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Southwest Bancorp, Inc. Reports Results for Third Quarter 2016 and Announces Quarterly Dividend

STILLWATER, Okla., Oct. 18, 2016 (GLOBE NEWSWIRE) -- Southwest Bancorp, Inc. (NASDAQ:OKSB), (“Southwest”), today reported net income for the third quarter of 2016 of $4.3 million, or $0.23 per diluted share, compared to $4.1 million, or $0.22 per diluted share, for the third quarter of 2015. Net income for the nine months ended September 30, 2016 totaled $11.5 million, or $0.60 per diluted share, compared to $12.8 million, or $0.67 per diluted share, for the nine months ended September 30, 2015.

Southwest announced that its board of directors has approved a quarterly cash dividend of $0.08 per share payable November 15, 2016 to shareholders of record as of November 1, 2016.

Mark Funke, President and CEO, stated, “Loan growth was solid in the third quarter and there was good improvement in noninterest income. Here are several takeaways from this quarter.

  • Total loans grew $58.7 million to $1.9 billion from the second quarter of 2016 and $332.0 million, or 21%, compared to the third quarter of 2015. We funded $98.2 million in new loans during the third quarter of 2016, making this our eleventh consecutive quarter of loan growth.
  • The quarterly net interest margin was 3.42% at September 30, 2016, compared to 3.48% at June 30, 2016 and 3.34% at September 30, 2015.
  • Pre-tax, pre-provision income was $8.3 million in the third quarter, an increase of 3.9% from $8.0 million in the second quarter of 2016 and an increase of 29.1% from $6.5 million in the third quarter of 2015.
  • During the third quarter of 2016, we incurred $0.4 million in restructuring charges for branch closures and personnel reductions.
  • The efficiency ratio for the third quarter of 2016 was 66.09%, compared to 65.70% for the second quarter of 2016 and 68.25% for the third quarter of 2015.
  • During the third quarter of 2016, Southwest repurchased 61,639 shares for a total of $1.0 million. During the first nine months of 2016, Southwest repurchased 1,398,026 shares for a total of $22.1 million, and since August 2014, Southwest has repurchased 2,519,584 shares under the share repurchase programs for a total of $40.8 million.

“Diluted earnings per share of $0.23 was up 4.5% from the same quarter a year ago. During the third quarter, we initiated the closure of three small branches combined with some personnel reductions. These tough decisions will allow us to operate more efficiently going forward. We will continue to focus our company on producing consistent, conservative, and sustainable earnings through the expansion of our revenue base while prudently managing risk and expenses.”

See Table 3 for details on pre-tax, pre-provision income, which is a non-GAAP financial measure.

Financial Overview

Condition: As of September 30, 2016, total assets were $2.5 billion, an increase of $65.8 million, when compared to June 30, 2016. As of September 30, 2016, total loans were $1.9 billion, an increase of $58.7 million from the prior quarter end. As of September 30, 2016, investment securities were $427.9 million, an increase of $5.6 million from the prior quarter end. Cash and cash equivalents at September 30, 2016 were $70.1 million, an increase of $2.0 million from June 30, 2016.

At September 30, 2016, the allowance for loan losses was $28.5 million, an increase of $1.6 million when compared to June 30, 2016 and an increase of $1.9 million when compared to September 30, 2015. The allowance for loan losses to portfolio loans was 1.52% as of September 30, 2016, compared to 1.48% as of June 30, 2016, and 1.73% as of September 30, 2015. The allowance for loan losses to nonperforming loans was 116.02% as of September 30, 2016, compared to 120.39% as of June 30, 2016 and 176.38% as of September 30, 2015. The total allowance for loan losses combined with the purchase discount on acquired loans represents 1.78% of gross loans as of September 30, 2016, compared to 1.87% as of June 30, 2016.

Nonperforming loans were $24.5 million at September 30, 2016, an increase of $2.2 million from June 30, 2016, and an increase of $9.4 million from September 30, 2015. Other real estate was $2.1 million at both September 30, 2016 and June 30, 2016, and $2.3 million at September 30, 2015. Nonperforming assets were $26.6 million, or 1.42% of portfolio loans and other real estate, as of September 30, 2016, compared to $24.4 million, or 1.35% of portfolio loans and other real estate, as of June 30, 2016, and $17.4 million, or 1.12% of portfolio loans and other real estate, as of September 30, 2015.

As of September 30, 2016, total deposits were $1.9 billion, an increase of $45.1 million, when compared to June 30, 2016. Total core funding, which includes all non-brokered deposits and sweep repurchase agreements, comprised 81% of total funding as of September 30, 2016 and June 30, 2016. Wholesale funding, including Federal Home Loan Bank borrowings and brokered deposits, accounted for 19% of total funding at September 30, 2016 and June 30, 2016. 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 as of September 30, 2016 exceeded the criteria for regulatory classification as “well-capitalized”. Southwest’s total regulatory capital was $341.2 million, for a total risk-based capital ratio of 15.21%, Common Equity Tier 1 capital was $268.0 million, for a Common Equity Tier 1 ratio of 11.95%, and Tier 1 capital was $313.0 million, for a Tier 1 risk-based capital ratio of 13.95%. Bank SNB had total regulatory capital of $321.7 million, for a total risk-based capital ratio of 14.37% and Common Equity Tier 1 and Tier 1 capital of $293.6 million, for a Common Equity Tier 1 and Tier 1 risk-based capital ratio of 13.12%. Designation as a well-capitalized institution under regulations does not constitute a recommendation or endorsement by bank regulators.

