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Southwest Bancorp, Inc. Reports Third Quarter 2013 Results

Southwest Bancorp, Inc. Logo

STILLWATER, Okla., Oct. 22, 2013 (GLOBE NEWSWIRE) -- Southwest Bancorp, Inc. (Nasdaq:OKSB), ("Southwest"), today reported net income available to common shareholders for the third quarter of 2013 of $3.8 million, or $0.19 per diluted share, compared to $4.4 million, or $0.22 per diluted share, for the second quarter of 2013. The second quarter's results included net pre-tax gains of $1.4 million on the sale of other real estate. Net income available to common shareholders for the nine months ended September 30, 2013 totaled $10.6 million, or $0.54 per diluted share, compared to $11.5 million, or $0.59 per diluted share, for the nine months ended September 30, 2012.

Mark Funke, President and CEO, stated, "We are pleased to announce solid core earnings, stabilized credit quality and a continued strong balance sheet structure for the third quarter of 2013. The third quarter marked ongoing progress toward producing consistent, conservative, and sustainable earnings growth for our company. Additionally in the third quarter, we announced that we will be consolidating our two bank charters and adopting the new name of Bank SNB across our three state geographic footprint effective November 16, 2013. These changes will unify our brand as one bank under Southwest Bancorp, Inc. to better serve our clients and prepares us for growth in the future."

Joe Shockley, CFO, stated, "During the quarter, we were pleased to redeem our 10.5% Trust Preferred Securities with par value of $34.5 million on September 16, 2013, which will improve our net interest income by approximately $3.5 million annually. The Company's capital and liquidity remain strong."

Financial Overview

Unless otherwise indicated, the following discussion excludes "covered" assets, which are subject to loss sharing agreements with the FDIC. For information on covered versus noncovered assets, please see the accompanying unaudited financial statement and tables.

Condition: At September 30, 2013, total assets were $2.0 billion, down $59.6 million compared to June 30, 2013, primarily due to a decline in cash and cash equivalents as a result of the Trust Preferred Securities redemption. Total loans were $1.3 billion, flat when compared to June 30, 2013, and total investment securities were $382.0 million as of September 30, 2013, an increase of $9.6 million compared June 30, 2013.

At September 30, 2013, the allowance for loan losses was $40.0 million, flat when compared to June 30, 2013. The allowance for loan losses to portfolio loans was 3.12% as of September 30, 2013 and June 30, 2013. The allowance for loan losses to nonperforming loans was 137.03% as of September 30, 2013, compared to 136.44% as of June 30, 2013.

Nonperforming loans decreased by $0.3 million during the quarter. Other real estate at September 30, 2013 was $0.7 million, an increase of $0.5 million from June 30, 2013 and a decrease of $14.0 million from September 30, 2012. Nonperforming assets were $29.9 million, or 2.33% of portfolio loans and other real estate, as of September 30, 2013, an increase of $0.2 million (1%) from $29.7 million, or 2.30% of portfolio loans and other real estate, as of June 30, 2013.

Total core funding, which includes all non-brokered deposits and sweep repurchase agreements, comprised 98% of total funding as of September 30, 2013 and June 30, 2013. Wholesale funding, including FHLB borrowings, federal funds purchased, and brokered deposits, accounted for 2% of total funding at September 30, 2013 and June 30, 2013. Please see Table 7 for details on core funding and non-brokered deposits, which are non-GAAP financial measures.

The capital ratios of Southwest and each of its banking subsidiaries, as of September 30, 2013, exceeded the criteria for regulatory classification as "well-capitalized". Southwest's total regulatory capital was $315.6 million, for a total risk-based capital ratio of 21.52%, and Tier 1 capital was $296.5 million, for a Tier 1 risk-based capital ratio of 20.22%. Southwest's capital exceeded the minimum to be classified as "well-capitalized" by $168.9 million. Stillwater National Bank, Southwest's principal banking subsidiary, had total regulatory capital of $249.2 million, for a total risk-based capital ratio of 19.27%, and Tier 1 capital of $232.7 million, for a Tier 1 risk-based capital ratio of 17.99%. Stillwater National Bank exceeded the minimum to be classified as "well-capitalized" by $119.9 million. Designation as a well-capitalized institution under regulations does not constitute a recommendation or endorsement by Federal bank regulators.

Third Quarter Results:

Summary: For the third quarter of 2013, net income available to common shareholders was $3.8 million, compared to $4.4 million for the second quarter of 2013, and $4.3 million for the third quarter of 2012. The $0.6 million decrease in net income available to common shareholders compared to the second quarter of 2013 is primarily the result of a $0.2 million increase in noninterest expense and a $0.5 million decrease in the negative provision for loan losses, offset in part by a $0.1 million increase in net interest income.

The $0.5 million decrease in our net income available to common shareholders compared to the third quarter of 2012 is the result of a $3.4 million decrease in net interest income, a $1.4 million decrease in the negative provision for loan losses, and a $0.4 million decrease in noninterest income, offset in part by a $1.6 million decrease in noninterest expense, a $1.6 million decrease in income tax expense, and a $1.5 million decrease primarily in dividends on preferred stock due to the repurchase during 2012.

Net Interest Income: Net interest income totaled $15.3 million for the third quarter of 2013, compared to $15.1 million for the second quarter of 2013, an increase of $0.1 million, or 1%, and to $18.7 million for the third quarter of 2012, a decrease of $3.4 million, or 18%. Net interest margin was 3.11% for the third quarter of 2013, compared to 3.07% for the second quarter of 2013 and 3.59% for the third quarter of 2012. With the rate environment remaining low in the short to mid-term, earning assets are repricing at lower rates. Noncovered loans (including loans held for sale) declined $8.8 million, or 1%, from June 30, 2013, and $176.3 million, or 12%, from September 30, 2012, primarily due to a decline in commercial real estate loans. On September 16, 2013, we redeemed the 10.5% Trust Preferred Securities with par value of $34.5 million.

