Business Context and Reporting Period
Company: West Bancorporation, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 29, 2011
Event: Redemption of Series A Preferred Stock issued under the Troubled Asset Relief Program (TARP) Capital Purchase Program.
Key Financial Metrics
- Redemption Payment: $36,220,000 paid to the U.S. Department of the Treasury.
- Components of Payment: $36,000,000 principal plus $220,000 in accrued and unpaid dividends.
- Carrying Value: The redeemed stock had a balance sheet carrying value of $34,750,000 (net of a $1.25 million unaccreted discount).
- Outstanding Warrant: Treasury holds a warrant to purchase 474,100 common shares at $11.39 per share.
Material Changes and Accounting Impact
The redemption triggers the acceleration of the $1.25 million unaccreted discount, resulting in a reduction of retained earnings. This adjustment is treated as a charge against net income available for common shareholders for the second quarter of 2011.
- EPS Impact: The adjustment reduces second-quarter net earnings available for common shareholders by slightly more than $0.07 per share.
- Warrant Status: The Company intends to repurchase the Treasury warrant. If no notice of intent to repurchase is provided by July 14, 2011, Treasury may sell the warrant.
Guidance, Outlook, and Risks
Management Commentary: The Company plans to deliver a timely notice of intent to repurchase the Treasury warrant and will pursue the Treasury process to determine its fair market value. Repurchase and cancellation are contingent upon agreeing on an acceptable fair market value.
Risks/Contingencies: The final cost of the warrant repurchase is not yet determined and depends on negotiations with the Treasury regarding fair market value.
Investor Verification Checklist
- Verify the exact timing of the warrant repurchase notice relative to the July 14, 2011 deadline.
- Confirm the final agreed-upon fair market value for the Treasury warrant repurchase.
- Review the second-quarter 2011 earnings release to confirm the $0.07+ per share reduction in net earnings available to common shareholders.
- Check subsequent filings for the execution of the warrant repurchase agreement.