Third Quarter Results:

Summary: For the third quarter of 2016, net income was $4.3 million, compared to $5.4 million for the second quarter of 2016 and $4.1 million for the third quarter of 2015. Pre-tax, pre-provision income for the third quarter of 2016 was $8.3 million, compared to $8.0 million for the second quarter of 2016 and $6.4 million for the third quarter of 2015.

The $1.1 million decrease in net income compared to the second quarter of 2016 was primarily due to the $1.7 million provision for loan losses recorded in the third quarter, combined with $0.4 million in restructuring charges. The decrease in net income also includes a $0.1 million increase in net interest income, a $0.7 million increase in noninterest income and a $0.6 million decrease in income taxes, offset in part by a $0.9 million increase in noninterest expense.

The $0.2 million increase in net income compared to the third quarter of 2015 was due to a $3.3 million increase in net interest income and a $0.5 million increase in noninterest income, offset in part by a $1.7 million increase in the provision for loan losses, and a $2.1 million increase in noninterest expense. The increases in net interest income, noninterest income, and noninterest expense are due in part to the First Commercial Bancshares, Inc. acquisition that occurred in the fourth quarter of 2015.

Net Interest Income: Net interest income totaled $19.8 million for the third quarter of 2016, compared to $19.7 million for the second quarter of 2016 and $16.5 million for the third quarter of 2015. Net interest margin was 3.42% for the third quarter of 2016, compared to 3.48% for the second quarter of 2016 and 3.34% for the third quarter of 2015. Interest income for the third quarter of 2016 and the second quarter of 2016 includes $0.5 million and $0.2 million, of accelerated discount accretion, respectively. The net effects of these adjustments on the net interest margins were a 10 basis point and a 3 basis point increase, respectively, for each quarter. Average loans (including loans held for sale) for the third quarter of 2016 increased $33.2 million when compared to June 30, 2016, and $359.5 million when compared to September 30, 2015. Loans acquired in the fourth quarter of 2015 were $202.4 million. The benefit of the accelerated loan discount accretion was partially reduced by a $0.2 million decrease in interest income on investment securities caused by accelerated premium amortization, resulting from increased prepayment speeds.

Provision (Credit) for Loan Losses and Net Charge-offs: The provision for loan losses is the amount that is required to maintain the allowance for loan 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 provision of $1.7 million for the third quarter of 2016, compared to a provision of $10,000 for the second quarter of 2016, and a provision of $23,000 for the third quarter of 2015. The third quarter 2016 provision was driven primarily by the growth in the loan portfolio and changes in nonperforming loans. During the third quarter of 2016, net charge-offs totaled $0.1 million, or 0.03% (annualized) of average portfolio loans, compared to net charge-offs of $0.3 million, or 0.07% (annualized) of average portfolio loans for the second quarter of 2016 and net recoveries of $0.4 million, or (0.09%) (annualized) of average portfolio loans for the third quarter of 2015.

Noninterest Income: Noninterest income totaled $4.6 million for the third quarter of 2016, compared to $3.9 million for the second quarter of 2016 and $4.0 million for the third quarter of 2015.

The $0.7 million increase from the second quarter of 2016 is the result of a $0.1 million increase in service charges and fees, a $0.1 million increase in the gain on sales of mortgage loans and a $0.7 million increase in other noninterest income, which is primarily from customer risk management interest rate swap income, partially offset by a $0.2 million decrease in gain on sale of investment securities. Service charges and fees includes a $0.1 million and a $0.2 million impairment on mortgage servicing rights for the third quarter of 2016 and the second quarter of 2016, respectively. Other noninterest income includes a $0.1 million loss on disposition of fixed assets related to branch closures.

The $0.5 million increase from the third quarter of 2015 is the result of a $0.2 million increase in service charges and fees, a $0.2 million increase in the gain on sales of mortgage loans and a $0.1 million increase in other noninterest income, which is primarily from customer risk management interest rate swap income.

Noninterest Expense: Noninterest expense totaled $16.2 million for the third quarter of 2016, compared to $15.3 million for the second quarter of 2016 and $14.1 million for the third quarter of 2015.

The $0.9 million increase in noninterest expense from the second quarter of 2016 was due to a $0.2 million increase in personnel expense, a $0.4 million increase in occupancy, a $0.2 million increase in data processing, and a $0.4 million increase in the provision for unfunded loan commitments, offset in part by a $0.2 million decrease in other real estate expenses due to gains on the sales of properties during the quarter. The increase in personnel expense was due to severance and employee benefits, combined with increased mortgage commissions.

The $2.1 million increase in noninterest expense from the third quarter of 2015 consisted of a $1.4 million increase in personnel expense, a $0.8 million increase in occupancy related to branch closures, a $0.1 million increase in data processing and a $0.1 million increase in the provision for unfunded loan commitments, offset in part by a $0.3 million decrease in other real estate expense and a $0.1 million decrease in general and administrative expense.

Income Tax: Income tax expense totaled $2.2 million for the third quarter of 2016, compared to $2.9 million for the second quarter of 2016 and $2.3 million for the third quarter of 2015. The income tax expense fluctuates in relation to pre-tax income levels. The third quarter of 2016 effective tax rate was 34.45%, compared to 34.70% for the second quarter of 2016 and 35.84% for the third quarter of 2015. The decline in the effective tax rate includes the impact of an increase in tax exempt income, as a percentage of pre-tax income.