Provision for Loan Losses and Net Charge-offs: The provision for loan losses is the amount that is required to maintain the allowance for losses at an appropriate level based upon the inherent risks in the loan portfolio after the effects of net charge-offs or net recoveries for the period. The provision for loan losses was a credit (or negative provision) of $0.3 million for the third quarter of 2013, compared to a credit of $0.9 million for the second quarter of 2013 and a credit of $1.7 million for third quarter of 2012. For the third quarter of 2013, net recoveries totaled $0.1 million, or (0.02%) (annualized) of average portfolio loans, compared to net charge-offs of $1.6 million, or 0.50% (annualized) of average portfolio loans for the second quarter of 2013, and net recoveries of $1.6 million, or (0.42%) (annualized) of average portfolio loans for the third quarter of 2012.

Noninterest Income: Noninterest income totaled $3.5 million for both the third quarter and second quarter of 2013, compared to $4.0 million for the third quarter of 2012. The decrease from third quarter 2012 includes a $0.5 million decrease in the gain on sales of loans and a $0.1 million decrease in service charges and fees, offset in part by a $0.2 million increase in other noninterest income. For the third quarter 2013, the decrease in gain on sale of loans was offset by the increase in other noninterest income due to a legal settlement.

Noninterest Expense: Noninterest expense totaled $13.0 million for the third quarter of 2013, compared to $12.8 million for the second quarter of 2013 and $14.6 million for the third quarter of 2012.

The $0.2 million increase in noninterest expense from second quarter of 2013 primarily consists of a $1.0 million increase in other real estate expense, due to decreased net gains on sales of other real estate properties from those generated in the second quarter of this year, offset in part by a $0.4 million decrease in personnel expense, a $0.3 million decrease in general and administrative expense, and a $0.2 million decrease in the provision for unfunded loan commitments.

The $1.6 million decrease in noninterest expense from third quarter of 2012 consists of a $1.7 million decrease in other real estate expense due to decreased expenses and write-downs as a result of fewer other real estate properties. Also included in the decline from third quarter of 2012 is a $0.3 million decrease in general and administrative expense, which is primarily the result of decreased consulting fees, legal fees, and miscellaneous expenses, and a $0.1 million decrease in FDIC and other insurance expense, offset in part by a $0.3 million increase in personnel expense and a $0.2 million increase in provision for unfunded loan commitments.

Income Tax: Income tax expense totaled $2.3 million for the third quarter of 2013, compared to $2.2 million for the second quarter of 2013 and $3.9 million for the third quarter of 2012. The income tax expense fluctuates in relation to pre-tax income levels. The third quarter of 2013 effective tax rate was 38.01%.

Year-to-date Results:

Summary: Net income available to common shareholders was $10.6 million as of September 30, 2013, compared to $11.5 million as of September 30, 2012. The $0.9 million decrease in our net income available to common shareholders from September 30, 2012 is primarily the result of a $13.3 million decrease in net interest income and a $0.5 million decrease in noninterest income, offset in part by a $5.4 million decrease in noninterest expense, a $3.7 million decrease primarily in dividends on preferred stock due to the repurchase during 2012, a $3.0 million decrease in income tax expense, and a $0.7 million decrease in the provision for loan losses.

Net Interest Income: Net interest income totaled $46.0 million for the first nine months of 2013, compared to $59.3 million for the first nine months of 2012, a decrease of $13.3 million, or 22%. Lower average loan volume was the primary cause of this decrease. Year-to-date net interest margin was 3.11%, compared to 3.71% for 2012. With the rate environment remaining low, earning assets are repricing at lower rates.

Provision for Loan Losses and Net Charge-offs: The provision for loan losses is the amount of expense that is required to maintain the allowance for losses at an appropriate level based upon the inherent risks in the loan portfolio after the effects of net charge-offs for the period. The provision for loan losses was a credit (or negative provision) of $0.7 million for the first nine months of 2013, compared to an expense of $22,000 for the first nine months of 2012. Net charge-offs totaled $5.9 million, or 0.61% (annualized) of average portfolio loans year-to-date as of September 30, 2013, compared to $1.0 million, or 0.08% (annualized) of average portfolio loans for the same period of 2012.

Noninterest Income: Noninterest income totaled $10.6 million for the first nine months of 2013, compared to $11.1 million for the first nine months of 2012. The decrease consists of a $0.7 million decline in service charges and fees, offset in part by a $0.2 million increase in other noninterest income.

Noninterest Expense: Noninterest expense totaled $40.2 million for the first nine months of 2013, compared to $45.7 million for the first nine months of 2012. The decrease consists of a $5.1 million decrease in other real estate expense, which is primarily due to net gains recognized on the sale of other real estate properties combined with decreased expenses associated with other real estate properties. Also included in the decline from the first nine months of 2012 is a $1.6 million decrease in general and administrative expense, which is primarily the result of lower legal fees, consulting fees, other loan costs, and bank exam fees, and a $0.7 million decrease in FDIC and other insurance expense, offset in part by a $1.9 million increase in personnel expense.

Income Tax: Income tax expense totaled $6.4 million for the first nine months of 2013, compared to $9.4 million for the first nine months of 2012. The income tax expense fluctuates in relation to pre-tax income levels. The year-to-date effective tax rate was 37.81% as of September 30, 2013.

Southwest Bancorp and Subsidiaries

Southwest is the bank holding company for Stillwater National Bank and Trust Company ("Stillwater National") and Bank of Kansas. Through its subsidiaries, commercial and consumer lending, deposit and investment services, specialized cash management, and other financial services are offered from offices in Oklahoma, Texas, and Kansas. Stillwater National was chartered in 1894 and Southwest was organized in 1981 as the holding company. At September 30, 2013, Southwest had total assets of $2.0 billion, deposits of $1.6 billion, and shareholders' equity of $252.8 million.

