Southwest Bancorp, Inc. Reports Third Quarter 2014 Results and Announces Quarterly Dividend

STILLWATER, Okla., Oct. 21, 2014 (GLOBE NEWSWIRE) -- Southwest Bancorp, Inc. (Nasdaq:OKSB), ("Southwest"), today reported net income for the third quarter of 2014 of $5.3 million, or $0.27 per diluted share, compared to $6.2 million, or $0.31 per diluted share, for the second quarter of 2014. Included in the second quarter of 2014 results was a pre-tax net gain of $4.4 million from the sale of three community bank branches in Anthony, Harper, and Overland Park, Kansas. Net income for the nine months ended September 30, 2014 totaled $15.1 million, or $0.77 per diluted share, compared to $10.6 million, or $0.54 per diluted share, for the nine months ended September 30, 2013.

Southwest announced that its board of directors has approved a quarterly cash dividend of $0.04 per share payable November 14, 2014 to shareholders of record as of October 31, 2014.

Mark Funke, President and CEO, stated, "The third quarter results reflect continued improvement in asset quality, our focus on growing loan and customer relationships, and improved operating efficiencies. Our efforts produced several highlights for the quarter.

  • Loan growth in the third quarter was $41.1 million, adjusted for paydowns on nonaccrual and potential problem loans and the sale of the student loan portfolio.
  • The quarterly net interest margin was 3.44% at September 30, 2014 compared to 3.34% (normalized) at June 30, 2014 and 3.11% at September 30, 2013.
  • Asset quality improved as nonperforming loans decreased $1.4 million, or 9%, and potential problem loans decreased $19.8 million, or 24%, during the third quarter. Included in these improvements is the collection of a $1.3 million recovery of a prior period loan loss and a $6.8 million payoff of a related restructured potential problem loan. The improved asset quality resulted in a negative provision of $2.9 million."

"These positive results and actions reflect the good work of our associates at Bank SNB and a growing customer base. We will continue to focus our company on future growth through the expansion of our revenue base while prudently managing our expenses. We are encouraged by the momentum we have throughout our company."

On October 1, 2014, Southwest's previously filed application with the Oklahoma State Banking Department was approved and its wholly owned banking subsidiary became a state chartered bank with the state of Oklahoma. Southwest's banking subsidiary's name is now Bank SNB.

On August 14, 2014, Southwest's board of directors authorized the repurchase of up to 5.0% or 990,000 shares, of its outstanding common stock, par value $1.00 per share. The share repurchases are expected to be made primarily on the open market from time to time until August 14, 2015. Repurchases under the program are available at the discretion of management based upon market, business, legal, and other factors. During the third quarter, Southwest repurchased 223,005 shares for a total of $3.7 million.

Financial Overview

Condition: During the quarter ended September 30, 2014, total assets of $1.9 billion increased $15.8 million from June 30, 2014. Total loans of $1.4 billion increased $15.7 million from June 30, 2014 and total investment securities of $370.6 million decreased $15.3 million compared to June 30, 2014. Cash and cash equivalents at September 30, 2014 were $130.1 million, up $14.9 million from June 30, 2014.

At September 30, 2014, the allowance for loan losses was $30.9 million, a decrease of $9.2 million when compared to a year ago, and a decrease of $2.2 million when compared to June 30, 2014. The allowance for loan losses to portfolio loans was 2.27% as of September 30, 2014, compared to 3.08% as of September 30, 2013 and 2.46% as of June 30, 2014. The allowance for loan losses to nonperforming loans was 205.29% as of September 30, 2014, compared to 122.65% as of September 30, 2013 and 200.77% as of June 30, 2014.

Nonperforming loans decreased by $17.6 million in a year over year comparison, and decreased $1.4 million during the quarter. Other real estate at September 30, 2014 was $3.4 million, an increase of $1.8 million from September 30, 2013, but a decrease of $0.8 million when compared to June 30, 2014. Nonperforming assets were $18.5 million, or 1.36% of portfolio loans and other real estate, as of September 30, 2014, compared to $34.4 million, or 2.63% of portfolio loans and other real estate, as of September 30, 2013, and $20.8 million, or 1.54% of portfolio loans and other real estate, as of June 30, 2014.

Total core funding, which includes all non-brokered deposits and sweep repurchase agreements, comprised 92% and 95% of total funding as of September 30, 2014 and June 30, 2014, respectively. Wholesale funding, including FHLB borrowings, federal funds purchased, and brokered deposits, accounted for 8% and 5% of total funding at September 30, 2014 and June 30, 2014, respectively. See Table 7 for details on core funding and non-brokered deposits, which are non-GAAP financial measures.

The capital ratios of Southwest and Bank SNB, Southwest's banking subsidiary, as of September 30, 2014, exceeded the criteria for regulatory classification as "well-capitalized". Southwest's total regulatory capital was $334.5 million, for a total risk-based capital ratio of 21.34%, and Tier 1 capital was $314.1 million, for a Tier 1 risk-based capital ratio of 20.05%. Southwest's capital exceeded the minimum to be classified as "well-capitalized" by $177.8 million. Bank SNB had total regulatory capital of $292.5 million, for a total risk-based capital ratio of 18.77%, and Tier 1 capital of $272.8 million, for a Tier 1 risk-based capital ratio of 17.51%. Bank SNB exceeded the minimum to be classified as "well-capitalized" by $136.7 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 2014, net income was $5.3 million, compared to $3.8 million for the third quarter of 2013 and $6.2 million for the second quarter of 2014.