Year-to-Date Results:

Summary: Net income was $11.5 million for the nine months ended September 30, 2016, compared to $12.8 million for the nine months ended September 30, 2015. The $1.3 million decrease in net income from 2015 is the result of a $9.1 million change in the provision for loan losses and a $6.3 million increase in noninterest expense due to increased personnel, occupancy, and general and administrative expenses, offset in part by an $11.4 million increase in net interest income, a $1.6 million increase in noninterest income, and a $1.1 million decrease in income taxes. The increases in net interest income, noninterest income, and noninterest expense, are due in part to the First Commercial Bancshares, Inc. acquisition that occurred in the fourth quarter of 2015. Net income for the nine months ended September 30, 2016, was also reduced by the restructuring charges of $0.4 million incurred in the third quarter of 2016.

Net Interest Income: Net interest income totaled $59.3 million for the first nine months of 2016, compared to $47.9 million for the first nine months of 2015, an increase of $11.4 million. Year-to-date net interest margin was 3.48%, compared to 3.30% for 2015. Interest income for the first nine months of 2016 includes $1.0 million of accelerated discount accretion. The net effect on the net interest margin was a 6 basis point increase for the nine-month period. Average loans (including loans held for sale) as of September 30, 2016 increased $363.2 million when compared to September 30, 2015. Loans acquired in the fourth quarter of 2015 were $202.4 million.

Provision (Credit) 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 or net recoveries for the period. The provision for loan losses was $6.1 million for the first nine months of 2016, compared to a negative provision of $3.0 million for the first nine months of 2015. The provision for loan losses for the first nine months of 2016 was driven by the growth in the loan portfolio and the impact of low energy prices combined with deterioration in a few general business credits. Net charge-offs totaled $3.8 million, or 0.28% (annualized) of average portfolio loans year-to-date as of September 30, 2016, compared to net recoveries of $1.1 million, or (0.11%) (annualized) of average portfolio loans for the same period in 2015.

Noninterest Income: Noninterest income totaled $11.8 million for the first nine months of 2016, compared to $10.3 million for the first nine months of 2015. The increase consists of a $0.5 million increase in service charges and fees, which for the first nine months of 2016 includes a $0.6 million impairment of mortgage servicing rights, a $0.4 million increase in gains on sales of mortgage loans, a $0.1 million increase in the gain on sale of investment securities, and a $0.6 million increase in other noninterest income, which includes income on bank owned life insurance and customer risk management interest rate swap income.

Noninterest Expense: Noninterest expense totaled $47.4 million for the first nine months of 2016, compared to $41.1 million for the first nine months of 2015. The increase consists of a $4.1 million increase in personnel expense, a $1.7 million increase in occupancy, a $0.2 million increase in data processing, a $0.2 million increase in FDIC and other insurance, a $0.2 million increase in the provision for unfunded loan commitments, and a $0.3 million increase in general and administrative expense, offset in part by a $0.4 million decrease in other real estate expense.

Income Tax: Income tax expense totaled $6.1 million for the first nine months of 2016, compared to $7.2 million for the first nine months of 2015. The income tax expense fluctuates in relation to pre-tax income levels. The year-to-date effective tax rate was 34.69% as of September 30, 2016, compared to 36.02% as of September 30, 2015. The decline in the effective tax rate includes the impact of an increase in tax exempt income, as a percentage of pre-tax income.

Conference Call

Southwest will host a conference call to review these results on Wednesday, October 19, 2016 at 11:00 a.m. Eastern Time (10:00 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/10093635. 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/oksb161019. An audio replay will be available one hour after the call at 877-344-7529 (toll-free) or 412-317-0088 (international), conference number 10093635. Telephone replay access will be available until November 19, 2016.

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 services, specialized cash management, and other financial services from offices in Oklahoma, Texas, Kansas, and Colorado. Bank SNB was chartered in 1894 and Southwest was organized in 1981 as the holding company. At September 30, 2016, Southwest had total assets of approximately $2.5 billion, deposits of $1.9 billion, and shareholders’ equity of $283.8 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 banking subsidiary provide credit and other remittance 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, 2016, approximately $443.6 million, or 24%, 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;
  • Expectations regarding Southwest’s stock repurchase program;
  • Expectations regarding dividends;
  • Expectations regarding acquisitions and divestitures;
  • Assessments of loan quality, probable loan losses or negative provisions, 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, 2015. 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, 2016 through the date its financial statements are filed with the Securities and Exchange Commission. The September 30, 2016 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-YTD 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.
UNAUDITED FINANCIAL HIGHLIGHTS

