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Southwest Bancorp, Inc. Reports Results for Second Quarter 2017 and Announces Quarterly Dividend

STILLWATER, Okla., July 25, 2017 (GLOBE NEWSWIRE) -- Southwest Bancorp, Inc. (NASDAQ:OKSB), (“Southwest”), today reported net income for the second quarter of 2017 of $5.8 million, or $0.31 per diluted share, compared to $5.4 million, or $0.28 per diluted share, for the second quarter of 2016. Net income for the six months ended June 30, 2017 totaled $11.1 million, or $0.59 per diluted share, compared to $7.3 million, or $0.38 per diluted share, for the six months ended June 30, 2016. The increase was attributable to stronger revenues and improved efficiency.

Southwest announced that its board of directors has approved a quarterly cash dividend of $0.08 per share payable August 18, 2017 to shareholders of record as of August 4, 2017.

Mark Funke, President and CEO, stated, “We are pleased with the improvement in the second quarter’s earnings. Our good loan growth boosted revenues while expenses remained flat.”

Highlights to take from this quarter:

  • Total loans grew $35.2 million to $1.97 billion from first quarter of 2017 and $150.3 million, or 8%, compared to the second quarter of 2016.

  • The quarterly net interest margin was 3.53% at June 30, 2017, compared to 3.43% at March 31, 2017 and 3.48% at June 30, 2016.

  • Pre-tax, pre-provision income was $10.8 million in the second quarter, an increase of 15% from $9.4 million in the first quarter of 2017 and an increase of 34% from $8.0 million in the second quarter of 2016.

  • The efficiency ratio for the second quarter of 2017 was 57.77%, compared to 63.30% for the first quarter of 2017 and 65.70% for the second quarter of 2016.

“Diluted earnings per share of $0.31 was up 11% from the same quarter a year ago. 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 measure.

Pending Merger Update

Southwest previously announced a definitive agreement and plan of merger with and into Simmons First National Corporation (NASDAQ-GS:SFNC). The merger application for this transaction was filed on July 14, 2017. Conversion and integration plans are in process. Subject to regulatory approval and the satisfaction of other closing conditions, Southwest anticipates a closing date as early as October 2017 or as late as January 2018.

Financial Overview

Condition: As of June 30, 2017, total assets were $2.6 billion, an increase of $50.3 million, when compared to March 31, 2017. As of June 30, 2017, total loans were $1.97 billion, an increase of $35.2 million from the prior quarter end. As of June 30, 2017, investment securities were $434.4 million, an increase of $1.4 million from the prior quarter end. Cash and cash equivalents at June 30, 2017 were $79.8 million, an increase of $14.7 million from March 31, 2017.

At June 30, 2017, the allowance for loan losses was $27.3 million, a decrease of $0.2 million when compared to March 31, 2017 and an increase of $0.4 million when compared to June 30, 2016. The allowance for loan losses to portfolio loans was 1.39% as of June 30, 2017, down from 1.43% as of March 31, 2017, and from 1.48% as of June 30, 2016. The allowance for loan losses to nonperforming loans was 118.46% as of June 30, 2017, compared to 166.01% as of March 31, 2017 and 120.39% as of June 30, 2016. The total allowance for loan losses combined with the purchase discount on acquired loans represents 1.53% of gross loans as of June 30, 2017, compared to 1.63% as of March 31, 2017.

Nonperforming loans were $23.1 million at June 30, 2017, an increase of $6.5 million from March 31, 2017, and an increase of $0.7 million from June 30, 2016. There was no other real estate at June 30, 2017, compared to other real estate of $0.4 million at March 31, 2017 and $2.1 million at June 30, 2016. Nonperforming assets were $23.1 million, or 1.17% of portfolio loans and other real estate, as of June 30, 2017, compared to $16.9 million, or 0.88% of portfolio loans and other real estate, as of March 31, 2017, and $24.4 million, or 1.35% of portfolio loans and other real estate, as of June 30, 2016.