Southwest's area of expertise focuses on the special financial needs of healthcare and health professionals, businesses and their managers and owners, commercial lending, energy banking, and commercial real estate borrowers. The strategic focus on healthcare lending was established in 1974. Southwest and its subsidiaries provide credit and other services, such as deposits, cash management, and document imaging for physicians and other healthcare practitioners to start or develop their practices and finance the development and purchase of medical offices, clinics, surgical care centers, hospitals, and similar facilities. As of September 30, 2013, approximately $456.5 million, or 36%, of noncovered loans were loans to individuals and businesses in the healthcare industry. Regular market reviews are conducted of current and potential healthcare lending business and the appropriate concentrations within healthcare based upon economic and regulatory conditions.

Southwest's common stock is traded on the NASDAQ Global Select Market under the symbol OKSB.

Caution About Forward-Looking Statements

Southwest makes forward-looking statements in this news release that are subject to risks and uncertainties. These statements are intended to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include:

  • Statements of Southwest's goals, intentions, and expectations;
  • Estimates of risks and of future costs and benefits;
  • Expectations regarding Southwest's future financial performance and the financial performance of its operating segments;
  • Expectations regarding regulatory actions;
  • Expectations regarding Southwest's ability to utilize tax loss benefits;
  • Assessments of loan quality, probable loan losses, and the amount and timing of loan payoffs;
  • Estimates of the value of assets held for sale or available for sale; and
  • Statements of Southwest's ability to achieve financial and other goals.

These forward-looking statements are subject to significant uncertainties because they are based upon: the amount and timing of future changes in interest rates, market behavior, and other economic conditions; future laws, regulations, and accounting principles; changes in regulatory standards and examination policies, and a variety of other matters. These other matters include, among other things, the direct and indirect effects of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators. Because of these uncertainties, the actual future results may be materially different from the results indicated by these forward-looking statements. In addition, Southwest's past growth and performance do not necessarily indicate future results. For other factors, risks, and uncertainties that could cause actual results to differ materially from estimates and projections contained in forward-looking statements, please read Southwest's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2012. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading "Risk Factors".

The cautionary statements in this release also identify important factors and possible events that involve risk and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made. Southwest does not intend, and undertakes no obligation, to update or revise any forward-looking statements contained in this release, whether as a result of differences in actual results, changes in assumptions, or changes in other factors affecting such statements, except as required by law.

Southwest is required under generally accepted accounting principles to evaluate subsequent events and their impact, if any, on its financial statements as of September 30, 2013 through the date its financial statements are filed with the Securities and Exchange Commission. The September 30, 2013 financial statements included in this release will be adjusted if necessary to properly reflect the impact of subsequent events on estimates used to prepare those statements.

