped by $151 compared to the same period in 2008.  In
the current uncertain economy, customers appear to be more conscientious about
monitoring their checking account balances.  For the first six months
of 2009 return check charges have declined $251, while other service charges
have held steady.





Trust
fees have declined for both the second quarter of 2009 and on a year-to-date
basis compared to the same time periods in 2008 as a result of lower asset
values due to the overall decline in the stock market.





The
volume of originations of residential mortgages sold into the secondary market
in the second quarter and the first six months of 2009 more than doubled
compared to the same time periods in 2008.  The growth of this line of
business is expected to continue as long as historically low interest rates
allow consumers to refinance existing mortgages in order to reduce their monthly
costs.  Despite the low level of home sales, consumers are selectively
purchasing real estate while locking in relatively low long-term
rates.





Investment
advisory fees are fees earned by WB Capital.  Most of the second
quarter and year-to-date 2009 reduction in fee income resulted from the decline
in advisory fees due to the severe decline in stock values and business lost due
to the uncertain markets.  Partially offsetting the decline was a 25
percent, or $169, year-to-date increase in public funds revenue due to increased
asset levels.





The
second quarter and year-to-date 2009 decline in the increase in cash value of
bank-owned life insurance was due to lower market interest rates.  As
previously discussed, West Bank received tax-exempt income from life insurance
proceeds as the result of the death of one of its officers in the first quarter
of 2009.




25




Debit
card usage fees continued to increase in the first six months of 2009 as West
Bank’s interest-bearing checking account product grew by over 1,500 accounts and
approximately $39 million in balances compared to December 31,
2008.  This product was introduced in April 2008 and encourages the
use of electronic payments.  This source of revenue is expected to
continue to grow due to the convenience of this payment method.  The
growth rate may decline going forward due to the implementation of a West Bank
requirement that new account owners be Iowa residents.





Investment
Securities Gains (Losses)





During
the second quarter of 2009, West Bank had one pooled trust preferred investment
security with other-than-temporary impairment (OTTI) of $1,013.  Of
this amount, $275 was recognized as an impairment loss.  Additional
details on this recognized loss are available in Note 5.  During the
first quarter of 2009, total impairment losses of $1,415 were recognized on two
trust preferred securities held by West Bank and one unit investment trust held
at the Company.  Realized securities gains of $1,453 were recognized
in the first quarter of 2009 on the sale of agency and municipal securities,
while realized gains in the first quarter of 2008 totaled $5.




26




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
significant variances are shown.





Three months ended June 30,2009
                            
                            
                            2008
                            
                            
                            Change
                            
                            
                            Change %Noninterest expense:Salaries
      and employee benefits
                            
                            $
                            3,308
                            
                            
                            $
                            3,634
                            
                            
                            $
                            (326
                            )
                            
                            
                            -9.0
                            %Occupancy
                            
                            
                            1,163
                            
                            
                            
                            899
                            
                            
                            
                            264
                            
                            
                            
                            29.4
                            %Data
      processing
                            
                            
                            579
                            
                            
                            
                            611
                            
                            
                            
                            (32
                            )
                            
                            
                            -5.2
                            %FDIC
      insurance expense
                            
                            
                            1,283
                            
                            
                            
                            153
                            
                            
                            
                            1,130
                            
                            
                            
                            738.6
                            %Goodwill
      impairment
                            
                            
                            23,036
                            
                            
                            
                            -
                            
                            
                            
                            23,036
                            
                            
                            
                            N/AOther:Marketing
                            
                            
                            124
                            
                            
                            
                            232
                            
                            
                            
                            (108
                            )
                            
                            
                            -46.6
                            %Professional
      fees
                            
                            
                            246
                            
                            
                            
                            294
                            
                            
                            
                            (48
                            )
                            
                            
                            -16.3
                            %Consulting
      fees
                            
                            
                            117
                            
                            
                            
                            80
                            
                            
                            
                            37
                            
                            
                            
                            46.3
                            %Deposit
      operations expense
                            
                            
                            288
                            
                            
                            
                            35
                            
                            
                            
                            253
                            
                            
                            
                            722.9
                            %Bank
      service charges
                            
                            
                            92
                            
                            
                            
                            57
                            
                            
                            
                            35
                            
                            
                            
                            61.4
                            %Other
      real estate owned expense
                            
                            
                            90
                            
                            
                            
                            105
                            
                            
                            
                            (15
                            )
                            
                            
                            -14.3
                            %Charitable
      contributions
                            
                            
                            -
                            
                            
                            
                            42
                            
                            
                            
                            (42
                            )
                            
                            
                            -100.0
                            %Intangible
      amortization
                            
                            
                            154
                            
                            
                            
                            183
                            
                            
                            
                            (29
                            )
                            
                            
                            -15.8
                            %All
      other
                            
                            
                            670
                            
                            
                            
                            736
                            
                            
                            
                            (66
                            )
                            
                            
                            -9.0
                            %Total
      other
                            
                            
                            1,781
                            
                            
                            
                            1,764
                            
                            
                            
                            17
                            
                            
                            
                            1.0
                            %Total
      noninterest expense
                            
                            $
                            31,150
                            
                            
                            $
                            7,061
                            
                            
                            $
                            24,089
                            
                            
                            
                            341.2
                            %
  Six months ended June 30,2009
                              
                              
                              2008
                              
                              
                              Change
                              
                              
                              Change %Noninterest
      expense:Salaries
      and employee benefits
                              
                              $
                              6,972
                              
                              
                              $
                              7,365
                              
                              
                              $
                              (393
                              )
                              
                              
                              -5.3
                              %Occupancy
                              
                              
                              2,103
                              
                              
                              
                              1,799
                              
                              
                              
                              304
                              
                              
                              
                              16.9
                              %Data
      processing
                              
                              
                              1,125
                              
                              
                              
                              1,198
                              
                              
                              
                              (73
                              )
                              
                              
                              -6.1
                              %FDIC
      insurance expense
                              
                              
                              1,736
                              
                              
                              
                              185
                              
                              
                              
                              1,551
                              
                              
                              