The $1.5 million increase in our net income compared to the third quarter of 2013 was primarily the result of a $0.6 million increase in net interest income, primarily driven by lower interest expense on deposits and a reduction in interest costs due to the redemption of the 10.5% Trust Preferred Securities in third quarter of 2013, and a $2.6 million increase in the negative provision for loan losses, offset in part by a $0.5 million decrease in noninterest income and a $0.3 million increase in noninterest expense.

The $0.9 million decrease in net income compared to the second quarter of 2014 was primarily due to the $0.7 million decrease in net interest income and the $5.2 million decrease in noninterest income, due to the prior quarter's inclusion of the $4.4 million pre-tax net gain recognized on the branch sales and $0.6 million recognized on the sale of a stock that was acquired in a prior year repossession. Partially offsetting these decreases were a $2.5 million increase in the negative provision for loan losses and a $2.0 million decrease in noninterest expense, primarily driven by decreased other real estate expenses, decreased personnel expenses, and decreased general and administrative expenses.

Net Interest Income: Net interest income totaled $15.8 million for the third quarter of 2014, compared to $15.3 million for the third quarter of 2013, an increase of $0.5 million, or 4%, and to $16.6 million for the second quarter of 2014, a decrease of $0.7 million, or 4%. Net interest margin was 3.44% for the third quarter of 2014, compared to 3.11% for the third quarter of 2013 and 3.50% for the second quarter of 2014. Included in interest income for the second quarter of 2014 was $0.8 million due to accelerated discount accretion attributable to the sale of loans covered by the loss share agreement. The net effects of these adjustments on the net interest margin were a 16 basis point increase in the second quarter of 2014 net interest margin. Loans (including loans held for sale) increased $60.8 million, or 5%, when compared to September 30, 2013, and $15.7 million, or 1%, when compared to June 30, 2014.

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 negative provision (or credit) of $2.9 million for the third quarter of 2014, compared to a negative provision of $0.3 million for the third quarter of 2013, and a negative provision of $0.4 million for the second quarter of 2014. During the third quarter of 2014, charge-offs totaled $1.2 million and recoveries totaled $1.9 million. Therefore, the third quarter of 2014 net recoveries totaled $0.7 million, or (0.21)% (annualized) of average portfolio loans, compared to net recoveries of $0.1 million, or (0.02)% (annualized) of average portfolio loans for the third quarter of 2013 and net charge-offs of $1.5 million, or 0.45% (annualized) of average portfolio loans for the second quarter of 2014.

Noninterest Income: Noninterest income totaled $3.1 million for the third quarter of 2014, compared to $3.5 million for the third quarter of 2013 and to $8.2 million for the second quarter of 2014. The $0.5 million decrease from third quarter 2013 included a $0.2 million decrease in gain on sale of mortgage loans, a $0.1 million decrease in service charges, and a $0.1 million decrease in other noninterest income. The $5.2 million decrease from second quarter 2014 is primarily the result of the $4.4 million recognized as the gain on sales of the community bank branches and $0.6 million gain on the sale of a stock investment that was acquired in a prior year repossession.

Noninterest Expense: Noninterest expense totaled $13.4 million for the third quarter of 2014, compared to $13.0 million for the third quarter of 2013 and to $15.3 million for the second quarter of 2014. The $0.4 million increase in noninterest expense from third quarter of 2013 consisted of a $0.2 million increase in other real estate expense due to net gains on sales of other real estate properties recognized in the prior year, a $0.2 million increase in employee benefit expense, and a $0.2 million increase in general and administrative expense, primarily increased legal and consulting fees, offset in part by a decrease in the provision for unfunded loan commitments.

The $2.0 million decrease in noninterest expense from second quarter of 2014 was due to a $0.7 million decrease in personnel expense, a $0.7 million decrease in other real estate expense, and a $0.4 million decrease in general and administrative expense, resulting from a decrease in the provision for unfunded loan commitments.

Income Tax: Income tax expense totaled $3.2 million for the third quarter of 2014, compared to $2.3 million for the third quarter of 2013 and $3.7 million for the second quarter of 2014. The income tax expense fluctuates in relation to pre-tax income levels. The third quarter of 2014 effective tax rate was 37.5%.

Year-to-date Results:

Summary: Net income was $15.1 million for the first nine months of 2014, compared to $10.6 million for the first nine months of 2013. The $4.5 million increase in net income from 2013 is the result of a $2.4 million increase in net interest income, primarily driven by lower interest expense on deposits and a reduction in interest expense due to the redemption of the 10.5% Trust Preferred Securities in third quarter of 2013, a $3.5 million increase in the negative provision for loan losses, resulting from improved asset quality, a $3.8 million increase in noninterest income, primarily the pre-tax net gain on sale of community bank branches, offset in part by a $2.6 million increase in noninterest expense due to decreased gains recognized on sale of other real estate properties and increased employee benefit expenses.

Net Interest Income: Net interest income totaled $48.4 million for the first nine months of 2014, compared to $46.0 million for the first nine months of 2013, an increase of $2.4 million, or 5%, primarily driven by lower interest expense on deposits and a reduction in interest expense due to the redemption the 10.5% Trust Preferred Securities in third quarter of 2013. Year-to-date net interest margin was 3.43%, compared to 3.11% for 2013. Included in interest income for the first nine months of 2014 was $0.8 million due to accelerated discount accretion attributable to the sale of loans covered by the loss share agreement and $0.6 million due to the interest recognition resulting from loans returning to accrual status. The net effect of these adjustments on the net interest margin was a 9 basis point increase for the first nine months of 2014. 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) of $4.2 million for the first nine months of 2014, compared to a credit of $0.7 million for the first nine months of 2013. Net charge-offs totaled $1.5 million, or 0.15% (annualized) of average portfolio loans year-to-date as of September 30, 2014, compared to $5.9 million, or 0.61% (annualized) of average portfolio loans for the same period 2013.