Financial Tables
Unaudited Financial Highlights Table 1
Unaudited Consolidated Statements of Financial Condition Table 2
Unaudited Consolidated Statements of Operations Table 3
Unaudited Average Balances, Yields, and Rates-Quarterly Table 4
Unaudited Average Balances, Yields, and Rates-Year-to-date Table 5
Unaudited Quarterly Summary Loan Data Table 6
Unaudited Quarterly Summary Financial Data Table 7
Unaudited Quarterly Supplemental Analytical Data Table 8
SOUTHWEST BANCORP, INC. Table 1
UNAUDITED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share)
Third Quarter Second Quarter Third Quarter
QUARTERLY HIGHLIGHTS 2013 % Change 2012 % Change
Operations
Net interest income $15,273 $15,134 1 % $18,682 (18)%
Provision for loan losses (329) (876) (62) (1,726) (81)
Noninterest income 3,547 3,491 2 3,950 (10)
Noninterest expense 13,019 12,839 1 14,591 (11)
Income before taxes 6,130 6,662 (8) 9,767 (37)
Taxes on income 2,330 2,248 4 3,880 (40)
Net income 3,800 4,414 (14) 5,887 (35)
Net income available to common shareholders 3,800 4,414 (14) 4,344 (13)
Diluted earnings per share 0.19 0.22 (14) 0.22 (14)
Balance Sheet
Total assets 1,972,367 2,031,962 (3) 2,151,153 (8)
Loans held for sale 3,641 7,217 (50) 34,749 (90)
Noncovered portfolio loans 1,284,004 1,289,226 (0) 1,429,165 (10)
Covered portfolio loans 18,980 21,646 (12) 28,197 (33)
Total deposits 1,583,791 1,615,961 (2) 1,743,673 (9)
Total shareholders' equity 252,802 249,420 1 244,821 3
Book value per common share 12.83 12.67 1 12.88 (0)
Key Ratios
Net interest margin 3.11% 3.07% 3.59%
Efficiency ratio 69.18 68.93 64.47
Total capital to risk-weighted assets 21.52 23.78 20.64
Nonperforming loans to portfolio loans - noncovered 2.27 2.29 1.88
Shareholders' equity to total assets 12.82 12.27 11.61
Tangible common equity to tangible assets* 12.76 12.22 11.33
Return on average assets (annualized) 0.75 0.87 1.07
Return on average common equity (annualized) 5.99 7.00 7.11
Return on average tangible common equity (annualized)** 6.02 7.03 7.15
Nine Months
YEAR-TO-DATE HIGHLIGHTS 2013 2012 % Change
Operations
Net interest income $46,013 $59,278 (22)%
Provision for loan losses (707) 22 (3,314)
Noninterest income 10,575 11,065 (4)
Noninterest expense 40,246 45,669 (12)
Income before taxes 17,049 24,652 (31)
Taxes on income 6,446 9,437 (32)
Net income 10,603 15,215 (30)
Net income available to common shareholders 10,603 11,476 (8)
Diluted earnings per share 0.54 0.59 (8)
Balance Sheet
Total assets 1,972,367 2,151,153 (8)
Loans held for sale 3,641 34,749 (90)
Noncovered portfolio loans 1,284,004 1,429,165 (10)
Covered portfolio loans 18,980 28,197 (33)
Total deposits 1,583,791 1,743,673 (9)
Total shareholders' equity 252,802 244,821 3
Book value per common share 12.83 12.88 (0)
Key Ratios
Net interest margin 3.11% 3.71%
Efficiency ratio (GAAP-based) 71.12 64.92
Total capital to risk-weighted assets 21.52 20.64
Nonperforming loans to portfolio loans - noncovered 2.27 1.88
Shareholders' equity to total assets 12.82 11.61
Tangible common equity to tangible assets* 12.76 11.33
Return on average assets (annualized) 0.69 0.89
Return on average common equity (annualized) 5.64 6.24
Return on average tangible common equity (annualized)** 5.67 6.41
Balance sheet amounts and ratios are as of period end unless otherwise noted.
* This is a Non-GAAP financial measure. Please see Table 8 for a reconciliation to the most directly comparable GAAP based measure.
** This is a Non-GAAP financial measure.
Please see accompanying tables for additional financial information.
SOUTHWEST BANCORP, INC. Table 2
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
September 30, December 31, September 30,
2013 2012 2012
Assets
Cash and due from banks $31,043 $45,045 $25,524
Interest-bearing deposits 214,241 243,034 164,712
Cash and cash equivalents 245,284 288,079 190,236
Securities held to maturity (fair values of $12,177, $13,659, and $13,854, respectively) 11,739 12,797 12,942
Securities available for sale (amortized cost of $371,433, $358,317, and $361,379, respectively) 370,262 364,315 368,557
Loans held for sale 3,641 31,682 34,749
Noncovered loans receivable 1,284,004 1,321,346 1,429,165
Less: Allowance for loan losses (40,013) (46,494) (43,607)
Net noncovered loans receivable 1,243,991 1,274,852 1,385,558
Covered loans receivable (includes loss share: $4,282, $6,714, and $7,333, respectively) 18,980 25,707 28,197
Less: Allowance for loan losses (68) (224) (138)
Net covered loans receivable 18,912 25,483 28,059
Net loans receivable 1,262,903 1,300,335 1,413,617
Accrued interest receivable 5,725 6,365 7,347
Income tax receivable 1,807 24,525 24,549
Premises and equipment, net 21,283 21,691 22,197
Noncovered other real estate 676 11,315 14,683
Covered other real estate 1,017 3,643 4,142
Goodwill 1,214 1,214 1,214
Other intangible assets, net 5,022 4,864 4,786
Other assets 41,794 51,430 52,134
Total assets $1,972,367 $2,122,255 $2,151,153
Liabilities
Deposits:
Noninterest-bearing demand $436,904 $424,008 $429,407
Interest-bearing demand 106,176 112,012 113,677
Money market accounts 423,720 423,417 385,296
Savings accounts 39,727 37,693 36,461