                              838.4
                              %Goodwill
      impairment
                              
                              
                              23,036
                              
                              
                              
                              -
                              
                              
                              
                              23,036
                              
                              
                              
                              N/AOther:Marketing
                              
                              
                              288
                              
                              
                              
                              419
                              
                              
                              
                              (131
                              )
                              
                              
                              -31.3
                              %Professional
      fees
                              
                              
                              525
                              
                              
                              
                              538
                              
                              
                              
                              (13
                              )
                              
                              
                              -2.4
                              %Consulting
      fees
                              
                              
                              200
                              
                              
                              
                              130
                              
                              
                              
                              70
                              
                              
                              
                              53.8
                              %Deposit
      operations expense
                              
                              
                              377
                              
                              
                              
                              38
                              
                              
                              
                              339
                              
                              
                              
                              892.1
                              %Bank
      service charges
                              
                              
                              174
                              
                              
                              
                              114
                              
                              
                              
                              60
                              
                              
                              
                              52.6
                              %Other
      real estate owned expense
                              
                              
                              125
                              
                              
                              
                              91
                              
                              
                              
                              34
                              
                              
                              
                              37.4
                              %Charitable
      contributions
                              
                              
                              200
                              
                              
                              
                              78
                              
                              
                              
                              122
                              
                              
                              
                              156.4
                              %Intangible
      amortization
                              
                              
                              309
                              
                              
                              
                              360
                              
                              
                              
                              (51
                              )
                              
                              
                              -14.2
                              %All
      other
                              
                              
                              1,483
                              
                              
                              
                              1,511
                              
                              
                              
                              (28
                              )
                              
                              
                              -1.9
                              %Total
      other
                              
                              
                              3,681
                              
                              
                              
                              3,279
                              
                              
                              
                              402
                              
                              
                              
                              12.3
                              %Total
      noninterest expense
                              
                              $
                              38,653
                              
                              
                              $
                              13,826
                              
                              
                              $
                              24,827
                              
                              
                              
                              179.6
                              %




27




The
decline in salaries and benefits resulted from reductions in bonus accruals of
$353 and $544 for the second quarter of 2009 and year-to-date 2009,
respectively, compared to the same time periods of 2008.  Partially
offsetting the lower bonus accruals was a year-to-date decline in salary
deferrals related to lower volume of new loans issued and a 5.7 percent increase
in the cost of employee healthcare coverage.





Occupancy
expenses increased in the second quarter and six months ended June 30, 2009, due
to a second quarter $190 one-time lease buyout for unused space in the facility
in which WB Capital is located in West Des Moines and the February 2009 opening
of a new branch in Waukee.





Data
processing expense declined because of new terms in West Bank’s contract with
its data processing provider.  Those savings were somewhat offset by
increased costs related to higher volumes of pin and signature-based debit/ATM
card transactions and higher volumes of transactions and accounts on West Bank’s
various deposit and loan application systems.





FDIC
insurance expense increased as a result of the full utilization of the FDIC
assessment credit during the first quarter of 2008, rate increases, and an
emergency special assessment in the second quarter of 2009.  The rate
assessed to each bank was based upon risk factors including past due and
non-performing loans, net loan charge-offs, and net income (loss) before
taxes.  The FDIC has imposed an emergency special assessment of 5
basis points multiplied by June 30, 2009 total assets less Tier 1 capital as
part of the restoration plan for the Deposit Insurance Fund.  The
impact on West Bank was an additional second quarter expense of $695 with
payment to occur on September 30, 2009.  The FDIC also has the ability
to collect up to two additional emergency assessments prior to the end of 2009
with announcement dates as late as the last day of each quarter.  With
the continued increased number of bank failures throughout the country, it is
highly likely that additional special assessments may be required to maintain a
positive balance in the FDIC’s Deposit Insurance Fund through the end of
2009.





As
discussed previously, the goodwill impairment consisted of writing off all
goodwill at West Bank, or $13,376, and a substantial part of WB Capital’s
goodwill, or $9,660.  The impairment analysis was completed at an
interim period due to the Company’s common stock price falling to levels below
book value.





Marketing
expense for 2009 compared to 2008 declined as a result of prior year expense
including costs for launching a new product.  Professional fees
declined due to lower legal fees in the second quarter and year-to-date
2009.  Consulting fees increased due to the implementation of a
customer relationship management system beginning in the second half of 2008,
investment securities valuations completed by a consulting firm, and hiring a
third party firm to assist in evaluating goodwill for impairment.





Deposit
operations expense increased for second quarter and year-to-date 2009 due to
costs associated with SmartyPig savings and Reward Me interest-bearing checking
products which have both grown substantially compared to the prior
year.  West Bank’s service charges paid have increased for second
quarter and year-to-date 2009 as a result of technological improvements in cash
letter processing that allows better availability of funds from incoming
deposits.  The improved availability results in a loss of earnings
credit used to offset the charges assessed by the processor.





Other
real estate owned expense declined during the second quarter of 2009 due to
recognizing a net gain on properties sold, while year-to-date 2009 expense
increased due to operating costs for a higher number of properties
held.





Charitable
contributions increased in the first six months of 2009 because $200 of the
previously mentioned bank-owned life insurance proceeds was contributed to the
West Bancorporation Foundation in the first quarter.  The Company does
not anticipate funding additional contribution expenses for the remainder of
2009.





Income
Tax Expense (Benefits)





The
Company recorded income tax benefits of $9,741 for the six months ended June 30,
2009, compared with expense of $2,010 for the six months ended June 30,
2008.  The effective income tax rates as a percent of income (loss)
before taxes for the second quarter of 2009 and 2008, was a benefit of 31.3
percent and expense of 30.1 percent, respectively, and was a benefit of 33.5
percent and expense of 25.4 percent, respectively, for the six months ended June
30, 2009 and 2008.  The Company’s consolidated income tax rate varies
from the statutory rate primarily due to tax-exempt income, including interest
on municipal securities and the life insurance proceeds, and approximately $7
million of non-deductible goodwill impairment.  The effective tax rate
for both years was also impacted by West Bank’s 2007 investment in a qualified
community development entity, which generated a federal new market tax
credit.  The credit, which totals $2,730, is being recognized over a
seven-year period.