Noninterest Income: Noninterest income totaled $14.4 million for the first nine months of 2014, compared to $10.6 million for the first nine months of 2013. The increase primarily consists of the $4.4 million recognized as the pre-tax net gain on sales of the community bank branches and the $0.8 million in gain on sale of investment securities, offset in part by the $1.2 million decline in gains on sales of mortgage loans.

Noninterest Expense: Noninterest expense totaled $42.8 million for the first nine months of 2014, compared to $40.2 million for the first nine months of 2013. The increase consists of a $1.8 million increase in other real estate expense, which is primarily due to net gains recognized during the prior year on the sale of other real estate properties, a $0.6 million increase in employee benefit expenses, a $0.2 million increase in occupancy expense, and a $0.3 million increase in general and administrative expense, primarily the result of increased legal fees and consulting fees, offset in part by a decrease in the provision for unfunded loan commitments.

Income Tax: Income tax expense totaled $9.1 million for the first nine months of 2014, compared to $6.4 million for the first nine months of 2013. The income tax expense fluctuates in relation to pre-tax income levels. The year-to-date effective tax rate was 37.5% as of September 30, 2014.

Conference Call

Southwest will host a conference call to review these results on Wednesday, October 22, 2014 at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). Investors, news media, and others may pre-register for the call using the following link to receive a special dial-in number and PIN: http://dpregister.com/10053246. Telephone participants who are unable to pre-register may access the call by telephone at 866-218-2402 (toll-free) or 412-902-4190 (international). Participants are encouraged to dial into the call approximately 10 minutes prior to the start time. The call and corresponding presentation slides will be webcast live on Southwest's website at www.oksb.com or http://services.choruscall.com/links/oksb141022.html. An audio replay will be available one hour after the call at 877-344-7529 (toll-free) or 412-317-0088 (international), conference number 10053246. Telephone replay access will be available until 9:00 a.m. Eastern Time on November 19, 2014.

Southwest Bancorp and Subsidiaries

Southwest is the holding company for Bank SNB, an Oklahoma state banking corporation ("Bank SNB"). Bank SNB offers commercial and consumer lending, deposit and investment services, specialized cash management, and other financial services from offices in Oklahoma, Texas, and Kansas. Bank SNB was chartered in 1894 and Southwest was organized in 1981 as the holding company. At September 30, 2014, Southwest had total assets of $1.9 billion, deposits of $1.5 billion, and shareholders' equity of $272.0 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 banking subsidiary 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, 2014, approximately $403.8 million, or 30%, of loans were loans to individuals and businesses in the healthcare industry. Regular market reviews are conducted of (i) current and potential healthcare lending business, and (ii) 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, 2013. 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, 2014 through the date its financial statements are filed with the Securities and Exchange Commission. The September 30, 2014 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.