Time deposits of $100,000 or more 270,916 351,273 389,969
Other time deposits 306,348 361,175 388,863
Total deposits 1,583,791 1,709,578 1,743,673
Accrued interest payable 840 1,116 944
Other liabilities 9,878 13,180 13,058
Other borrowings 78,663 70,362 66,694
Subordinated debentures 46,393 81,963 81,963
Total liabilities 1,719,565 1,876,199 1,906,332
Shareholders' equity
Common stock -- $1 par value; 40,000,000 shares authorized;
19,703,313, 19,529,705, and 19,448,312 shares issued and outstanding, respectively 19,703 19,530 19,448
Additional paid-in capital 99,488 99,705 98,903
Retained earnings 135,696 125,093 124,123
Accumulated other comprehensive income (loss) (2,085) 1,728 2,347
Total shareholders' equity 252,802 246,056 244,821
Total liabilities and shareholders' equity $1,972,367 $2,122,255 $2,151,153
SOUTHWEST BANCORP, INC. Table 3
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share)
For the three months ended For the nine months
September 30, June 30, September 30, ended September 30,
2013 2013 2012 2013 2012
Interest income
Loans $ 16,242 $ 16,415 $ 20,496 $ 49,663 $ 65,581
Investment securities 1,623 1,594 1,934 4,908 6,019
Other interest-earning assets 270 255 186 765 563
Total interest income 18,135 18,264 22,616 55,336 72,163
Interest expense
Interest-bearing deposits 1,317 1,442 2,251 4,411 7,689
Other borrowings 225 222 225 667 671
Subordinated debentures 1,320 1,466 1,458 4,245 4,525
Total interest expense 2,862 3,130 3,934 9,323 12,885
Net interest income 15,273 15,134 18,682 46,013 59,278
Provision for loan losses (329) (876) (1,726) (707) 22
Net interest income after provision for loan losses 15,602 16,010 20,408 46,720 59,256
Noninterest income
Service charges and fees 2,589 2,607 2,730 7,856 8,588
Gain on sales of loans 619 831 1,106 2,264 2,223
Gain on investment securities -- -- -- -- 35
Other noninterest income 339 53 114 455 219
Total noninterest income 3,547 3,491 3,950 10,575 11,065
Noninterest expense
Salaries and employee benefits 7,645 8,039 7,362 23,820 21,963
Occupancy 2,721 2,679 2,729 7,974 7,909
FDIC and other insurance 413 400 539 1,304 2,021
Other real estate, net (387) (1,394) 1,267 (1,428) 3,698
General and administrative 2,627 3,115 2,694 8,576 10,078
Total noninterest expense 13,019 12,839 14,591 40,246 45,669
Income before taxes 6,130 6,662 9,767 17,049 24,652
Taxes on income 2,330 2,248 3,880 6,446 9,437
Net income $ 3,800 $ 4,414 $ 5,887 $ 10,603 $ 15,215
Net income available to common shareholders $ 3,800 $ 4,414 $ 4,344 $ 10,603 $ 11,476
Basic earnings per common share $ 0.19 $ 0.22 $ 0.22 $ 0.53 $ 0.59
Diluted earnings per common share 0.19 0.22 0.22 0.54 0.59
Common dividends declared per share -- -- -- -- --
SOUTHWEST BANCORP, INC. Table 4
UNAUDITED AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
(Dollars in thousands)
For the three months ended
September 30, 2013 June 30, 2013
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
Assets
Noncovered loans $1,277,747 $15,837 4.92% $1,296,589 $16,018 4.96%
Covered loans 20,271 405 7.93 22,361 397 7.12
Investment securities 364,746 1,623 1.76 374,353 1,594 1.71
Other interest-earning assets 287,968 270 0.37 282,067 255 0.36
Total interest-earning assets 1,950,732 18,135 3.69 1,975,370 18,264 3.71
Other assets 57,622 63,390
Total assets $2,008,354 $2,038,760
Liabilities and Shareholders' Equity
Interest-bearing demand deposits $117,124 $35 0.12% $126,250 $37 0.12%
Money market accounts 416,839 182 0.17 420,477 190 0.18
Savings accounts 38,992 10 0.10 38,833 12 0.12
Time deposits 600,321 1,090 0.72 633,647 1,203 0.76
Total interest-bearing deposits 1,173,276 1,317 0.45 1,219,207 1,442 0.47
Other borrowings 75,822 225 1.18 71,857 222 1.24
Subordinated debentures 75,004 1,320 7.04 81,963 1,466 7.15
Total interest-bearing liabilities 1,324,102 2,862 0.86 1,373,027 3,130 0.91
Noninterest-bearing demand deposits 422,203 402,224
Other liabilities 10,319 10,561
Shareholders' equity 251,730 252,948
Total liabilities and shareholders' equity $2,008,354 $2,038,760
Net interest income and spread $15,273 2.83% $15,134 2.80%
Net interest margin (1) 3.11% 3.07%
Average interest-earning assets to average interest-bearing liabilities 147.32% 143.87%
(1) Net interest margin = annualized net interest income / average interest-earning assets
SOUTHWEST BANCORP, INC. Table 5
UNAUDITED AVERAGE BALANCES, YIELDS, AND RATES - YEAR-TO-DATE
(Dollars in thousands)
For the nine months ended September 30,
2013 2012
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
Assets
Noncovered loans $1,301,446 $48,369 4.97% $1,574,095 $63,861 5.42%
Covered loans 22,492 1,294 7.69 32,490 1,720 7.07
Investment securities 373,150 4,908 1.76 339,776 6,019 2.37
Other interest-earning assets 279,549 765 0.37 188,264 563 0.40
Total interest-earning assets 1,976,637 55,336 3.74 2,134,625 72,163 4.52
Other assets 69,423 149,193
Total assets $2,046,060 $2,283,818
Liabilities and Shareholders' Equity
Interest-bearing demand deposits $125,598 $117 0.12% $118,036 $178 0.20%
Money market accounts 418,973 608 0.19 375,634 750 0.27
Savings accounts 38,850 34 0.12 35,237 39 0.15
Time deposits 638,739 3,652 0.76 875,012 6,722 1.03