28




FINANCIAL
CONDITION





Total
assets were approximately $1.51 billion as of June 30, 2009, a slight decrease
compared to December 31, 2008.  The decline was primarily due to lower
federal funds purchased from downstream correspondent banks.  A
summary of changes in the components of the balance sheet are described in the
following paragraphs.





Investment
Securities





Investment
securities available for sale increased approximately $64 million from December
31, 2008, to $245.8 million at June 30, 2009.  The increase was
primarily the result of purchasing government agency, mortgage-backed, and
corporate securities in an effort to improve the Company’s net interest
margin.





The
Company conducts quarterly reviews to identify and evaluate each investment that
has an unrealized loss for other-than-temporary impairment (OTTI).  In
June 2009, the Company adopted FSP FAS 115-2/124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments,” which changed the accounting
requirements for OTTI for debt securities, and in certain circumstances,
separates the total impairment into credit and noncredit-related
amounts.  The review takes into consideration current market
conditions, issuer rating changes and trends, the credit worthiness of the
obligor of the security, current analysts’ evaluations, failure of the issuer to
make scheduled interest or principal payments, the Company’s intent to sell the
security or whether it is more-likely-than-not that the Company will be required
to sell the debt security before its anticipated recovery, as well as other
qualitative factors.  The term OTTI is not intended to indicate that
the decline is permanent, but indicates that the prospects for a near-term
recovery of value is not necessarily favorable, or that there is a lack of
evidence to support a realizable value equal to or greater than the carrying
value of the investment.  Declines in the fair value of securities
below their amortized cost basis that are deemed to be OTTI are carried at fair
value.  Any portion of a decline in value associated with a credit
loss is recognized in income with the remaining noncredit-related component
being recognized in other comprehensive income.  A credit loss is
determined by assessing whether the amortized cost basis of the security will be
recovered, by comparing the present value of cash flows expected to be collected
from the security to the amortized cost basis of the security. The shortfall of
the present value of the cash flows expected to be collected in relation to the
amortized cost basis is considered to be the “credit loss.”





As of
June 30, 2009, one pooled trust preferred security had an amortized cost of
$4,901 and an estimated market value of $1,266 which resulted in $3,635 of total
impairment, or an additional impairment of $1,013 in the second quarter of
2009.  With the assistance of an investment consulting firm, the
Company estimated the fair value of the security using a discounted cash flow
method.  To determine the credit loss on this security, the investment
consulting firm projected cash flows for the security and discounted the cash
flows at the original purchased yield.  Based on this calculation,
$275 of the total impairment was considered to be a credit loss which was
recognized in the 2009 second quarter income statement and the remaining
amortized cost of the security was reduced to create a new cost
basis.  The remaining change in fair market value of $3,360 is
reflected in other comprehensive income (loss), net of taxes of
$1,277.  On a quarterly basis, the Company will continue to estimate
the present value of cash flows expected to be collected over the life of the
security.





At June
30, 2009, the most significant risk of a future impairment charge relates to
West Bank’s investment in trust preferred securities of other
banks.  As of June 30, 2009, six trust preferred securities with a
cost basis of $4.2 million were valued at $2.0 million.  In accordance
with SFAS No. 115, the decline in fair market value has been charged against
equity on an after income tax basis.  Management has concluded these
securities are not OTTI.  Any potential future loss that would be
considered OTTI would negatively impact net income and regulatory capital;
however, as previously noted the fair market value adjustment at June 30, 2009,
has already been recorded against equity.  The investment securities
portfolio includes a note issued by SLM Corporation, also know as Sallie
Mae.  The cost of the note was $4 million and the current market value
improved to $3.0 million as of June 30, 2009, compared to $1.5 million a quarter
earlier.  The value of the note has been impacted by the U.S.
Government’s decision to continue to use Sallie Mae to service student
loans.  Also, included in the portfolio is a note issued by CIT Group
Inc. with a par value of $2 million and market value of $1.9 million as of June
30, 2009.  CIT Group, a small business lender, is experiencing
liquidity issues and the U.S. Treasury, the Federal Reserve, and the FDIC are
not currently willing to provide additional government assistance to the
lender.  On July 20, 2009, CIT Group announced it had secured $3
billion in short-term funding from private sources.  Management will
continue to monitor this security which is scheduled to mature in the fourth
quarter of 2009.




29




As of
June 30, 2009, the available for sale investment securities portfolio consists
of approximately 40 percent U.S. government and government agency securities, 42
percent municipal securities, 5 percent mortgage-backed securities, and 13
percent corporate and trust preferred securities.





Loans and
Non-performing Assets





Loans
outstanding increased approximately $15 million from December 31, 2008, to June
30, 2009.  The increase was primarily attributable to growth in
commercial, construction, and commercial real estate
loans.  Meanwhile, multifamily, residential real estate, and consumer
loans declined somewhat compared to December 31, 2008.  New loan
funding in the first six months of 2009 totaled approximately $70
million.  West Bank has fewer new loans in process which should result
in little to no growth in the third quarter of 2009.  West Bank stands
ready to provide loans to those credit-worthy customers requesting additional
funding; however, in this economic environment, loan requests are at a reduced
level.





The
following tables show a breakdown of West Bank’s three major components of its
loan portfolio (construction, commercial real estate, and commercial) as of June
30, 2009.