The Southwest Bancorp, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8074

The Bank SNB logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=23106

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 2014 % Change 2013 % Change
Operations
Net interest income $ 15,837 $ 16,574 (4)% $15,273 4 %
Provision for loan losses (2,897) (355) 716 (329) 781
Noninterest income 3,084 8,246 (63) 3,547 (13)
Noninterest expense 13,358 15,332 (13) 13,019 3
Income before taxes 8,460 9,843 (14) 6,130 38
Taxes on income 3,172 3,691 (14) 2,330 36
Net income 5,288 6,152 (14) 3,800 39
Diluted earnings per share 0.27 0.31 (13) 0.19 42
Balance Sheet
Total assets 1,900,948 1,885,158 1 1,972,367 (4)
Loans held for sale 4,368 6,803 (36) 3,641 20
Portfolio loans 1,363,020 1,344,897 1 1,302,984 5
Total deposits 1,494,946 1,463,855 2 1,583,791 (6)
Total shareholders' equity 271,966 271,351 0 252,802 8
Book value per common share 13.90 13.71 1 12.83 8
Key Ratios
Net interest margin 3.44% 3.50% 3.11%
Efficiency ratio 70.60 61.77 69.18
Total capital to risk-weighted assets 21.34 21.43 21.52
Nonperforming loans to portfolio loans 1.10 1.23 2.27
Shareholders' equity to total assets 14.31 14.39 12.82
Tangible common equity to tangible assets* 14.25 14.34 12.76
Return on average assets (annualized) 1.12 1.27 0.75
Return on average common equity (annualized) 7.69 9.19 5.99
Return on average tangible common equity (annualized)** 7.72 9.24 6.02
Nine Months
YEAR-TO-DATE HIGHLIGHTS 2014 2013 % Change
Operations
Net interest income $ 48,412 $ 46,013 5%
Provision for loan losses (4,238) (707) 499
Noninterest income 14,355 10,575 36
Noninterest expense 42,797 40,246 6
Income before taxes 24,208 17,049 42
Taxes on income 9,077 6,446 41
Net income 15,131 10,603 43
Diluted earnings per share 0.77 0.54 43
Balance Sheet
Total assets 1,900,948 1,972,367 (4)
Loans held for sale 4,368 3,641 20
Portfolio loans 1,363,020 1,302,984 5
Total deposits 1,494,946 1,583,791 (6)
Total shareholders' equity 271,966 252,802 8
Book value per common share 13.90 12.83 8
Key Ratios
Net interest margin 3.43% 3.11%
Efficiency ratio 68.18 71.12
Total capital to risk-weighted assets 21.34 21.52
Nonperforming loans to portfolio loans 1.10 2.27
Shareholders' equity to total assets 14.31 12.82
Tangible common equity to tangible assets* 14.25 12.76
Return on average assets (annualized) 1.04 0.69
Return on average common equity (annualized) 7.54 5.64
Return on average tangible common equity (annualized)** 7.58 5.67
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,
2014 2013 2013
Assets
Cash and due from banks $ 18,498 $ 28,062 $ 31,043
Interest-bearing deposits 111,605 251,777 214,241
Cash and cash equivalents 130,103 279,839 245,284
Securities held to maturity (fair values of $11,265, $12,115, and $12,177, respectively) 10,663 11,720 11,739
Securities available for sale (amortized cost of $359,042, $385,423, and $371,433, respectively) 359,944 382,479 370,262
Loans held for sale 4,368 3,060 3,641
Loans receivable (includes loss share of $0, $1,812, and $4,282, respectively) 1,363,020 1,267,843 1,302,984
Less: Allowance for loan losses (30,917) (36,663) (40,081)
Net loans receivable 1,332,103 1,231,180 1,262,903
Accrued interest receivable 4,952 5,335 5,725
Income tax receivable -- -- 1,807
Non-hedge derivative asset 166 -- --
Premises and equipment, net 18,986 20,833 21,283
Other real estate 3,448 2,654 1,693
Goodwill 1,214 1,214 1,214
Other intangible assets, net 3,866 4,980 5,022
Other assets 31,135 38,129 41,794
Total assets $ 1,900,948 $ 1,981,423 $ 1,972,367
Liabilities
Deposits:
Noninterest-bearing demand $ 445,148 $ 444,796 $ 436,904
Interest-bearing demand 104,807 120,156 106,176
Money market accounts 477,614 439,981 423,720
Savings accounts 33,398 41,727 39,727
Time deposits of $100,000 or more 203,090 251,185 270,916
Other time deposits 230,889 286,241 306,348
Total deposits 1,494,946 1,584,086 1,583,791
Accrued interest payable 771 832 840
Non-hedge derivative liability 166 -- --
Other liabilities 10,822 10,293 9,878
Other borrowings 75,884 80,632 78,663
Subordinated debentures 46,393 46,393 46,393
Total liabilities 1,628,982 1,722,236 1,719,565
Shareholders' equity
Common stock -- $1 par value; 40,000,000 shares authorized; 19,793,623 shares issued and 19,732,926 and 19,703,313 shares issued and outstanding, respectively 19,794 19,733 19,703
Additional paid-in capital 100,971 99,937 99,488
Retained earnings 155,290 142,528 135,696