Total interest-bearing deposits 1,222,160 4,411 0.48 1,403,919 7,689 0.73
Other borrowings 72,491 667 1.23 59,846 671 1.50
Subordinated debentures 79,618 4,245 7.11 81,963 4,525 7.36
Total interest-bearing liabilities 1,374,269 9,323 0.91 1,545,728 12,885 1.11
Noninterest-bearing demand deposits 409,393 388,370
Other liabilities 11,047 48,851
Shareholders' equity 251,351 300,869
Total liabilities and shareholders' equity $2,046,060 $2,283,818
Net interest income and spread $46,013 2.83% $59,278 3.41%
Net interest margin (1) 3.11% 3.71%
Average interest-earning assets to average interest-bearing liabilities 143.83% 138.10%
(1) Net interest margin = annualized net interest income / average interest-earning assets
SOUTHWEST BANCORP, INC. Table 6
UNAUDITED QUARTERLY SUMMARY LOAN DATA
(Dollars in thousands, except per share)
2013 2012
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
LOAN COMPOSITION
Noncovered:
Real estate mortgage:
Commercial $743,858 $786,686 $819,873 $870,977 $898,453 $931,239 $996,486
One-to-four family residential 80,561 77,445 73,911 70,952 74,081 74,390 76,287
Real estate construction:
Commercial 162,995 158,907 139,462 130,753 206,342 211,098 222,678
One-to-four family residential 4,464 5,241 5,015 3,656 3,438 4,184 3,814
Commercial 263,598 235,667 232,224 240,498 244,018 263,085 273,324
Installment and consumer:
Guaranteed student loans 4,471 4,520 4,576 4,680 4,872 5,153 5,276
Other 27,698 27,977 28,553 31,512 32,710 33,555 31,766
Total noncovered loans, including held for sale 1,287,645 1,296,443 1,303,614 1,353,028 1,463,914 1,522,704 1,609,631
Less allowance for loan losses (40,013) (40,270) (42,639) (46,494) (43,607) (43,807) (45,023)
Total noncovered loans, net $1,247,632 $1,256,173 $1,260,975 $1,306,534 $1,420,307 $1,478,897 $1,564,608
Covered:
Real estate mortgage:
Commercial $13,577 $15,452 $16,970 $18,298 $20,664 $21,472 $22,607
One-to-four family residential 4,084 4,253 4,458 4,881 5,059 5,432 5,766
Real estate construction:
Commercial 312 320 367 382 419 1,627 2,344
Commercial 967 1,554 1,715 2,037 1,937 2,033 2,401
Installment and consumer 40 67 91 109 118 148 196
Total covered loans 18,980 21,646 23,601 25,707 28,197 30,712 33,314
Less allowance for loan losses (68) (82) (214) (224) (138) (91) (60)
Total covered loans, net $18,912 $21,564 $23,387 $25,483 $28,059 $30,621 $33,254
LOANS BY SEGMENT
Oklahoma banking $681,749 $656,356 $628,747 $652,121 $704,916 $751,758 $810,217
Texas banking 414,433 444,327 495,815 520,481 560,197 588,370 616,455
Kansas banking 206,802 210,189 195,355 174,451 192,249 189,292 177,508
Subtotal 1,302,984 1,310,872 1,319,917 1,347,053 1,457,362 1,529,420 1,604,180
Secondary market 3,641 7,217 7,298 31,682 34,749 23,996 38,765
Total loans $1,306,625 $1,318,089 $1,327,215 $1,378,735 $1,492,111 $1,553,416 $1,642,945
NONPERFORMING LOANS BY TYPE
Construction & development $5,659 $5,989 $6,409 $3,355 $3,436 $3,608 $3,768
Commercial real estate 12,203 12,325 13,362 18,337 20,576 4,932 6,821
Commercial 10,887 10,719 11,861 15,232 1,791 10,878 2,209
One-to-four family residential 396 418 651 1,310 949 1,125 1,508
Consumer 55 64 73 160 131 176 118
Total nonperforming loans - noncovered $29,200 $29,515 $32,356 $38,394 $26,883 $20,719 $14,424
NONPERFORMING LOANS BY SEGMENT
Oklahoma banking $3,279 $1,678 $2,000 $2,956 $4,369 $2,979 $3,550
Texas banking 24,963 26,294 28,817 33,756 19,940 14,894 5,703
Kansas banking 958 1,543 1,539 1,682 2,574 2,846 5,171
Total nonperforming loans - noncovered $29,200 $29,515 $32,356 $38,394 $26,883 $20,719 $14,424
OTHER REAL ESTATE BY TYPE
Construction & development $676 $145 $215 $215 $445 $2,585 $3,542
Commercial real estate -- -- 9,207 11,003 14,130 14,129 14,854
One-to-four family residential -- -- -- 97 108 549 933
Total other real estate - noncovered $676 $145 $9,422 $11,315 $14,683 $17,263 $19,329
Continued
SOUTHWEST BANCORP, INC. Table 6
UNAUDITED QUARTERLY SUMMARY LOAN DATA Continued
(Dollars in thousands, except per share)
2013 2012
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
OTHER REAL ESTATE BY SEGMENT
Oklahoma banking $-- $-- $1,980 $3,393 $6,178 $6,178 $6,273
Texas banking -- -- 7,227 7,227 7,227 9,162 9,846
Kansas banking 676 145 215 695 1,278 1,923 3,210
Total other real estate - noncovered $676 $145 $9,422 $11,315 $14,683 $17,263 $19,329
POTENTIAL PROBLEM LOANS BY TYPE
Construction & development 22,222 20,745 19,968 22,077 22,565 25,563 33,907
Commercial real estate 62,475 62,166 60,329 58,549 53,725 71,537 67,654
Commercial 10,028 10,136 8,220 12,526 9,305 12,753 23,506
One-to-four family residential 414 1,071 1,129 1,147 1,157 1,230 1,253
Consumer -- -- -- 62 -- -- --
Total potential problem loans - noncovered $95,139 $94,118 $89,646 $94,361 $86,752 $111,083 $126,320
POTENTIAL PROBLEM LOANS BY SEGMENT
Oklahoma banking $31,345 $31,495 $32,246 $30,875 $39,606 $48,038 $44,122
Texas banking 59,561 58,710 51,978 58,377 43,313 59,368 79,735
Kansas banking 4,233 3,913 5,422 5,109 3,833 3,677 2,463
Total potential problem loans - noncovered $95,139 $94,118 $89,646 $94,361 $86,752 $111,083 $126,320
LOANS OUT OF MARKET
Net balance of loans out of market:
Arizona $30,516 $31,564 $33,017 $40,326 $41,255 $39,449 $34,749