Construction
      loans:June 30, 2009$
                        
                        
                        %Land
      development1-4
      family
                        
                        $
                        8,331
                        
                        
                        
                        5
                        %Multifamily
                        
                        
                        19,403
                        
                        
                        
                        13
                        %Construction1-4
      familyOwner
      occupied
                        
                        
                        4,292
                        
                        
                        
                        3
                        %Non-owner
      occupied
                        
                        
                        34,823
                        
                        
                        
                        23
                        %Multifamily
                        
                        
                        14,751
                        
                        
                        
                        10
                        %Industrial,
      commercial and other
                        
                        
                        71,147
                        
                        
                        
                        46
                        %$
                        152,747
                        
                        
                        
                        100
                        %




Commercial
      Real Estate Loans:June 30, 2009$
                      
                      
                      %Owner
      occupied
                      
                      $
                      217,036
                      
                      
                      
                      50
                      %Non-owner
      occupiedMedical/Retirement
                      
                      
                      60,945
                      
                      
                      
                      14
                      %Retail
                      
                      
                      46,665
                      
                      
                      
                      11
                      %Multifamily
                      
                      
                      37,635
                      
                      
                      
                      9
                      %Office
                      
                      
                      36,056
                      
                      
                      
                      8
                      %Warehouse
                      
                      
                      15,407
                      
                      
                      
                      3
                      %Hotel
                      
                      
                      7,334
                      
                      
                      
                      2
                      %Other
                      
                      
                      15,060
                      
                      
                      
                      3
                      %Total
      non-owner occupied
                      
                      
                      219,102
                      
                      
                      
                      50
                      %$
                      436,138
                      
                      
                      
                      100
                      %




30




Commercial
      Loans:June 30, 2009$
                                
                                
                                %Finance
      and insurance
                                
                                $
                                87,146
                                
                                
                                
                                21
                                %Real
      estate and rental/leasing
                                
                                
                                54,212
                                
                                
                                
                                13
                                %Manufacturing
                                
                                
                                46,664
                                
                                
                                
                                11
                                %Publishing,
      broadcasting and information services
                                
                                
                                30,112
                                
                                
                                
                                7
                                %Construction
                                
                                
                                20,638
                                
                                
                                
                                5
                                %Wholesale
      trade
                                
                                
                                15,635
                                
                                
                                
                                3
                                %Building
      trades
                                
                                
                                16,796
                                
                                
                                
                                4
                                %Transportation
      and warehousing
                                
                                
                                19,785
                                
                                
                                
                                5
                                %Retail
                                
                                
                                11,250
                                
                                
                                
                                3
                                %Arts,
      entertainment and recreation
                                
                                
                                11,694
                                
                                
                                
                                3
                                %Other
                                
                                
                                106,916
                                
                                
                                
                                25
                                %$
                                420,848
                                
                                
                                
                                100
                                %




The
following table sets forth the amount of non-performing loans and assets held by
the Company and common ratio measurements of those items.





June 30, 2009
                          
                          
                          December 31, 2008
                          
                          
                          ChangeNon-accrual
      loans
                          
                          $
                          29,591
                          
                          
                          $
                          21,367
                          
                          
                          $
                          8,224Loans
      past due 90 days and stillaccruing
      interest
                          
                          
                          14,012
                          
                          
                          
                          92
                          
                          
                          
                          13,920Restructured
      loans
                          
                          
                          12,855
                          
                          
                          
                          7,376
                          
                          
                          
                          5,479Total
      non-performing loans
                          
                          
                          56,458
                          
                          
                          
                          28,835
                          
                          
                          
                          27,623Other
      real estate owned
                          
                          
                          6,137
                          
                          
                          
                          4,352
                          
                          
                          
                          1,785Non-accrual
      investment securities
                          
                          
                          1,746
                          
                          
                          
                          2,575
                          
                          
                          
                          (829
                          )Total
      non-performing assets
                          
                          $
                          64,341
                          
                          
                          $
                          35,762
                          
                          
                          $
                          28,579Non-performing
      loans to total loans
                          
                          
                          5.06
                          %
                          
                          
                          2.62
                          %
                          
                          
                          2.44
                          %Non-performing
      assets to total assets
                          
                          
                          4.25
                          %
                          
                          
                          2.30
                          %
                          
                          
                          1.95
                          %




Total
non-performing assets have increased 79.9 percent since the end of
2008.  The balance of non-performing loans grew during the first six
months of 2009, with the increase consisting of 1-4 family construction, other
construction and development, commercial real estate, and commercial (many tied
to the construction industry) loan customers experiencing financial
difficulties.  If the economy does not improve in the near future, it
is expected that commercial customers in various retail industries could
experience financial difficulties as well.  West Bank loan officers
are in frequent contact with loan customers to aid in monitoring any potential
problem loans.  Of the increase in loans past due 90 days and still
accruing interest, $8,661 relates to a customer who sold a significant business
asset in mid-July which brought the loan current.





Reference
is also made to the information and discussion earlier in this report under the
heading “Provision for Loan Losses and the Related Allowance for Loan Losses”
and Notes 6 and 7 to the Financial Statements.





Deposits





Total
deposits as of June 30, 2009, were approximately $1.18 billion compared with
$1.15 billion as of December 31, 2008, an increase of 1.9
percent.  All deposit categories except certificates of deposit
increased during this time period.  Certificates of deposit declined
approximately $158 million by June 30, 2009 compared to December 31, 2008, with
the majority of the change attributable to three factors.  These
factors include one customer who opted to move a portion of their CDARS deposits
into other investment vehicles, letting West Bank’s wholesale CDARS deposits
mature, and the decision to reduce public funds.





In order
to maintain and build core deposits, West Bank introduced a product called
“Reward Me Checking” in April 2008.  This product, which pays a
certificate of deposit-like rate if the customer performs a certain number of
electronic banking transactions and agrees to receive monthly statements
electronically, grew by approximately $39 million in the first six months of
2009.  Also, West Bank is the banking partner for a savings program
called SmartyPig.  SmartyPig is an internet-based savings and rewards
program developed by SmartyPig, LLC, which is partially owned by WB Funding, a
subsidiary of West Bank.  As of June 30, 2009, this program had
gathered $102 million in deposits, including over $93 million in the first six
months of 2009.




31




Borrowings





The
balance of federal funds purchased and securities sold under agreements to
repurchase was $48.9 million at June 30, 2009, down from $93.1 million at
December 31, 2008.  The reduction was principally in federal funds
purchased, which consists of funds sold to West Bank by approximately 15 Iowa
banks as part of the correspondent bank services provided by West
Bank.  The balance of federal funds purchased from correspondent banks
fluctuates depending upon the loan demand and investment strategy of those
banks.  The balance of other short-term borrowings consisted of
Treasury, Tax, and Loan option notes.  Long-term borrowings have not
changed since December 31, 2008.