Accumulated other comprehensive loss (411) (3,011) (2,085)
Treasury stock, at cost, 223,005, 0, and 0 shares, respectively (3,678) -- --
Total shareholders' equity 271,966 259,187 252,802
Total liabilities and shareholders' equity $ 1,900,948 $ 1,981,423 $ 1,972,367
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,
2014 2014 2013 2014 2013
Interest income
Loans $ 15,683 $ 16,343 $ 16,242 $ 47,801 $ 49,663
Investment securities 1,534 1,628 1,623 4,812 4,908
Other interest-earning assets 274 314 270 963 765
Total interest income 17,491 18,285 18,135 53,576 55,336
Interest expense
Interest-bearing deposits 864 931 1,317 2,820 4,411
Other borrowings 227 223 225 675 667
Subordinated debentures 563 557 1,320 1,669 4,245
Total interest expense 1,654 1,711 2,862 5,164 9,323
Net interest income 15,837 16,574 15,273 48,412 46,013
Provision for loan losses (2,897) (355) (329) (4,238) (707)
Net interest income after provision for loan losses 18,734 16,929 15,602 52,650 46,720
Noninterest income
Service charges and fees 2,492 2,608 2,589 7,696 7,856
Gain on sale of branches, net -- 4,378 -- 4,378 --
Gain on sales of mortgage loans 382 463 619 1,069 2,264
Gain on sale/call of investment securities, net -- 629 -- 764 --
Other noninterest income 210 168 339 448 455
Total noninterest income 3,084 8,246 3,547 14,355 10,575
Noninterest expense
Salaries and employee benefits 7,804 8,472 7,645 24,402 23,820
Occupancy 2,612 2,783 2,721 8,164 7,974
FDIC and other insurance 299 314 413 1,010 1,304
Other real estate, net (220) 511 (387) 359 (1,428)
General and administrative 2,863 3,252 2,627 8,862 8,576
Total noninterest expense 13,358 15,332 13,019 42,797 40,246
Income before taxes 8,460 9,843 6,130 24,208 17,049
Taxes on income 3,172 3,691 2,330 9,077 6,446
Net income $ 5,288 $ 6,152 $ 3,800 $ 15,131 $ 10,603
Basic earnings per common share $ 0.27 $ 0.31 $ 0.19 $ 0.77 $ 0.53
Diluted earnings per common share 0.27 0.31 0.19 0.77 0.54
Common dividends declared per share 0.04 0.04 -- 0.12 --
SOUTHWEST BANCORP, INC. Table 4
UNAUDITED AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
(Dollars in thousands)
For the three months ended
September 30, 2014 June 30, 2014 September 30, 2013
Average Average Average Average Average Average
Balance Yield/Rate Balance Yield/Rate Balance Yield/Rate
Assets
Loans $1,356,729 4.59% $1,331,126 4.92% $1,298,018 4.96%
Investment securities 378,924 1.61 384,395 1.70 364,746 1.76
Other interest-earning assets 88,653 1.23 183,378 0.69 287,968 0.37
Total interest-earning assets 1,824,306 3.80 1,898,899 3.86 1,950,732 3.69
Other assets 43,339 49,829 57,622
Total assets $1,867,645 $1,948,728 $2,008,354
Liabilities and Shareholders' Equity
Interest-bearing demand deposits $ 109,245 0.12% $ 130,232 0.12% $ 117,124 0.12%
Money market accounts 437,632 0.14 421,001 0.13 416,839 0.17
Savings accounts 32,076 0.10 43,124 0.10 38,992 0.10
Time deposits 440,317 0.60 493,805 0.60 600,321 0.72
Total interest-bearing deposits 1,019,270 0.34 1,088,162 0.34 1,173,276 0.45
Other borrowings 85,423 1.05 85,682 1.04 75,822 1.18
Subordinated debentures 46,393 4.85 46,393 4.80 75,004 7.04
Total interest-bearing liabilities 1,151,086 0.57 1,220,237 0.56 1,324,102 0.86
Noninterest-bearing demand deposits 432,255 449,364 422,203
Other liabilities 11,442 10,751 10,319
Shareholders' equity 272,862 268,376 251,730
Total liabilities and shareholders' equity $1,867,645 $1,948,728 $2,008,354
Net interest income and spread 3.23% 3.30% 2.83%
Net interest margin (1) 3.44% 3.50% 3.11%
Average interest-earning assets to average interest-bearing liabilities 158.49% 155.62% 147.32%
(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,
2014 2013
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
Assets
Loans $1,322,351 4.83% $1,323,938 5.02%
Investment securities 383,950 1.68 373,150 1.76
Other interest-earning assets 183,416 0.70 279,549 0.37
Total interest-earning assets 1,889,717 3.79 1,976,637 3.74
Other assets 47,780 69,423
Total assets $1,937,497 $ 2,046,060
Liabilities and Shareholders' Equity
Interest-bearing demand deposits $124,652 0.12% $125,598 0.12%
Money market accounts 431,802 0.14 418,973 0.19
Savings accounts 39,941 0.10 38,850 0.12
Time deposits 488,066 0.61 638,739 0.76
Total interest-bearing deposits 1,084,461 0.35 1,222,160 0.48
Other borrowings 83,987 1.07 72,491 1.23
Subordinated debentures 46,393 4.80 79,618 7.11
Total interest-bearing liabilities 1,214,841 0.57 1,374,269 0.91
Noninterest-bearing demand deposits 443,520 409,393