As of June 30, 2017, total deposits were $2.0 billion, an increase of $36.6 million, when compared to March 31, 2017. Total core funding, which includes all non-brokered deposits and sweep repurchase agreements, comprised 78% and 79% of total funding as of June 30, 2017 and March 31, 2017, respectively. Wholesale funding, including Federal Home Loan Bank borrowings, federal funds purchased, and brokered deposits, accounted for 22% of total funding at June 30, 2017 and 21% of total funding at March 31, 2017. 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 June 30, 2017 exceeded the criteria for regulatory classification as “well-capitalized.” Southwest’s total regulatory capital was $354.7 million, for a total risk-based capital ratio of 15.48%, Common Equity Tier 1 capital was $280.9 million, for a Common Equity Tier 1 ratio of 12.26%, and Tier 1 capital was $325.9 million, for a Tier 1 risk-based capital ratio of 14.23%. Bank SNB had total regulatory capital of $341.0 million, for a total risk-based capital ratio of 14.91% and Common Equity Tier 1 and Tier 1 capital of $312.3 million, for a Common Equity Tier 1 and Tier 1 risk-based capital ratio of 13.66%. Designation as a well-capitalized institution under regulations does not constitute a recommendation or endorsement by bank regulators.

Second Quarter Results:

Summary: For the second quarter of 2017, net income was $5.8 million, compared to $5.3 million for the first quarter of 2017 and $5.4 million for the second quarter of 2016. Pre-tax, pre-provision income for the second quarter of 2017 was $10.8 million, compared to $9.4 million for the first quarter of 2017 and $8.0 million for the second quarter of 2016.

The $0.5 million increase in net income compared to the first quarter of 2017 includes a $1.2 million increase in net interest income and a $0.1 million decrease in noninterest expense, offset in part by a $0.4 million decrease in noninterest income, and a $0.5 million increase in income taxes.

The $0.4 million increase in net income compared to the second quarter of 2016 was due to a $1.7 million increase in net interest income, a $0.7 million increase in noninterest income, and a $0.1 million decrease in noninterest expense, offset in part by a $1.7 million increase in the provision for loan losses and a $0.3 million increase in income taxes.

Net Interest Income: Net interest income totaled $21.4 million for the second quarter of 2017, compared to $20.2 million for the first quarter of 2017 and $19.7 million for the second quarter of 2016. Net interest margin was 3.53% for the second quarter of 2017, compared to 3.43% for the first quarter of 2017 and 3.48% for the second quarter of 2016. Included in interest income for the second quarter of 2017, the first quarter of 2017, and the second quarter of 2016 was $0.4 million, $0.3 million, and $0.2 million of accelerated discount accretion, respectively. The net effects of these adjustments on the net interest margins were a 7 basis point, a 5 basis point, and a 3 basis point increase, respectively for each quarter. Average loans (including loans held for sale) for the second quarter of 2017 increased $41.6 million when compared to March 31, 2017, and $141.1 million when compared to June 30, 2016. Loan growth combined with the March 2017 interest rate increase provided growth in interest income during the second quarter of 2017.

Provision 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 $1.7 million for the second quarter of 2017, compared to a provision of $1.8 million for the first quarter of 2017, and a provision of $10,000 for the second quarter of 2016. The second quarter 2017 provision was driven primarily by loan growth and an increase in reserves on a few classified loans. During the second quarter of 2017, net charge-offs totaled $1.9 million, or 0.40% (annualized) of average portfolio loans, compared to net charge-offs of $1.8 million, or 0.38% (annualized) of average portfolio loans, for the first quarter of 2017 and net charge-offs of $0.3 million, or 0.07% (annualized) of average portfolio loans, for the second quarter of 2016.

Noninterest Income: Noninterest income totaled $4.5 million for the second quarter of 2017, compared to $4.9 million for the first quarter of 2017 and $3.9 million for the second quarter of 2016.

The $0.4 million decrease from the first quarter of 2017 is primarily the result of a $0.4 million decrease in the gain on sale/call of investment securities.

The $0.7 million increase from the second quarter of 2016 is the result of a $0.2 million increase in service charges and fees 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, offset in part by a $0.2 million decrease in the gain on sale/call of investment securities.

Noninterest Expense: Noninterest expense totaled $15.2 million for the second quarter of 2017, compared to $15.3 million for both the first quarter of 2017 and the second quarter of 2016.

The $0.1 million decrease in noninterest expense from the first quarter of 2017 was primarily due to a $0.2 million decrease in salaries and employee benefits and a $0.4 million decrease in general and administrative expenses, offset in part by a $0.4 million increase in the provision for unfunded loan commitments.