Liquidity
and Capital Resources





The
objective of liquidity management is to ensure the availability of sufficient
cash flows to meet all corporate financial commitments and to capitalize on
opportunities for profitable business expansion.  The Company’s
principal source of funds is deposits, which include demand, money market,
savings, and certificates of deposit.  Other sources include principal
repayments on loans, proceeds from the maturity and sale of investment
securities, federal funds purchased, repurchase agreements, advances from the
FHLB, 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
maturities and payments, expected deposit flows, and the objectives set by the
Company’s asset-liability management policy. The Company had liquid assets (cash
and cash equivalents) of $88 million as of June 30, 2009, compared with $197
million as of December 31, 2008.  West Bank has additional borrowing
capacity available from the FHLB of approximately $75 million.  In
addition, West Bank has $78 million in borrowing capacity available through
unsecured federal funds lines of credit with correspondent
banks.  West Bank was not drawing on any of these lines of credit as
of June 30, 2009.  The combination of high levels of potentially
liquid assets, cash flows from operations, and additional borrowing capacity
provided strong liquidity for the Company at June 30, 2009.





On
December 31, 2008, the Company received $36 million from the U.S. Department of
the Treasury in exchange for 36,000 shares of cumulative senior preferred stock
and a warrant to purchase 474,100 shares of common stock under the Capital
Purchase Program (CPP).  The senior preferred shares qualify as Tier 1
capital for regulatory purposes and rank senior to common stock and bear a
cumulative dividend rate of five percent per annum for the first five years they
are outstanding and a rate of nine percent per annum thereafter.  The
Board of Directors and management believed it was prudent to participate in the
CPP because (i) the cost of capital under the program was significantly lower
than the cost of capital otherwise available to the Company at the time, and
(ii) despite being well-capitalized, additional capital provided the Company and
West Bank additional flexibility to meet future capital needs throughout the
current uncertain economic environment.





The
Company’s total stockholders’ equity declined to $128.7 million at June 30,
2009, from $150.1 million at December 31, 2008.  Total equity declined
due to the year-to-date net loss and dividends paid.  Total
stockholders' equity was 8.50 percent and 9.66 percent of total assets as of
June 30, 2009, and December 31, 2008, respectively.  No material
capital expenditures or material changes in the capital resource mix are
anticipated at this time.





The
Company and West Bank are subject to various regulatory capital requirements
administered by Federal and State banking agencies.  Failure to meet
minimum capital requirements can result in certain mandatory and possibly
additional discretionary actions by regulators which, if undertaken, could have
a direct material effect on the Company’s consolidated financial
statements.  Under capital adequacy guidelines and regulatory
framework for prompt corrective action, the Company and West Bank must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices.  The Company’s and West Bank’s capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.





The
quantitative measures of the Company and West Bank of total and Tier 1 capital
to risk-weighted assets and of Tier 1 capital to average assets are set forth in
the following table along with the minimum required
ratios.  Management believes the capital levels of the Company and
West Bank met all capital adequacy requirements to which they were subject at
June 30, 2009.  Prompt corrective action provisions are not applicable
to the Holding Company.  Management monitors the capital ratios of the
Company and West Bank to ensure they stay in compliance with the
well-capitalized guidelines.




32




To Be Well-Capitalized UnderFor Capital
                        
                        
                        Prompt CorrectiveActual
                        
                        
                        Adequacy Purposes
                        
                        
                        Action ProvisionsAmount
                        
                        
                        Ratio
                        
                        
                        Amount
                        
                        
                        Ratio
                        
                        
                        Amount
                        
                        
                        RatioAs
      of June 30, 2009:Total
      Capital (to Risk-Weighted Assets)Consolidated
                        
                        $
                        166,522
                        
                        
                        
                        13.1
                        %
                        
                        $
                        101,538
                        
                        
                        
                        8.0
                        %
                        
                        
                        n/a
                        
                        
                        
                        n/aWest
      Bank
                        
                        
                        162,384
                        
                        
                        
                        12.8
                        
                        
                        
                        101,169
                        
                        
                        
                        8.0
                        
                        
                        $
                        126,461
                        
                        
                        
                        10.0
                        %Tier
      I Capital (to Risk-Weighted Assets)Consolidated
                        
                        
                        150,560
                        
                        
                        
                        11.9
                        
                        
                        
                        50,769
                        
                        
                        
                        4.0
                        
                        
                        
                        n/a
                        
                        
                        
                        n/aWest
      Bank
                        
                        
                        136,479
                        
                        
                        
                        10.8
                        
                        
                        
                        50,585
                        
                        
                        
                        4.0
                        
                        
                        
                        75,877
                        
                        
                        
                        6.0Tier
      I Capital (to Average Assets)Consolidated
                        
                        
                        150,560
                        
                        
                        
                        8.6
                        
                        
                        
                        70,188
                        
                        
                        
                        4.0
                        
                        
                        
                        n/a
                        
                        
                        
                        n/aWest
      Bank
                        
                        
                        136,479
                        
                        
                        
                        7.8
                        
                        
                        
                        69,658
                        
                        
                        
                        4.0
                        
                        
                        
                        87,073
                        
                        
                        
                        5.0As
      of December 31, 2008:Total
      Capital (to Risk-Weighted Assets)Consolidated
                        
                        $
                        165,458
                        
                        
                        
                        13.3
                        %
                        
                        $
                        99,383
                        
                        
                        
                        8.0
                        %
                        
                        
                        n/a
                        
                        
                        
                        n/aWest
      Bank
                        
                        
                        161,790
                        
                        
                        
                        13.1
                        
                        
                        
                        99,073
                        
                        
                        
                        8.0
                        
                        
                        $
                        123,841
                        
                        
                        
                        10.0
                        %Tier
      I Capital (to Risk-Weighted Assets)Consolidated
                        
                        
                        150,017
                        
                        
                        
                        12.1
                        
                        
                        
                        49,692
                        
                        
                        
                        4.0
                        
                        
                        
                        n/a
                        
                        
                        