Other liabilities 10,898 11,047
Shareholders' equity 268,238 251,351
Total liabilities and shareholders' equity $1,937,497 $2,046,060
Net interest income and spread 3.22% 2.83%
Net interest margin (1) 3.43% 3.11%
Average interest-earning assets to average interest-bearing liabilities 155.55% 143.83%
(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)
2014 2013
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
LOAN COMPOSITION
Real estate mortgage:
Commercial $ 757,878 $ 769,021 $ 766,178 $ 752,279 $ 757,435 $ 802,138 $ 836,843
One-to-four family residential 78,985 79,542 84,619 83,988 84,645 81,698 78,369
Real estate construction:
Commercial 166,379 166,981 166,007 143,848 163,307 159,227 139,829
One-to-four family residential 11,030 8,359 6,629 4,646 4,464 5,241 5,015
Commercial 330,738 300,163 266,311 255,058 264,565 237,221 233,939
Installment and consumer:
Guaranteed student loans 127 4,282 4,318 4,394 4,471 4,520 4,576
Other 22,251 23,352 26,060 26,690 27,738 28,044 28,644
Total loans, including held for sale 1,367,388 1,351,700 1,320,122 1,270,903 1,306,625 1,318,089 1,327,215
Less allowance for loan losses (30,917) (33,083) (34,925) (36,663) (40,081) (40,352) (42,853)
Total loans, net $ 1,336,471 $ 1,318,617 $ 1,285,197 $ 1,234,240 $ 1,266,544 $ 1,277,737 $ 1,284,362
LOANS BY SEGMENT
Oklahoma banking $ 777,037 $ 773,665 $ 754,698 $ 681,999 $ 681,749 $ 656,356 $ 628,747
Texas banking 424,640 408,385 372,018 366,697 414,433 444,327 495,815
Kansas banking 142,547 145,248 170,720 198,992 206,802 210,189 195,355
Subtotal 1,344,224 1,327,298 1,297,436 1,247,688 1,302,984 1,310,872 1,319,917
Mortgage banking 23,164 24,402 22,686 23,215 3,641 7,217 7,298
Total loans $ 1,367,388 $ 1,351,700 $ 1,320,122 $ 1,270,903 $ 1,306,625 $ 1,318,089 $ 1,327,215
NONPERFORMING LOANS BY TYPE
Construction & development $ 77 $ 82 $ 80 $ 2,721 $ 5,789 $ 6,119 $ 6,539
Commercial real estate 7,504 7,613 7,541 7,766 15,378 15,112 15,975
Commercial 6,149 7,484 7,992 8,819 10,991 10,790 11,940
One-to-four family residential 1,274 1,180 470 513 467 492 701
Consumer 55 119 2 53 55 64 74
Total nonperforming loans $ 15,059 $ 16,478 $ 16,085 $ 19,872 $ 32,680 $ 32,577 $ 35,229
NONPERFORMING LOANS BY SEGMENT
Oklahoma banking $ 6,410 $ 7,149 $ 7,056 $ 5,547 $ 3,279 $ 1,678 $ 2,000
Texas banking 5,777 5,636 5,793 11,902 24,963 26,294 28,817
Kansas banking 2,872 3,693 3,236 2,423 4,438 4,605 4,412
Total nonperforming loans $ 15,059 $ 16,478 $ 16,085 $ 19,872 $ 32,680 $ 32,577 $ 35,229
OTHER REAL ESTATE BY TYPE
Construction & development $ 2,130 $ 2,130 $ 2,130 $ 130 $ 1,333 $ 972 $ 1,389
Commercial real estate 1,318 2,155 2,524 2,524 360 839 10,276
Total other real estate $ 3,448 $ 4,285 $ 4,654 $ 2,654 $ 1,693 $ 1,811 $ 11,665
OTHER REAL ESTATE BY SEGMENT
Oklahoma banking $ -- $ -- $ -- $ -- $ -- $ -- $ 1,980
Texas banking 2,000 2,000 2,000 -- -- -- 7,227
Kansas banking 1,448 2,285 2,654 2,654 1,693 1,811 2,458
Total other real estate $ 3,448 $ 4,285 $ 4,654 $ 2,654 $ 1,693 $ 1,811 $ 11,665
Continued
SOUTHWEST BANCORP, INC. Table 6
UNAUDITED QUARTERLY SUMMARY LOAN DATA Continued
(Dollars in thousands)
2014 2013
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
POTENTIAL PROBLEM LOANS BY TYPE
Construction & development $ 19,307 $ 18,842 $ 22,220 $ 21,501 $ 22,222 $ 20,745 $ 19,968
Commercial real estate 40,623 60,559 64,257 70,654 64,505 65,518 64,287
Commercial 4,090 4,299 4,807 7,107 10,028 10,136 8,220
One-to-four family residential 355 475 481 488 414 1,071 1,157
Total potential problem loans $ 64,375 $ 84,175 $ 91,765 $ 99,750 $ 97,169 $ 97,470 $ 93,632
POTENTIAL PROBLEM LOANS BY SEGMENT
Oklahoma banking $ 23,895 $ 23,887 $ 29,208 $ 29,005 $ 31,345 $ 31,495 $ 32,246
Texas banking 38,586 57,044 58,361 65,079 59,561 58,710 51,978
Kansas banking 1,894 3,244 4,196 5,666 6,263 7,265 9,408
Total potential problem loans $ 64,375 $ 84,175 $ 91,765 $ 99,750 $ 97,169 $ 97,470 $ 93,632
LOANS OUT OF MARKET
Net balance of loans out of market:
Arizona $ 14,397 $ 14,984 $ 15,348 $ 19,458 $ 30,516 $ 31,564 $ 33,017
Kentucky 14,648 14,273 13,415 12,404 10,088 11,860 10,144
North Carolina 13,711 13,323 13,494 13,070 10,161 300 407
Colorado 14,048 13,269 13,705 12,553 12,358 8,586 3,067
Iowa 11,369 11,501 22,178 22,316 22,438 22,537 22,659
California 9,000 9,527 8,869 9,154 9,472 9,632 10,866
Mississippi 8,474 8,582 8,712 8,823 8,929 9,233 9,170
Montana 6,434 6,722 471 514 519 566 570
Tennessee 7,005 6,555 6,684 6,048 6,136 6,171 6,246