(Dollars in thousands, except per share)
Table 1
Third Quarter Second Quarter
QUARTERLY HIGHLIGHTS 2016 2015 % Change 2016 % Change
Operations
Net interest income $ 19,805 $ 16,496 20% $ 19,695 1%
Provision (credit) for loan losses 1,713 23 7,348 10 17,030
Noninterest income 4,555 4,029 13 3,871 18
Noninterest expense 16,156 14,077 15 15,268 6
Income before taxes 6,491 6,425 1 8,288 (22)
Taxes on income 2,236 2,303 (3) 2,876 (22)
Net income 4,255 4,122 3 5,412 (21)
Diluted earnings per share 0.23 0.22 5 0.28 (18)
Balance Sheet
Total assets 2,468,042 2,059,899 20 2,402,262 3
Loans held for sale 7,899 7,024 12 7,090 11
Portfolio loans 1,872,213 1,541,070 21 1,814,287 3
Total deposits 1,947,924 1,626,250 20 1,902,865 2
Total shareholders' equity 283,820 277,344 2 282,360 1
Book value per common share 15.19 14.57 4 15.06 1
Key Ratios
Net interest margin 3.42% 3.34% 3.48%
Efficiency ratio 66.09 68.25 65.70
Total capital to risk-weighted assets 15.21 18.21 15.56
Nonperforming loans to portfolio loans 1.31 0.98 1.23
Shareholders' equity to total assets 11.50 13.46 11.75
Tangible common equity to tangible assets* 10.92 13.40 11.16
Return on average assets (annualized) 0.70 0.81 0.91
Return on average common equity (annualized) 5.97 5.94 7.67
Return on average tangible common equity (annualized)** 6.33 5.97 8.13
Nine Months
YEAR-TO-DATE HIGHLIGHTS 2016 2015 % Change
Operations
Net interest income $ 59,340 $ 47,897 24%
Provision (credit) for loan losses 6,098 (3,000) 303
Noninterest income 11,841 10,278 15
Noninterest expense 47,420 41,141 15
Income before taxes 17,663 20,034 (12)
Taxes on income 6,127 7,216 (15)
Net income 11,536 12,818 (10)
Diluted earnings per share 0.60 0.67 (11)
Balance Sheet
Total assets 2,468,042 2,059,899 20
Loans held for sale 7,899 7,024 12
Portfolio loans 1,872,213 1,541,070 21
Total deposits 1,947,924 1,626,250 20
Total shareholders' equity 283,820 277,344 2
Book value per common share 15.19 14.57 4
Key Ratios
Net interest margin 3.48% 3.30%
Efficiency ratio 66.41 70.33
Total capital to risk-weighted assets 15.21 18.21
Nonperforming loans to portfolio loans 1.31 0.98
Shareholders' equity to total assets 11.50 13.46
Tangible common equity to tangible assets* 10.92 13.40
Return on average assets (annualized) 0.65 0.86
Return on average common equity (annualized) 5.37 6.27
Return on average tangible common equity (annualized)** 5.69 6.31
Balance sheet amounts and ratios are as of period end unless otherwise noted.
* This is a Non-GAAP financial measure. Please see Table 7 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.
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands)
Table 2
September 30, December 31, September 30,
2016 2015 2015
Assets
Cash and due from banks$ 36,298 $ 24,971 $ 25,198
Interest-bearing deposits 33,799 53,158 43,447
Cash and cash equivalents 70,097 78,129 68,645
Securities held to maturity (fair values of $10,887, $12,282, and $13,462 respectively) 10,474 11,797 12,954
Securities available for sale (amortized cost of $414,830, $401,136 and $373,219, respectively) 417,464 400,331 375,589
Loans held for sale 7,899 7,453 7,024
Loans receivable 1,872,213 1,771,975 1,541,070
Less: Allowance for loan losses (28,452) (26,106) (26,593)
Net loans receivable 1,843,761 1,745,869 1,514,477
Accrued interest receivable 5,839 5,767 4,872
Non-hedge derivative asset 4,123 1,793 2,344
Premises and equipment, net 23,248 23,819 18,180
Other real estate 2,106 2,274 2,274
Goodwill 13,545 13,467 1,214
Other intangible assets, net 5,819 6,615 3,973
Other assets 63,667 59,708 48,353
Total assets$ 2,468,042 $ 2,357,022 $ 2,059,899
Liabilities
Deposits:
Noninterest-bearing demand$ 550,121 $ 596,494 $ 526,159
Interest-bearing demand 146,583 151,015 114,877
Money market accounts 576,550 534,357 502,028
Savings accounts 54,849 56,333 36,163
Time deposits of $100,000 or more 347,976 311,538 238,318
Other time deposits 271,845 234,368 208,705
Total deposits 1,947,924 1,884,105 1,626,250
Accrued interest payable 969 867 778
Non-hedge derivative liability 4,123 1,793 2,344
Other liabilities 10,842 11,684 9,989
Other borrowings 173,971 110,927 96,801
Subordinated debentures 46,393 51,548 46,393
Total liabilities 2,184,222 2,060,924 1,782,555
Shareholders' equity
Common stock - $1 par value; 40,000,000 shares authorized;
21,223,895, 21,138,028 and 19,901,336 shares issued, respectively 21,224 21,138 19,901
Additional paid-in capital 122,594 121,966 101,611
Retained earnings 180,133 173,210 169,825
Accumulated other comprehensive income (loss) 1,028 (1,290) 372
Treasury stock, at cost, 2,538,510, 1,131,226 and 868,617 shares, respectively (41,159) (18,926) (14,365)
Total shareholders' equity 283,820 296,098 277,344
Total liabilities and shareholders' equity$ 2,468,042 $ 2,357,022 $ 2,059,899