                        n/aWest
      Bank
                        
                        
                        136,349
                        
                        
                        
                        11.0
                        
                        
                        
                        49,536
                        
                        
                        
                        4.0
                        
                        
                        
                        74,305
                        
                        
                        
                        6.0Tier
      I Capital (to Average Assets)Consolidated
                        
                        
                        150,017
                        
                        
                        
                        10.3
                        
                        
                        
                        58,244
                        
                        
                        
                        4.0
                        
                        
                        
                        n/a
                        
                        
                        
                        n/aWest
      Bank
                        
                        
                        136,349
                        
                        
                        
                        9.4
                        
                        
                        
                        58,066
                        
                        
                        
                        4.0
                        
                        
                        
                        72,583
                        
                        
                        
                        5.0




The
goodwill impairment charge discussed earlier had a negligible impact on
regulatory capital measurements.  Goodwill and other intangible assets
are not included in capital or assets when calculating regulatory capital
ratios.





Likewise,
goodwill and other intangible assets are not considered when calculating the
tangible common equity ratio.  This ratio is getting more attention
from the investing community.  The Company’s tangible common equity
ratio at June 30, 2009, was 6.08 percent, up from 5.91 percent at December 31,
2008.





In April
2008, the Company’s Board of Directors authorized the buyback of up to $5
million of the Company’s common stock for a period of twelve
months.  No shares were repurchased under this authorization which
expired in April 2009.





Market
Risk Management





Market
risk is the risk of earnings volatility that results from adverse changes in
interest rates and market prices. The Company's market risk is primarily
interest rate risk arising from its core banking activities of lending and
deposit taking. Interest rate risk is the risk that changes in market interest
rates may adversely affect the Company's net interest
income.  Management continually develops and implements strategies to
mitigate this risk.  The analysis of the Company’s interest rate risk
was presented in the Form 10-K filed with the Securities and Exchange Commission
on March 6, 2009, and is incorporated herein by reference.  The
Company has not experienced any material changes to its market risk position
since December 31, 2008.  Management does not believe the Company's
primary market risk exposures and how those exposures were managed in the first
six months of 2009 changed when compared to 2008.




33




Effects
of New Statements of Financial Accounting Standards





In April
2009, the Financial Accounting Standards Board (FASB) issued Financial Statement
of Position FAS 115−2 and FAS 124−2, “Recognition and Presentation of
Other−Than−Temporary Impairments” (“FSP FAS 115−2/124−2”).  FSP
FAS 115−2/124−2 requires entities to separate an other−than−temporary impairment
(OTTI) of a debt security into two components when there are credit-related
losses associated with the impaired debt security for which management asserts
that it does not have the intent to sell the security, and it is more likely
than not that it will not be required to sell the security before recovery of
its cost basis.  The amount of the OTTI related to a credit loss is
recognized in earnings, and the amount of the OTTI related to other factors is
recorded in other comprehensive income (loss).  FSP FAS 115−2/124−2 is
effective for periods ending after June 15, 2009.  The Company adopted
FSP FAS 115−2/124−2 effective for the quarter ending June 30,
2009.  The Company recorded a cumulative effect accounting adjustment
that increased retained earnings and decreased other accumulated comprehensive
income (loss) by $2,622 pre-tax, or $1,625 after tax, relating to the $4,739 of
impairment losses recorded during 2008.





In April
2009, the FASB issued FSP FAS 157−4, “Determining Fair Value When Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions that are Not Orderly” (“FSP FAS
157−4”).  Under FSP FAS 157−4, if an entity determines that there has
been a significant decrease in the volume and level of activity for the asset or
the liability in relation to the normal market activity for the asset or
liability (or similar assets or liabilities), then transactions or quoted prices
may not accurately reflect fair value.  In addition, if there is
evidence that the transaction for the asset or liability is not orderly; the
entity shall place little, if any weight on that transaction price as an
indicator of fair value.  FSP FAS 157−4 is effective for periods
ending after June 15, 2009.  The Company adopted FSP FAS 157−4
effective for the quarter ending June 30, 2009.  The adoption of this
FSP did not have a material impact on the Company’s financial position or
results of operations.





In April
2009, the FASB issued FSP FAS 107−1 and APB 28−1, “Interim Disclosures about Fair
Value of Financial Instruments” (“FSP FAS 107−1 and APB
28−1”).  FSP FAS 107−1 and APB 28−1 require disclosures about fair
value of financial instruments in interim and annual financial
statements.  FSP FAS 107−1 and APB 28−1 are effective for periods
ending after June 15, 2009.  The Company adopted FSP FAS 107−1 and APB
28−1 effective for the quarter ending June 30, 2009.  The adoption did
not have an impact on the Company’s financial position or results of
operations.





In May
2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No.
165”).  SFAS No. 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued.  The Company adopted this statement
for the quarter ending June 30, 2009.





In
June 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets — an amendment of FASB Statement No.140,”to improve the
reporting for the transfer of financial assets resulting from (1) practices that
have developed since the issuance of FASB Statement No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,”that are not consistent
with the original intent and key requirements of that Statement and
(2) concerns of financial statement users that many of the financial assets
(and related obligations) that have been derecognized should continue to be
reported in the financial statements of transferors.  This Statement must
be applied as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter.  Earlier application is prohibited.  The Company will
review the requirements of FASB No. 166 and comply with its requirements.
 The Company does not expect that the adoption of this Statement will have
a material impact on the Company’s consolidated financial
statements.





In
June 2009, the FASB issued Statement of Financial Accounting Standards
No. 167, “Amendments to
FASB Interpretation No.46(R)”to amend certain
requirements of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable
InterestEntities” to improve
financial reporting by enterprises involved with variable interest entities and
to provide more relevant and reliable information to users of financial
statements.  The Statement is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter.  Earlier
application is prohibited.  The Company will review the requirements of
FASB No. 167 and comply with its requirements.  The Company does not
expect that the adoption of this Statement will have a material impact on the
Company’s consolidated financial statements.