Ohio 132 4,142 3,862 3,549 3,294 4,759 4,132
Other 9,894 10,011 9,452 14,766 27,342 30,100 27,759
Total loans out of market $ 109,112 $ 112,889 $ 116,190 $ 122,655 $ 141,253 $ 135,308 $ 128,037
Nonperforming loans out of market:
Arizona $ 5,174 $ 5,381 $ 5,441 $ 9,302 $ 11,205 $ 12,167 $ 13,419
New Jersey 66 594 1,094 -- -- -- --
New York -- -- -- -- 1,033 1,048 --
Florida 235 240 246 252 258 264 270
Colorado -- -- -- -- -- -- 131
Other 112 -- -- -- -- 1 --
Total nonperforming out of market $ 5,587 $ 6,215 $ 6,781 $ 9,554 $ 12,496 $ 13,480 $ 13,820
Potential problem loans out of market:
Iowa $ 11,336 $ 11,414 $ 11,490 $ 11,568 $ 11,645 $ 11,719 $ 11,792
Arizona 1,138 1,152 1,167 -- -- -- --
California -- 461 474 482 499 512 524
Florida 53 58 62 66 71 75 80
New Jersey -- -- -- 1,094 1,170 1,244 --
Total potential problem loans out of market $ 12,527 $ 13,085 $ 13,193 $ 13,210 $ 13,385 $ 13,550 $ 12,396
Continued
SOUTHWEST BANCORP, INC. Table 6
UNAUDITED QUARTERLY SUMMARY FINANCIAL DATA Continued
(Dollars in thousands)
2014 2013
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
ALLOWANCE ACTIVITY
Balance, beginning of period $ 33,083 $ 34,925 $ 36,663 $ 40,081 $ 40,352 $ 42,853 $ 46,718
Charge offs 1,156 1,991 3,392 2,681 600 2,072 4,651
Recoveries 1,887 504 2,640 5,765 658 447 288
Net charge offs (recoveries) (731) 1,487 752 (3,084) (58) 1,625 4,363
Provision for loan losses (2,897) (355) (986) (6,502) (329) (876) 498
Balance, end of period $ 30,917 $ 33,083 $ 34,925 $ 36,663 $ 40,081 $ 40,352 $ 42,853
NET CHARGE OFFS BY TYPE
Construction & development $ -- $ -- $ 655 $ (4,845) $ (20) $ 111 $ (19)
Commercial real estate (640) 583 (2,243) (62) 274 7 416
Commercial 22 652 2,267 1,883 (169) 1,085 3,751
One-to-four family residential 11 (2) (18) (40) (165) 363 167
Consumer (124) 254 91 (20) 22 59 48
Total net charge offs (recoveries) by type $ (731) $ 1,487 $ 752 $ (3,084) $ (58) $ 1,625 $ 4,363
NET CHARGE OFFS BY SEGMENT
Oklahoma banking $ 67 $ 763 $ 229 $ (1,294) $ (203) $ 200 $ 589
Texas banking (611) 244 (1,586) (2,314) (80) 1,356 3,241
Kansas banking (187) 480 2,109 524 225 69 533
Total net charge offs (recoveries) by segment $ (731) $ 1,487 $ 752 $ (3,084) $ (58) $ 1,625 $ 4,363
SOUTHWEST BANCORP, INC. Table 7
UNAUDITED QUARTERLY SUMMARY FINANCIAL DATA
(Dollars in thousands, except per share)
2014 2013
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PER SHARE DATA
Basic earnings per common share $ 0.27 $ 0.31 $ 0.19 $ 0.35 $ 0.19 $ 0.22 $ 0.12
Diluted earnings per common share 0.27 0.31 0.19 0.35 0.19 0.22 0.12
Common dividends declared per share 0.04 0.04 0.04 -- -- -- --
Book value per common share 13.90 13.71 13.37 13.13 12.83 12.67 12.72
Tangible book value per share* 13.83 13.65 13.31 13.07 12.77 12.60 12.66
COMMON STOCK
Shares issued 19,793,623 19,793,123 19,786,206 19,732,926 19,703,313 19,692,606 19,692,038
Less treasury shares 223,005 -- -- -- -- -- --
Outstanding shares 19,570,618 19,793,123 19,786,206 19,732,926 19,703,313 19,692,606 19,692,038
OTHER FINANCIAL DATA
Investment securities $ 370,607 $ 385,873 $ 386,987 $ 394,199 $ 382,001 $ 372,403 $ 365,605
Loans held for sale 4,368 6,803 5,741 3,060 3,641 7,217 7,297
Portfolio loans 1,363,020 1,344,897 1,314,381 1,267,843 1,302,984 1,310,872 1,319,918
Total loans 1,367,388 1,351,700 1,320,122 1,270,903 1,306,625 1,318,089 1,327,215
Total assets 1,900,948 1,885,158 2,012,053 1,981,423 1,972,367 2,031,962 2,091,694
Total deposits 1,494,946 1,463,855 1,605,906 1,584,086 1,583,791 1,615,961 1,677,668
Other borrowings 75,884 90,760 85,692 80,632 78,663 74,334 70,872
Subordinated debentures 46,393 46,393 46,393 46,393 46,393 81,963 81,963
Total shareholders' equity 271,966 271,351 264,586 259,187 252,802 249,420 250,509
Mortgage servicing portfolio 401,756 397,339 391,303 390,732 383,400 368,825 356,032
INTANGIBLE ASSET DATA
Goodwill $ 1,214 $ 1,214 $ 1,214 $ 1,214 $ 1,214 $ 1,214 $ 1,214
Core deposit intangible 597 667 1,925 2,058 2,185 2,306 2,424
Mortgage servicing rights 3,269 3,182 3,006 2,922 2,837 2,675 2,445
Total intangible assets $ 5,080 $ 5,063 $ 6,145 $ 6,194 $ 6,236 $ 6,195 $ 6,083
Intangible amortization expense $ 195 $ 210 $ 183 $ 278 $ 314 $ 313 $ 410
DEPOSIT COMPOSITION
Non-interest bearing demand $ 445,148 $ 427,431 $ 471,568 $ 444,796 $ 436,904 $ 412,176 $ 416,979
Interest-bearing demand 104,807 124,712 132,622 120,156 106,176 138,502 125,914
Money market accounts 477,614 430,296 440,875 439,981 423,720 408,145 437,629