Iowa 22,438 22,537 22,659 22,826 22,958 23,022 23,130
Colorado 12,358 8,586 3,067 3,110 3,119 3,111 3,104
North Carolina 10,161 300 407 65 604 682 771
Kentucky 10,088 11,860 10,144 8,691 7,517 9,455 517
California 9,472 9,632 10,866 9,791 9,684 9,922 10,252
Mississippi 8,929 9,233 9,170 9,239 9,842 -- --
South Carolina 7,125 7,165 7,205 7,244 7,283 7,320 --
Florida 6,314 6,346 6,333 6,254 6,204 6,240 6,269
Tennessee 6,136 6,171 6,246 6,204 6,232 6,310 6,368
Other 17,716 21,914 18,923 29,915 31,143 31,737 37,730
Total loans out of market $141,253 $135,308 $128,037 $143,665 $145,841 $137,248 $122,890
Nonperforming loans out of market:
Arizona $11,205 $12,167 $13,419 $11,599 $250 $256 $261
New York 1,033 1,048 -- -- -- -- --
Florida 258 264 270 275 281 287 293
Colorado -- -- 131 131 131 131 131
Other -- 1 -- 59 -- -- --
Total nonperforming out of market $12,496 $13,480 $13,820 $12,064 $662 $674 $685
Potential problem loans out of market:
Iowa $11,645 $11,719 $11,792 $11,868 $11,941 $11,970 $12,035
New Jersey 1,170 1,244 -- -- -- -- --
California 499 512 524 536 548 559 570
Florida 71 75 80 85 90 95 100
Arizona -- -- -- 9,037 -- -- --
Total potential problem out of market $13,385 $13,550 $12,396 $21,526 $12,579 $12,624 $12,705
Continued
SOUTHWEST BANCORP, INC. Table 6
UNAUDITED QUARTERLY SUMMARY LOAN DATA Continued
(Dollars in thousands, except per share)
2013 2012
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
ALLOWANCE ACTIVITY
Balance, beginning of period $40,352 $42,853 $46,718 $43,745 $43,898 $45,083 $44,684
Charge offs 600 2,072 4,651 722 2,653 2,229 1,936
Recoveries 658 447 288 610 4,226 1,012 619
Net charge offs (recoveries) (58) 1,625 4,363 112 (1,573) 1,217 1,317
Provision for loan losses (329) (876) 498 3,085 (1,726) 32 1,716
Balance, end of period $40,081 $40,352 $42,853 $46,718 $43,745 $43,898 $45,083
NET CHARGE OFFS BY TYPE
Construction & development (20) 111 (19) (22) (1,823) (85) (42)
Commercial real estate 274 7 416 (18) 2,022 91 14
Commercial (169) 1,085 3,751 239 (1,894) 1,228 1,211
One-to-four family residential (165) 363 167 (40) 20 (105) 123
Consumer 22 59 48 (47) 102 88 11
Total net charge offs (recoveries) by type $(58) $1,625 $4,363 $112 $(1,573) $1,217 $1,317
NET CHARGE OFFS BY SEGMENT
Oklahoma banking $(203) $200 $589 $(261) $5 $(247) $1,150
Texas banking (80) 1,356 3,241 305 857 1,139 227
Kansas banking 225 69 533 68 (2,435) 325 (60)
Total net charge offs (recoveries) by segment $(58) $1,625 $4,363 $112 $(1,573) $1,217 $1,317
SOUTHWEST BANCORP, INC. Table 7
UNAUDITED QUARTERLY SUMMARY FINANCIAL DATA
(Dollars in thousands, except per share)
2013 2012
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PER SHARE DATA
Basic earnings per common share $0.19 $0.22 $0.12 $0.05 $0.22 $0.15 $0.21
Diluted earnings per common share 0.19 0.22 0.12 0.05 0.22 0.15 0.21
Book value per common share 12.83 12.67 12.72 12.60 12.59 12.35 12.21
Tangible book value per share* 12.77 12.60 12.66 12.54 12.53 12.29 12.15
COMMON STOCK
Shares issued and outstanding 19,703,313 19,692,606 19,692,038 19,529,721 19,448,312 19,447,202 19,445,913
OTHER FINANCIAL DATA
Investment securities $382,001 $372,403 $365,605 $377,112 $381,499 $340,378 $333,860
Loans held for sale 3,641 7,217 7,297 31,682 34,749 23,996 38,765
Noncovered portfolio loans 1,284,004 1,289,226 1,296,317 1,321,346 1,429,165 1,498,708 1,570,866
Total noncovered loans 1,287,645 1,296,443 1,303,614 1,353,028 1,463,914 1,522,704 1,609,631
Covered portfolio loans 18,980 21,646 23,601 25,707 28,197 30,712 33,314
Total assets 1,972,367 2,031,962 2,091,694 2,122,255 2,151,153 2,264,123 2,268,264
Total deposits 1,583,791 1,615,961 1,677,668 1,709,578 1,743,673 1,788,379 1,806,780
Other borrowings 78,663 74,334 70,872 70,362 66,694 68,477 55,139
Subordinated debentures 46,393 81,963 81,963 81,963 81,963 81,963 81,963
Total shareholders' equity 252,802 249,420 250,509 246,056 244,821 309,003 306,046
Mortgage servicing portfolio 383,400 368,825 356,032 343,397 329,184 305,465 301,378
INTANGIBLE ASSET DATA
Goodwill $1,214 $1,214 $1,214 $1,214 $1,214 $1,214 $1,214
Core deposit intangible 2,185 2,306 2,424 2,543 2,664 2,785 2,906
Mortgage servicing rights 2,837 2,675 2,445 2,321 2,122 1,975 1,952
Total intangible assets $6,236 $6,195 $6,083 $6,078 $6,000 $5,974 $6,072
Intangible amortization expense $314 $313 $410 $283 $283 $282 $296
DEPOSIT COMPOSITION
Non-interest bearing demand $436,904 $412,176 $416,979 $424,008 $429,407 $421,083 $395,141
Interest-bearing demand 106,176 138,502 125,914 112,012 113,677 119,929 119,759
Money market accounts 423,720 408,145 437,629 423,417 385,296 361,839 349,419
Savings accounts 39,727 38,611 39,733 37,693 36,461 35,610 34,679
Time deposits of $100,000 or more 270,916 295,179 317,270 351,273 389,969 431,317 464,876
Other time deposits 306,348 323,348 340,143 361,175 388,863 418,601 442,906
Total deposits** $1,583,791 $1,615,961 $1,677,668 $1,709,578 $1,743,673 $1,788,379 $1,806,780
OFFICES AND EMPLOYEES
FTE Employees 407 408 412 422 429 430 435
Branches 23 22 22 22 23 23 23
Loan production offices 0 1 1 1 2 2 2
Assets per employee $4,846 $4,980 $5,077 $5,029 $5,014 $5,265 $5,214