34





In
June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards
CodificationTMand the Hierarchy of Generally
Accepted Accounting Principles—a replacement of FASB Statement No.162.”Under the Statement,
The FASB Accounting
Standards Codification (Codification) will become the source of
authoritative U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied by nongovernmental
entities.  Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants.  On the effective date
of this Statement, the Codification will supersede all then-existing non-SEC
accounting and reporting standards.  All other non-grandfathered non-SEC
accounting literature not included in the Codification will become
non-authoritative.  This Statement is effective for financial statements
issued for interim and annual periods ending after September 15, 2009.
 In the FASB’s view, the issuance of this Statement and the Codification
will not change GAAP, except for those nonpublic nongovernmental entities that
must now apply the American Institute of Certified Public Accountants Technical
Inquiry Service Section 5100, “Revenue Recognition,” paragraphs 38–76.
 The Company does not expect that the adoption of this Statement will have
a material impact on the Company’s consolidated financial
statements.





Item
3.  Quantitative and Qualitative Disclosures about Market
Risk





The
information appearing above under the heading “Market Risk Management” is
incorporated herein by reference.





Item
4.  Controls and Procedures





a.  Evaluation
of disclosure controls and procedures.  As of the end of the period
covered by this report, an evaluation of the effectiveness of the Company’s
disclosure controls and procedures (as defined in Exchange Act Rule
240.13a-15(f)) was performed under the supervision and with the participation of
the Company’s Interim Chief Executive Officer and Chief Financial
Officer.  Based on that evaluation, the Interim Chief Executive
Officer and the Chief Financial Officer have concluded that the Company’s
current disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms.





b.  Changes
in internal controls over financial reporting.  There were no changes
in the Company's internal control over financial reporting that occurred during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





Part II –
OTHER INFORMATION





Item
1.  Legal Proceedings





The
Company and its subsidiaries are not parties to any material pending legal
proceedings (other than ordinary litigation incidental to the entities’
businesses) and no property of these entities is the subject of any such
proceeding.  The Company does not know of any proceeding contemplated
by a governmental authority against the Company, its subsidiaries, or any
related property.





Item
1A.  Risk Factors





Management
of the Company does not believe there have been any material changes in the risk
factors that were disclosed in the Form 10-K filed with the Securities and
Exchange Commission on March 6, 2009.  However, management believes
the current economic environment continues to remain uncertain.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





There
were no purchases of the Company’s common shares during the second quarter of
2009 under the $5 million stock buy-back plan approved by the Board of Directors
on April 16, 2008, which expired on April 15, 2009.


35


Item
4.  Submission of Matters to a Vote of Security Holders





The
Company’s annual meeting of shareholders was held on April 16,
2009.  The record date for determination of shareholders entitled to
vote at the meeting was February 20, 2009.  There were 17,403,882
shares outstanding as of that date, each such share being entitled to one
vote.  At the shareholders’ meeting the holders of 15,546,230 shares
or approximately 89.3 percent of the outstanding shares, were represented in
person or by proxy, which constituted a quorum.  The following
proposals were voted on at the meeting:





Proposal
I – Election of Directors





Thirteen
directors were elected to serve for a one year term or until their successors
shall have been elected and qualified.  At the shareholders’ meeting,
the individuals received the number of votes set opposite their
names:





VoteFor
                                
                                
                                WithheldFrank
      W. Berlin
                                
                                
                                14,448,190
                                
                                
                                
                                1,098,040Thomas
      A. Carlstrom
                                
                                
                                14,458,065
                                
                                
                                
                                1,088,165Joyce
      A. Chapman
                                
                                
                                14,451,488
                                
                                
                                
                                1,094,742Orville
      E. Crowley
                                
                                
                                13,933,546
                                
                                
                                
                                1,612,684Douglas
      R. Gulling
                                
                                
                                14,413,485
                                
                                
                                
                                1,132,745Kaye
      R. Lozier
                                
                                
                                14,434,770
                                
                                
                                
                                1,111,460David
      R. Milligan
                                
                                
                                13,974,073
                                
                                
                                
                                1,572,157George
      D. Milligan
                                
                                
                                14,451,536
                                
                                
                                
                                1,094,694Robert
      G. Pulver
                                
                                
                                14,400,160
                                
                                
                                
                                1,146,070Thomas
      E. Stanberry
                                
                                
                                13,629,162
                                
                                
                                
                                1,917,068Jack
      G. Wahlig
                                
                                
                                13,941,872
                                
                                
                                
                                1,604,358Connie
      Wimer
                                
                                
                                14,437,797
                                
                                
                                
                                1,108,433Brad
      L. Winterbottom
                                
                                
                                13,659,483
                                
                                
                                
                                1,886,747





Proposal
II – Approve, on a non-binding basis, the 2008 executive compensation disclosed
in the Proxy Statement





The vote
to approve the above proposal was as follows:





VoteFor
                    
                    
                    Against
                    
                    
                    WithheldApproval
      of executive compensation
                    
                    
                    13,534,832
                    
                    
                    
                    891,876
                    
                    
                    
                    1,119,522





Proposal
III – Ratify the Appointment of Independent Registered Public Accounting
Firm





The vote
to ratify the above proposal was as follows:





VoteFor
                
                
                Against
                
                
                WithheldMcGladrey
      & Pullen, LLP
                
                
                14,728,174
                
                
                
                274,598
                
                
                
                543,458





Item
6.  Exhibits





The
following exhibits are filed as part of this report:





Exhibits
              
              Description3.1
              
              Restated
      Articles of Incorporation of the Company (incorporated herein by
      reference to Exhibit 3.1 filed with the Form 10 on March 11,
      2002.)3.2
              
              Articles
      of Amendment to the Restated Articles of Incorporation filed with the
      Secretary of State on December 24, 2008 (incorporated herein by
      reference to Exhibit 3.1 filed with the Form 8-K on December 31,
      2008.)3.3
              
              Articles
      of Amendment to the Restated Articles of Incorporation filed with the Iowa
      Secretary of State on December 24, 2008, designating the terms of Fixed
      Rate Cumulative Perpetual Preferred Stock, Series A (incorporated herein by
      reference to Exhibit 3.2 filed with the Form 8-K on December 31,
      2008.)3.4
              
              Bylaws
      of the Company as amended through October 17, 2007 (incorporated herein by
      reference to Exhibit 4.1 filed with the Form S-3 on January 30,
      2009.)