Savings accounts 33,398 31,187 47,532 41,727 39,727 38,611 39,733
Time deposits of $100,000 or more 203,090 209,059 236,035 251,185 270,916 295,179 317,270
Other time deposits 230,889 241,170 277,274 286,241 306,348 323,348 340,143
Total deposits** $ 1,494,946 $ 1,463,855 $ 1,605,906 $ 1,584,086 $ 1,583,791 $ 1,615,961 $ 1,677,668
OFFICES AND EMPLOYEES
FTE Employees 351 364 397 402 407 408 412
Branches 21 21 24 23 23 22 22
Assets per employee $ 5,416 $ 5,179 $ 5,068 $ 4,929 $ 4,846 $ 4,980 $ 5,077
*This is a Non-GAAP based financial measure.
**Calculation of Non-brokered Deposits and Core Funding (Non-GAAP Financial Measures)
Total deposits $ 1,494,946 $ 1,463,855 $ 1,605,906 $ 1,584,086 $ 1,583,791 $ 1,615,961 $ 1,677,668
Less:
Brokered time deposits 2,952 1,348 1,347 1,347 1,343 4,904 5,760
Other brokered deposits 98,425 48,424 3,424 3,423 3,423 3,422 3,422
Non-brokered deposits $ 1,393,569 $ 1,414,083 $ 1,601,135 $ 1,579,316 $ 1,579,025 $ 1,607,635 $ 1,668,486
Plus:
Sweep repurchase agreements 50,884 65,760 60,692 55,631 53,663 49,334 45,872
Core funding $ 1,444,453 $ 1,479,843 $ 1,661,827 $ 1,634,947 $ 1,632,688 $ 1,656,969 $ 1,714,358
Balance sheet amounts are as of period end unless otherwise noted.
SOUTHWEST BANCORP, INC. Table 8
UNAUDITED QUARTERLY SUPPLEMENTAL ANALYTICAL DATA
(Dollars in thousands)
2014 2013
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PERFORMANCE RATIOS
Return on average assets (annualized) 1.12% 1.27% 0.75% 1.37% 0.75% 0.87% 0.46%
Return on average common equity (annualized) 7.69 9.19 5.68 10.59 5.99 7.00 3.89
Return on average tangible common equity (annualized)* 7.72 9.24 5.71 10.64 6.02 7.03 3.90
Net interest margin (annualized) 3.44 3.50 3.33 3.42 3.11 3.07 3.16
Total dividends declared to net income 14.88 12.86 21.40 -- -- -- --
Effective tax rate 37.49 37.50 37.49 38.68 38.01 33.74 43.88
Efficiency ratio 70.60 61.77 74.15 76.45 69.18 68.93 75.16
NONPERFORMING ASSETS
Nonaccrual loans $ 15,059 $ 16,478 $ 16,085 $ 19,819 $ 32,678 $ 32,575 $ 35,229
90 days past due and accruing -- -- -- 53 2 2 --
Total nonperforming loans 15,059 16,478 16,085 19,872 32,680 32,577 35,229
Other real estate 3,448 4,285 4,654 2,654 1,693 1,811 11,665
Total nonperforming assets $ 18,507 $ 20,763 $ 20,739 $ 22,526 $ 34,373 $ 34,388 $ 46,894
Potential problem loans $ 64,375 $ 84,175 $ 91,765 $ 99,750 $ 97,169 $ 97,470 $ 93,632
ASSET QUALITY RATIOS
Nonperforming assets to portfolio loans and other real estate 1.36% 1.54% 1.57% 1.77% 2.63% 2.62% 3.52%
Nonperforming loans to portfolio loans 1.10 1.23 1.22 1.57 2.51 2.49 2.67
Allowance for loan losses to portfolio loans 2.27 2.46 2.66 2.89 3.08 3.08 3.24
Allowance for loan losses to nonperforming loans 205.29 200.77 217.13 184.50 122.65 123.87 121.64
Net loan charge-offs to average portfolio loans (annualized) (0.21)% 0.45 0.24 (0.96) (0.02) 0.50 1.32
CAPITAL RATIOS
Average total shareholders' equity to average assets 14.61% 13.77% 13.18% 12.93% 12.53% 12.41% 11.92%
Leverage ratio 16.86 15.95 15.09 14.86 14.78 16.10 15.59
Tier 1 capital to risk-weighted assets 20.05 20.13 19.98 20.28 20.21 22.48 22.25
Total capital to risk-weighted assets 21.34 21.43 21.29 21.59 21.52 23.78 23.54
Tangible common equity to tangible assets*** 14.25 14.34 13.10 13.03 12.76 12.22 11.93
REGULATORY CAPITAL DATA
Tier I capital $ 314,120 $ 309,600 $ 299,938 $ 292,051 $ 296,488 $ 326,831 $ 324,659
Total capital 334,456 329,586 319,516 310,867 315,570 345,717 343,562
Total risk adjusted assets 1,566,996 1,537,903 1,500,957 1,439,934 1,466,672 1,453,878 1,459,465
Average total assets 1,863,127 1,941,064 1,987,231 1,964,920 2,006,525 2,030,064 2,082,789
*This is a Non-GAAP based financial measure.
***Calculation of Tangible Common Equity to Tangible Assets (Non-GAAP Financial Measure)
Total shareholders' equity $ 271,966 $ 271,351 $ 264,586 $ 259,187 $ 252,802 $ 249,420 $ 250,509
Less goodwill 1,214 1,214 1,214 1,214 1,214 1,214 1,214
Tangible common equity $ 270,752 $ 270,137 $ 263,372 $ 257,973 $ 251,588 $ 248,206 $ 249,295
Total assets $1,900,948 $1,885,158 $2,012,053 $1,981,423 $1,972,367 $2,031,962 $2,091,694
Less goodwill 1,214 1,214 1,214 1,214 1,214 1,214 1,214
Tangible assets $1,899,734 $1,883,944 $2,010,839 $1,980,209 $1,971,153 $2,030,748 $2,090,480
Total shareholders' equity to total assets 14.31% 14.39% 13.15% 13.08% 12.82% 12.27% 11.98%
Tangible common equity to tangible assets 14.25% 14.34% 13.10% 13.03% 12.76% 12.22% 11.93%
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.