SOUTHWEST BANCORP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)
Table 3
For the three months ended For the nine months
September 30, June 30, September 30, ended September 30,
2016 2016 2015 2016 2015
Interest income
Loans$ 20,541 $ 20,031 $16,510 $ 60,602 $ 47,919
Investment securities 1,719 1,962 1,443 5,646 4,120
Other interest-earning assets 50 51 267 154 860
Total interest income 22,310 22,044 18,220 66,402 52,899
Interest expense
Interest-bearing deposits 1,542 1,428 905 4,277 2,602
Other borrowings 374 342 255 1,025 723
Subordinated debentures 589 579 564 1,760 1,677
Total interest expense 2,505 2,349 1,724 7,062 5,002
Net interest income 19,805 19,695 16,496 59,340 47,897
Provision (credit) for loan losses 1,713 10 23 6,098 (3,000)
Net interest income after provision for loan losses 18,092 19,685 16,473 53,242 50,897
Noninterest income
Service charges and fees 2,681 2,556 2,441 7,786 7,319
Gain on sales of mortgage loans 775 722 565 1,898 1,534
Gain on sale/call of investment securities, net 3 165 19 294 162
Other noninterest income 1,096 428 1,004 1,863 1,263
Total noninterest income 4,555 3,871 4,029 11,841 10,278
Noninterest expense
Salaries and employee benefits 9,794 9,587 8,374 28,723 24,577
Occupancy 3,103 2,669 2,288 8,443 6,773
Data processing 582 430 475 1,482 1,331
FDIC and other insurance 341 432 341 1,141 969
Other real estate, net (233) 8 20 (212) 153
Provision (credit) for unfunded loan commitments 146 (263) 18 98 (92)
General and administrative 2,423 2,405 2,561 7,745 7,430
Total noninterest expense 16,156 15,268 14,077 47,420 41,141
Income before taxes 6,491 8,288 6,425 17,663 20,034
Taxes on income 2,236 2,876 2,303 6,127 7,216
Net income$ 4,255 $ 5,412 $4,122 $ 11,536 $ 12,818
Pre-tax, pre-provision income*$ 8,350 $ 8,035 $6,466 $ 23,859 $ 16,942
Basic earnings per common share$ 0.23 $ 0.29 $0.22 $$0.61 $ 0.67
Diluted earnings per common share 0.23 0.28 0.22 $0.60 0.67
Common dividends declared per share 0.08 0.08 0.06 0.24 0.18
*This is a Non-GAAP based financial measure. Pre-tax, pre-provision income is calculated as follows:
Net Income + Taxes on income + Provision (credit) for loan losses + Provision (credit) for unfunded loan commitments


SOUTHWEST BANCORP, INC.
UNAUDITED AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY

(Dollars in thousands)
Table 4
For the three months ended
September 30, 2016 June 30, 2016 September 30, 2015
Average Average Average Average Average Average
Balance Yield/Rate Balance Yield/Rate Balance Yield/Rate
Assets
Loans$ 1,832,750 4.46% $ 1,799,591 4.48% $ 1,473,297 4.45%
Investment securities 425,276 1.61 428,275 1.84 387,194 1.48
Other interest-earning assets 48,759 0.41 48,569 0.42 100,011 1.06
Total interest-earning assets 2,306,785 3.85 2,276,435 3.89 1,960,502 3.69
Other assets 107,140 103,566 65,459
Total assets$ 2,413,925 $ 2,380,001 $ 2,025,961
Liabilities and Shareholders' Equity
Interest-bearing demand deposits$ 152,134 0.15% $ 165,011 0.16% $ 123,829 0.12%
Money market accounts 545,040 0.26 537,734 0.25 497,935 0.17
Savings accounts 54,073 0.14 54,808 0.13 35,982 0.10
Time deposits 603,201 0.73 589,029 0.69 446,464 0.57
Total interest-bearing deposits 1,354,448 0.45 1,346,582 0.43 1,104,210 0.33
Other borrowings 163,495 0.91 141,623 0.97 76,799 1.32
Subordinated debentures 46,393 5.08 46,393 4.99 46,393 4.86
Total interest-bearing liabilities 1,564,336 0.64 1,534,598 0.62 1,227,402 0.56
Noninterest-bearing demand deposits 549,077 547,963 511,442
Other liabilities 16,937 13,598 11,708
Shareholders' equity 283,575 283,842 275,409
Total liabilities and shareholders' equity$ 2,413,925 $ 2,380,001 $ 2,025,961
Net interest income and spread 3.21% 3.27% 3.13%
Net interest margin (1) 3.42% 3.48% 3.34%
Average interest-earning assets
to average interest-bearing liabilities 147.46% 148.34% 159.73%
(1) Net interest margin = annualized net interest income / average interest-earning assets


SOUTHWEST BANCORP, INC.
UNAUDITED AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE

(Dollars in thousands)
Table 5
For the nine months ended September 30,
2016 2015
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
Assets
Loans$ 1,807,204 4.48% $ 1,444,026 4.44%
Investment securities 421,965 1.79 374,987 1.47
Other interest-earning assets 49,451 0.42 120,749 0.95
Total interest-earning assets 2,278,620 3.89 1,939,762 3.65
Other assets 106,196 57,787
Total assets$ 2,384,816 $ 1,997,549
Liabilities and Shareholders' Equity
Interest-bearing demand deposits$ 159,235 0.16% $ 133,447 0.10%
Money market accounts 541,870 0.25 485,571 0.16
Savings accounts 54,902 0.14 34,688 0.10
Time deposits 585,545 0.69 443,060 0.57
Total interest-bearing deposits 1,341,552 0.43 1,096,766 0.32
Other borrowings 140,846 0.97 69,908 1.38
Subordinated debentures 47,108 4.98 46,393 4.82
Total interest-bearing liabilities 1,529,506 0.62 1,213,067 0.55
Noninterest-bearing demand deposits 553,338 500,263
Other liabilities 15,108 10,879
Shareholders' equity 286,864 273,340
Total liabilities and shareholders' equity$ 2,384,816 $ 1,997,549
Net interest income and spread 3.27% 3.10%
Net interest margin (1) 3.48% 3.30%
Average interest-earning assets
to average interest-bearing liabilities 148.98% 159.91%
(1) Net interest margin = annualized net interest income / average interest-earning assets