36





4.1
              
              Warrant
      for Purchase of Shares of Common Stock (incorporate herein by
      reference to Exhibit 4.1 filed with the Form 8-K on December 31,
      2008.)4.2
              
              Letter
      Agreement, dated December 31, 2008, between the Company and the UST, which
      includes the Securities Purchase Agreement attached hereto, with respect
      to the issuance and sale of the Preferred Stock and the Warrant (incorporated herein by
      reference to Exhibit 10.1 filed with the Form 8-K on December 31,
      2008.)10.1
              
              Lease
      for Main Bank Facility(incorporated herein by
      reference to Exhibit 10.1 filed with the Form 10 on March 11,
      2002.)10.2
              
              Supplemental
      Agreement to Lease for Main Bank Facility (incorporated herein by
      reference to Exhibit 10.2 filed with the Form 10 on March 11,
      2002.)10.3
              
              Short-term
      Lease related to Main Bank Facility (incorporated herein by
      reference to Exhibit 10.3 filed with the Form 10 on March 11,
      2002.)10.4
              
              Assignment
      (incorporated herein by
      reference to Exhibit 10.4 filed with the Form 10 on March 11,
      2002.)10.5
              
              Lease
      Modification Agreement No. 1 for Main Bank Facility (incorporated herein by
      reference to Exhibit 10.5 filed with the Form 10 on March 11,
      2002.)10.6
              
              Memorandum
      of Real Estate Contract (incorporated herein by
      reference to Exhibit 10.6 filed with the Form 10 on March 11,
      2002.)10.7
              
              Affidavit
      (incorporated herein by
      reference to Exhibit 10.7 filed with the Form 10 on March 11,
      2002.)10.8
              
              Addendum
      to Lease for Main Bank Facility (incorporated herein by
      reference to Exhibit 10.8 filed with the Form 10 on March 11,
      2002.)10.9
              
              Data
      Processing Contract (incorporated herein by
      reference to Exhibit 10.9 filed with the Form 10 on March 11,
      2002.)10.10*
              
              Employment
      Contract (incorporated
      herein by reference to Exhibit 10.10 filed with the Form 10 on March 11,
      2002.)10.11
              
              Data
      Processing Contract Amendment (incorporated herein by
      reference to Exhibit 10.12 filed with the Form 10-K on March 26,
      2003.)10.12
              
              The
      Employee Savings and Stock Ownership Plan, as amended (incorporated herein by
      reference to Exhibit 4.1 filed with the Form S-8 on October 29,
      2004.)10.13
              
              Amendment
      to Lease Agreement (incorporated herein by
      reference to Exhibit 10.16 filed with the Form 10-K on March 3,
      2005.)10.14*
              
              Employment
      Agreement with Scott D. Eltjes (incorporated herein by
      reference to Exhibit 10.17 filed with the Form 10-K on March 3,
      2005.)10.15
              
              Consulting
      Agreement with David L. Miller (incorporated herein by
      reference to Exhibit 10.18 filed with the Form 10-Q on May 6,
      2005.)10.16*
              
              West
      Bancorporation, Inc. Restricted Stock Compensation Plan (incorporated herein by
      reference to Exhibit B of the definitive proxy statement 14A filed on
      March 10, 2005.)10.17*
              
              Employment
      Agreement between Investors Management Group Ltd. and Jeff Lorenzen (incorporated herein by
      reference to Exhibit 99 filed with the Form 8-K on February 22,
      2006.)10.18
              
              Assignment
      and Assumption of Lease and Consent to Assignment (incorporated herein by
      reference to Exhibit 10.21 filed with the Form 10-K on March 8,
      2006.)10.19
              
              2007
      Amendment to Lease Agreement (incorporated herein by
      reference to Exhibit 10.22 filed with the Form 10-Q on May 4,
      2007.)10.20*
              
              Employment
      Agreement with Thomas E. Stanberry (incorporated herein by
      reference to Exhibit 10.24 filed with the Form 8-K on May 23,
      2008.)10.21*
              
              Employment
      Agreement with Douglas R. Gulling (incorporated herein by
      reference to Exhibit 10.25 filed with the Form 8-K on May 23,
      2008.)10.22*
              
              Employment
      Agreement with Brad L. Winterbottom (incorporated herein by
      reference to Exhibit 10.26 filed with the Form 8-K on May 23,
      2008.)10.23
              
              Data
      Processing Contract Amendment (incorporated herein by
      reference to Exhibit 10.23 filed with the Form 10-Q on October 30,
      2008.).10.24*
              
              Letter
      agreement dated July 15, 2009, between West Bancorporation, Inc. and David
      R. Milligan (incorporated herein by
      reference to Exhibit 10.24 filed with the Form 8-K on July 15,
      2009.)12
              
              Computation
      of Ratios of Earnings (Loss) to Fixed Charges and Preferred
      Dividends31.1
              
              Certification
      of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of
      200231.2
              
              Certification
      of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of
      200232.1
              
              Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
              
              Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002





*
Indicates management contract or compensatory plan or
arrangement.


37


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.





West Bancorporation, Inc.(Registrant)July 30, 2009
                    By:
                    /s/ David R. MilliganDate
                    David
      R. MilliganInterim
      Chief Executive OfficerJuly 30, 2009
                    By:
                    /s/ Douglas R. GullingDate
                    Douglas
      R. GullingExecutive
      Vice President and Chief Financial Officer(Principal
      Accounting
Officer)


38


EXHIBIT
INDEX





The
following exhibits are filed herewith:





Exhibit No.
              
              Description
              
              Page Number12
              
              Ratios
      of Earnings (Loss) to Fixed Charges and Preferred
Dividends
              
              4031.1
              
              Certification
      of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of
      2002
              
              4131.2
              
              Certification
      of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of
      2002
              
              4232.1
              
              Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted
              
              43Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 200232.2
              
              Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted
              
              44Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002


39