*This is a Non-GAAP based financial measure.
**Calculation of Non-brokered Deposits and Core Funding (Non-GAAP Financial Measures)
Total deposits $1,583,791 $1,615,961 $1,677,668 $1,709,578 $1,743,673 $1,788,379 $1,806,780
Less:
Brokered time deposits 1,343 4,904 5,760 9,865 10,197 12,238 13,307
Other brokered deposits 3,423 3,422 3,422 3,421 4,421 4,420 6,529
Non-brokered deposits $1,579,025 $1,607,635 $1,668,486 $1,696,292 $1,729,055 $1,771,721 $1,786,944
Plus:
Sweep repurchase agreements 53,663 49,334 45,872 45,362 41,694 43,477 30,139
Core funding $1,632,688 $1,656,969 $1,714,358 $1,741,654 $1,770,749 $1,815,198 $1,817,083
Balance sheet amounts are as of period end unless otherwise noted.
SOUTHWEST BANCORP, INC. Table 8
UNAUDITED QUARTERLY SUPPLEMENTAL ANALYTICAL DATA
(Dollars in thousands, except per share)
2013 2012
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PERFORMANCE RATIOS
Return on average assets (annualized) 0.75% 0.87% 0.46% 0.18% 1.06% 0.73% 0.89%
Return on average common equity (annualized) 5.99 7.00 3.89 1.56 7.11 5.03 7.00
Return on average tangible common equity (annualized)* 6.02 7.03 3.90 1.56 7.15 5.06 7.03
Net interest margin (annualized) 3.11 3.07 3.16 3.41 3.59 3.71 3.82
Effective tax rate 38.01 33.74 43.88 31.45 39.73 37.12 37.50
Efficiency ratio 69.18 68.93 75.16 79.68 64.47 71.82 58.73
NONPERFORMING ASSETS
Noncovered:
Nonaccrual loans $29,198 $29,513 $32,356 $35,104 $26,493 $20,474 $14,324
90 days past due and accruing 2 2 -- 3,290 390 245 100
Total nonperforming loans 29,200 29,515 32,356 38,394 26,883 20,719 14,424
Other real estate 676 145 9,422 11,315 14,683 17,263 19,329
Total nonperforming assets $29,876 $29,660 $41,778 $49,709 $41,566 $37,982 $33,753
Performing restructured $527 $993 $512 $290 $281 $328 $1,700
Potential problem loans $95,139 $94,118 $89,646 $94,361 $86,752 $111,083 $126,320
Covered:
Nonaccrual loans $3,480 $3,062 $2,873 $3,595 $4,809 $6,067 $7,015
90 days past due and accruing -- -- -- -- 353 -- --
Total nonperforming loans 3,480 3,062 2,873 3,595 5,162 6,067 7,015
Other real estate 1,017 1,666 2,243 3,643 4,142 3,825 4,694
Total nonperforming assets $4,497 $4,728 $5,116 $7,238 $9,304 $9,892 $11,709
Performing restructured $1,733 $1,800 $1,854 $2,523 $2,548 $1,701 $--
Potential problem loans $2,030 $3,352 $3,986 $3,155 $1,621 $1,573 $553
ASSET QUALITY RATIOS
Net loan charge-offs to average portfolio loans (annualized) (0.02)% 0.50% 1.32% 0.03% (0.42)% 0.31% 0.32%
Noncovered:
Nonperforming assets to portfolio loans and other real estate 2.33% 2.30% 3.20% 3.73% 2.88% 2.51% 2.12%
Nonperforming loans to portfolio loans 2.27 2.29 2.50 2.91 1.88 1.38 0.92
Allowance for loan losses to portfolio loans 3.12 3.12 3.29 3.52 3.05 2.92 2.87
Allowance for loan losses to nonperforming loans 137.03 136.44 131.78 121.10 162.21 211.43 312.14
Covered:
Nonperforming assets to portfolio loans and other real estate 22.49% 20.28% 19.80% 24.66% 28.77% 28.64% 30.81%
Nonperforming loans to portfolio loans 18.34 14.15 12.17 13.98 18.31 19.75 21.06
Allowance for loan losses to portfolio loans 0.36 0.38 0.91 0.87 0.49 0.30 0.18
Allowance for loan losses to nonperforming loans 1.95 2.68 7.45 6.23 2.67 1.50 0.86
CAPITAL RATIOS
Average total shareholders' equity to average assets 12.53% 12.41% 11.92% 11.61% 12.31% 13.56% 12.99%
Leverage ratio 14.78 16.10 15.59 15.01 14.49 16.84 16.20
Tier 1 capital to risk-weighted assets 20.22 22.48 22.25 20.28 19.36 22.24 21.21
Total capital to risk-weighted assets 21.52 23.78 23.54 21.56 20.64 23.52 22.49
Tangible common equity to tangible assets*** 12.76 12.22 11.93 11.54 11.33 10.56 10.42
Continued
SOUTHWEST BANCORP, INC. Table 8
UNAUDITED QUARTERLY SUPPLEMENTAL ANALYTICAL DATA Continued
(Dollars in thousands, except per share)
2013 2012
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
REGULATORY CAPITAL DATA
Tier I capital $296,488 $326,831 $324,659 $319,665 $317,665 $382,263 $378,949
Total capital 315,570 345,717 343,562 339,964 338,739 404,252 401,808
Total risk adjusted assets 1,466,672 1,453,878 1,459,465 1,576,521 1,641,121 1,719,058 1,786,282
Average total assets 2,006,525 2,030,064 2,082,789 2,130,035 2,192,579 2,269,640 2,339,784
____________________
*This is a Non-GAAP based financial measure.
***Calculation of Tangible Capital to Tangible Assets (Non-GAAP Financial Measure)
Total shareholders' equity $252,802 $249,420 $250,509 $246,056 $244,821 $309,003 $306,046
Less:
Goodwill 1,214 1,214 1,214 1,214 1,214 1,214 1,214
Preferred stock -- -- -- -- -- 68,837 68,644
Tangible common equity $251,588 $248,206 $249,295 $244,842 $243,607 $238,952 $236,188
Total assets $1,972,367 $2,031,962 $2,091,694 $2,122,255 $2,151,153 $2,264,123 $2,268,264
Less goodwill 1,214 1,214 1,214 1,214 1,214 1,214 1,214
Tangible assets $1,971,153 $2,030,748 $2,090,480 $2,121,041 $2,149,939 $2,262,909 $2,267,050
Tangible common equity to tangible assets 12.76% 12.22% 11.93% 11.54% 11.33% 10.56% 10.42%
Balance sheet amounts and ratios are as of period end unless otherwise noted.

CONTACT: For additional information: Mark W. Funke President & CEO Joe T. Shockley, Jr. EVP & CFO (405) 372-2230

Source:Southwest Bancorp, Inc.