SOUTHWEST BANCORP, INC.
UNAUDITED QUARTERLY SUMMARY LOAN DATA

(Dollars in thousands)
Table 6
2016
2015
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
LOAN COMPOSITION
Real estate mortgage:
Commercial$ 893,807 $ 862,287 $ 878,822 $ 938,462 $ 869,250 $ 759,406 $ 759,676
One-to-four family residential 193,678 183,693 158,078 161,958 95,906 85,338 86,343
Real estate construction:
Commercial 184,211 175,805 156,454 129,070 126,407 186,140 192,052
One-to-four family residential 22,460 20,347 24,202 21,337 12,866 13,107 12,586
Commercial 566,403 558,472 543,822 507,173 423,480 384,788 366,282
Installment and consumer 19,553 20,773 20,506 21,429 20,185 20,651 21,306
Total loans, including held for sale 1,880,112 1,821,377 1,781,884 1,779,429 1,548,094 1,449,430 1,438,245
Less allowance for loan losses (28,452) (26,876) (27,168) (26,106) (26,593) (26,219) (27,250)
Total loans, net$ 1,851,660 $ 1,794,501 $ 1,754,716 $ 1,753,323 $ 1,521,501 $ 1,423,211 $ 1,410,995
LOANS BY SEGMENT
Oklahoma banking****$ 1,117,716 $ 1,085,986 $ 1,060,482 $ 1,048,473 $ 832,282 $ 810,367 $ 814,949
Texas banking 605,682 577,333 560,421 580,476 563,010 493,047 478,005
Kansas banking 156,714 158,058 160,981 150,480 152,802 146,016 145,291
Total loans$ 1,880,112 $ 1,821,377 $ 1,781,884 $ 1,779,429 $ 1,548,094 $ 1,449,430 $ 1,438,245
NONPERFORMING LOANS BY TYPE
Construction & development$ 1,073 $ 1,436 $ 1,444 $ 1,010 $ 391 $ 416 $ 392
Commercial real estate 7,620 3,894 3,830 3,992 1,795 2,141 2,247
Commercial 12,791 13,800 13,461 13,491 11,727 5,114 5,447
One-to-four family residential 2,982 3,120 3,448 1,777 1,016 1,216 1,065
Consumer 58 75 84 88 148 - -
Total nonperforming loans$ 24,524 $ 22,325 $ 22,267 $ 20,358 $ 15,077 $ 8,887 $ 9,151
NONPERFORMING LOANS BY SEGMENT
Oklahoma banking****$ 12,275 $ 9,268 $ 7,978 $ 6,948 $ 2,846 $ 1,670 $ 2,244
Texas banking 11,805 12,586 13,521 12,450 11,025 5,353 5,264
Kansas banking 444 471 768 960 1,206 1,864 1,643
Total nonperforming loans$ 24,524 $ 22,325 $ 22,267 $ 20,358 $ 15,077 $ 8,887 $ 9,151
OTHER REAL ESTATE BY TYPE
Construction & development$ 1,756 $ 1,962 $ 2,060 $ 2,060 $ 2,025 $ 2,035 $ 2,035
Commercial real estate 350 160 214 214 249 358 220
Total other real estate$ 2,106 $ 2,122 $ 2,274 $ 2,274 $ 2,274 $ 2,393 $ 2,255
OTHER REAL ESTATE BY SEGMENT
Oklahoma banking****$ - $ 220 $ 274 $ 274 $ 200 $ 200 $ -
Texas banking 2,106 1,902 2,000 2,000 2,025 2,000 2,000
Kansas banking - - - - 49 193 255
Total other real estate$ 2,106 $ 2,122 $ 2,274 $ 2,274 $ 2,274 $ 2,393 $ 2,255
****Due to immateriality, Colorado banking is included within Oklahoma banking.
Continued


SOUTHWEST BANCORP, INC.
UNAUDITED QUARTERLY SUMMARY LOAN DATA

(Dollars in thousands)
Table 6
Continued
2016
2015
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
POTENTIAL PROBLEM LOANS BY TYPE
Construction & development$ 588 $ - $ - $ - $ - $ - $ 201
Commercial real estate 12,212 33,472 36,216 26,981 22,362 20,375 24,672
Commercial 30,555 29,537 29,931 9,879 7,366 14,519 14,016
One-to-four family residential 2,119 1,353 2,275 2,285 79 80 81
Consumer 2 2 38 10 - - -
Total potential problem loans$ 45,476 $ 64,364 $ 68,460 $ 39,155 $ 29,807 $ 34,974 $ 38,970
POTENTIAL PROBLEM LOANS BY SEGMENT
Oklahoma banking****$ 21,780 $ 43,895 $ 46,102 $ 32,970 $ 23,597 $ 23,231 $ 26,713
Texas banking 21,029 17,726 18,801 4,165 4,086 9,180 9,541
Kansas banking 2,667 2,743 3,557 2,020 2,124 2,563 2,716
Total potential problem loans$ 45,476 $ 64,364 $ 68,460 $ 39,155 $ 29,807 $ 34,974 $ 38,970
ALLOWANCE ACTIVITY
Balance, beginning of period$ 26,876 $ 27,168 $ 26,106 $ 26,593 $ 26,219 $ 27,250 $ 28,452
Charge-offs 626 538 3,725 569 226 325 230
Recoveries 489 236 412 648 577 430 915
Net charge-offs (recoveries) 137 302 3,313 (79) (351) (105) (685)
Provision (credit) for loan losses 1,713 10 4,375 (566) 23 (1,136) (1,887)
Balance, end of period$ 28,452 $ 26,876 $ 27,168 $ 26,106 $ 26,593 $ 26,219 $ 27,250
NET CHARGE-OFFS BY TYPE
Construction & development$ - $ - $ - $ - $ (16) $ (15) $ 5
Commercial real estate 108 (44) (187) 219 24 82 (118)
Commercial (64) 82 3,408 (286) (325) (52) (188)
One-to-four family residential 44 (12) 41 (48) (68) (91) (331)
Consumer 49 276 51 36 34 (29) (53)
Total net charge-offs (recoveries) by type$ 137 $ 302 $ 3,313 $ (79) $ (351) $ (105) $ (685)
NET CHARGE-OFFS BY SEGMENT
Oklahoma banking****$ 34 $ 127 $ 458 $ 288 $ (86) $ 25 $ (309)
Texas banking 180 211 952 (415) (103) (72) (114)
Kansas banking (77) (36) 1,903 48 (162) (58) (262)
Total net charge-offs (recoveries) by segment$ 137 $ 302 $ 3,313 $ (79) $ (351) $ (105) $ (685)
****Due to immateriality, Colorado banking is included within Oklahoma banking.


SOUTHWEST BANCORP, INC.
UNAUDITED QUARTERLY SUMMARY FINANCIAL DATA

(Dollars in thousands, except per share)
Table 7
2016
2015
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PER SHARE DATA
Basic earnings per common share$0.23 $0.29 $0.10 $0.23 $0.22 $0.22 $0.24
Diluted earnings per common share 0.23 0.28 0.10 0.23 0.22 0.22 0.24
Common dividends declared per share 0.08 0.08 0.08 0.06 0.06 0.06 0.06
Book value per common share 15.19 15.06 14.81 14.80 14.57 14.38 14.26
Tangible book value per share* 14.33 14.20 13.97 13.98 14.49 14.29 14.17
COMMON STOCK
Shares issued 21,223,895 21,223,613 21,225,034 21,138,028 19,901,336 19,900,855 19,900,350
Less treasury shares 2,538,510 2,472,830 1,939,989 1,131,226 868,617 867,310 867,310
Outstanding shares 18,685,385 18,750,783 19,285,045 20,006,802 19,032,719 19,033,545 19,033,040
OTHER FINANCIAL DATA
Investment securities$427,938 $422,296 $423,030 $412,128 $388,543 $373,260 $377,545
Loans held for sale 7,899 7,010 1,803 7,453 7,024 6,687 9,106
Portfolio loans 1,872,213 1,814,367 1,780,081 1,771,975 1,541,070 1,442,743 1,429,139
Total loans 1,880,112 1,821,377 1,781,884 1,779,428 1,548,094 1,449,430 1,438,245
Total assets 2,468,042 2,402,262 2,360,819 2,357,022 2,059,899 2,031,581 2,003,079
Total deposits 1,947,924 1,902,865 1,895,248 1,884,105 1,626,250 1,624,446 1,616,454
Other borrowings 173,971 153,568 117,763 110,927 96,801 75,839 58,578
Subordinated debentures 46,393 46,393 46,393 51,548 46,393 46,393 46,393
Total shareholders' equity 283,820 282,360 285,661 296,098 277,344 273,681 271,444
Mortgage servicing portfolio 453,988 443,568 434,340 432,318 422,845 415,961 407,903
INTANGIBLE ASSET DATA
Goodwill$13,545 $13,467 $13,467 $13,467 $1,214 $1,214 $1,214
Core deposit intangible 2,438 2,584 2,734 2,894 342 405 467
Mortgage servicing rights 3,381 3,350 3,411 3,721 3,631 3,518 3,399
Total intangible assets$19,364 $19,401 $19,612 $20,082 $5,187 $5,137 $5,080
Intangible amortization expense$344 $350 $341 $330 $243 $243 $168
DEPOSIT COMPOSITION
Non-interest bearing demand$550,121 $545,421 $552,499 $596,494 $526,159 $515,156 $506,952
Interest-bearing demand 146,583 160,886 168,210 151,015 114,877 131,547 140,659
Money market accounts 576,550 547,415 540,323 534,357 502,028 496,178 488,569
Savings accounts 54,849 55,209 56,235 56,333 36,163 35,647 34,413
Time deposits of $100,000 or more 347,976 323,137 314,496 311,538 238,318 233,105 227,426
Other time deposits 271,845 270,797 263,485 234,368 208,705 212,813 218,435
Total deposits**$1,947,924 $1,902,865 $1,895,248 $1,884,105 $1,626,250 $1,624,446 $1,616,454
OFFICES AND EMPLOYEES
FTE Employees 393 410 411 412 358 361 360
Branches 31 33 33 33 24 24 23
Assets per employee$6,280 $5,859 $5,744 $5,721 $5,754 $5,628 $5,564
____________________
*This is a Non-GAAP based financial measure.
**Calculation of Non-brokered Deposits and Core Funding (Non-GAAP Financial Measures)
Total deposits$1,947,924 $1,902,865 $1,895,248 $1,884,105 $1,626,250 $1,624,446 $1,616,454
Less:
Brokered time deposits 65,398 61,709 55,901 39,797 10,086 7,683 7,694
Other brokered deposits 214,175 175,367 140,372 135,880 133,025 103,025 83,025
Non-brokered deposits$1,668,351 $1,665,789 $1,698,975 $1,708,428 $1,483,139 $1,513,738 $1,525,735
Plus:
Sweep repurchase agreements 46,971 42,568 42,763 37,273 50,801 50,839 33,578
Core funding$1,715,322 $1,708,357 $1,741,738 $1,745,701 $1,533,940 $1,564,577 $1,559,313
Balance sheet amounts are as of period end unless otherwise noted.


SOUTHWEST BANCORP, INC.
UNAUDITED QUARTERLY SUPPLEMENTAL ANALYTICAL DATA

(Dollars in thousands)
Table 8
2016
2015
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PERFORMANCE RATIOS
Return on average assets (annualized) 0.70% 0.91% 0.32% 0.78% 0.81% 0.85% 0.92%
Return on average common equity (annualized) 5.97 7.67 2.56 6.14 5.94 6.11 6.78
Return on average tangible common equity
(annualized)* 6.33 8.13 2.71 6.46 5.97 6.14 6.82
Net interest margin (annualized) 3.42 3.48 3.54 3.48 3.34 3.31 3.25
Total dividends declared to net income 35.14 28.35 84.66 26.22 27.53 27.45 25.19
Effective tax rate 34.45 34.70 35.19 35.96 35.84 34.51 37.49
Efficiency ratio 66.09 65.70 67.48 72.17 68.16 71.83 71.69
NONPERFORMING ASSETS
Nonaccrual loans$ 24,109 $ 22,259 $ 22,161 $ 19,858 $ 15,076 $ 8,887 $ 9,151
90 days past due and accruing 415 66 106 500 1 - -
Total nonperforming loans 24,524 22,325 22,267 20,358 15,077 8,887 9,151
Other real estate 2,106 2,122 2,274 2,274 2,274 2,393 2,255
Total nonperforming assets$ 26,630 $ 24,447 $ 24,541 $ 22,632 $ 17,351 $ 11,280 $ 11,406
Potential problem loans$ 45,476 $ 64,364 $ 68,460 $ 39,155 $ 29,807 $ 34,974 $ 38,970
ASSET QUALITY RATIOS
Nonperforming assets to portfolio loans and
other real estate 1.42% 1.35% 1.38% 1.28% 1.12% 0.78% 0.80%
Nonperforming loans to portfolio loans 1.31 1.23 1.25 1.15 0.98 0.62 0.64
Allowance for loan losses to portfolio loans 1.52 1.48 1.53 1.47 1.73 1.82 1.91
Allowance for loan losses to
nonperforming loans 116.02 120.39 122.01 128.23 176.38 295.03 297.78
Net loan charge-offs to average portfolio
loans (annualized) 0.03 0.07 0.75 (0.02) (0.09) (0.03) (0.20)
CAPITAL RATIOS
Average total shareholders' equity to
average assets 11.75% 11.93% 12.42% 12.77% 13.59% 13.87% 13.59%
Leverage ratio 13.07 13.18 13.45 14.41 15.84 16.12 15.75
Common equity tier 1 capital 11.95 12.22 12.13 13.21 14.57 15.30 15.51
Tier 1 capital to risk-weighted assets 13.95 14.28 14.14 15.53 16.95 17.84 18.10
Total capital to risk-weighted assets 15.21 15.53 15.39 16.79 18.21 19.09 19.36
Tangible common equity to tangible assets*** 10.92 11.16 11.49 11.95 13.40 13.40 13.48
REGULATORY CAPITAL DATA
Common equity tier 1 capital$ 268,045 $ 266,612 $ 270,564 $ 282,737 $ 275,350 $ 272,048 $ 269,007
Tier I capital 313,045 311,612 315,326 332,468 320,350 317,048 314,007
Total capital 341,196 338,968 343,287 359,300 344,095 339,412 335,734
Total risk adjusted assets 2,243,895 2,182,051 2,230,326 2,140,344 1,889,892 1,777,618 1,734,401
Average total assets 2,395,991 2,363,834 2,344,259 2,307,421 2,022,972 1,966,577 1,993,446
____________________
*This is a Non-GAAP based financial measure.
***Calculation of Tangible Common Equity to Tangible Assets (Non-GAAP Financial Measure)
Total shareholders' equity$ 283,820 $ 282,360 $ 285,661 $ 296,098 $ 277,344 $ 273,681 $ 271,444
Less goodwill and core deposit intangible 15,983 16,051 16,201 16,361 1,556 1,619 1,681
Tangible common equity$ 267,837 $ 266,309 $ 269,460 $ 279,737 $ 275,788 $ 272,062 $ 269,763
Total assets$ 2,468,042 $ 2,402,262 $ 2,360,819 $ 2,357,022 $ 2,059,899 $ 2,031,581 $ 2,003,079
Less goodwill and core deposit intangible 15,983 16,051 16,201 16,361 1,556 1,619 1,681
Tangible assets$ 2,452,059 $ 2,386,211 $ 2,344,618 $ 2,340,661 $ 2,058,343 $ 2,029,962 $ 2,001,398
Total shareholders' equity to total assets 11.50% 11.75% 12.10% 12.56% 13.46% 13.47% 13.55%
Tangible common equity to tangible assets 10.92% 11.16% 11.49% 11.95% 13.40% 13.40% 13.48%
Balance sheet amounts and ratios are as of period end unless otherwise noted.

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

Source:Southwest Bancorp, Inc.