The $0.1 million decrease in noninterest expense from the second quarter of 2016 was primarily due to a $0.4 million decrease in occupancy, offset in part by a $0.3 million increase in the provision for unfunded loan commitments.

Income Tax: Income tax expense totaled $3.2 million for the second quarter of 2017, compared to $2.7 million for the first quarter of 2017 and $2.9 million for the second quarter of 2016. The income tax expense fluctuates in relation to pre-tax income levels. The second quarter of 2017 effective tax rate was 35.41%, compared to 33.71% for the first quarter of 2017 and 34.70% for the second quarter of 2016. The increase in the effective tax rate from the first quarter of 2017 includes a reduction in the tax benefit of vested stock awards.

Year-to-Date Results:

Summary: Net income was $11.1 million for the six months ended June 30, 2017, compared to $7.3 million for the six months ended June 30, 2016. The $3.8 million increase in net income from 2016 is the result of a $2.0 million increase in net interest income, a $2.1 million increase in noninterest income, a $0.9 million decrease in the provision for loan losses, and a $0.8 million decrease in noninterest expense, offset in part by a $2.0 million increase in income taxes.

Net Interest Income: Net interest income totaled $41.5 million for the first six months of 2017, compared to $39.5 million for the first six months of 2016, an increase of $2.0 million. Year-to-date net interest margin was 3.48% for the first six months of 2017 and 3.51% for the first six months of 2016. Included in interest income for the first six months of 2017 and the first six months of 2016 was $0.7 million and $0.5 million of accelerated discount accretion, respectively. The net effect on the net interest margin was a 6 basis point and a 4 basis point increase, respectively for each six-month period. For the first six months of 2017, net interest margin was also reduced by an increase in the cost of deposits and other borrowings. Average loans (including loans held for sale) as of June 30, 2017 increased $125.7 million when compared to June 30, 2016. Loan growth combined with the recent interest rate increases provided growth in our loan interest income.

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 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 $3.5 million for the first six months of 2017, compared to a provision of $4.4 million for the first six months of 2016. The provision for loans losses for the first six months of 2017 was driven primarily by loan growth and an increase in reserves on a few classified loans. Net charge-offs totaled $3.7 million, or 0.39% (annualized) of average portfolio loans year-to-date as of June 30, 2017, compared to net charge-offs of $3.6 million, or 0.41% (annualized) of average portfolio loans for the same period in 2016.

Noninterest Income: Noninterest income totaled $9.4 million for the first six months of 2017, compared to $7.3 million for the first six months of 2016. The $2.1 million increase consists of a $0.4 million increase in service charges and fees, a $0.1 million increase in gains on sales of mortgage loans, a $0.2 million increase in the gain on sale of investment securities driven by a first quarter of 2017 sale of a private equity investment, and a $1.4 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 $30.5 million for the first six months of 2017, compared to $31.3 million for the first six months of 2016. The $0.8 million decrease consists of a $0.6 million decrease in occupancy, a $0.3 million decrease in FDIC and other insurance, a $0.3 million increase in the credit provision for unfunded loan commitments, and a $0.2 million decrease in general and administrative expense, offset in part by a $0.6 million increase in salaries and employee benefits.

Income Tax: Income tax expense totaled $5.9 million for the first six months of 2017, compared to $3.9 million for the first six months of 2016. The income tax expense fluctuates in relation to pre-tax income levels. The year-to-date effective tax rate was 34.61% as of June 30, 2017, compared to 34.83% as of June 30, 2016.

Conference Call

Southwest will host a conference call to review these results on Wednesday, July 26, 2017 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/10109903. 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/oksb170726. An audio replay will be available one hour after the call at 877-344-7529 (toll-free) or 412-317-0088 (international), conference number 10109903. Telephone replay access will be available until August 26, 2017.

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 June 30, 2017, Southwest had total assets of approximately $2.6 billion, deposits of $2.0 billion, and shareholders’ equity of $295.5 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 June 30, 2017, approximately $429.5 million, or 22%, 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 our planned merger with Simmons First National Corporation;
  • 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, 2016. 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 June 30, 2017 through the date its financial statements are filed with the Securities and Exchange Commission. The June 30, 2017 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 HighlightsTable 1
Unaudited Consolidated Statements of Financial ConditionTable 2
Unaudited Consolidated Statements of OperationsTable 3
Unaudited Average Balances, Yields, and Rates-Quarterly Table 4
Unaudited Average Balances, Yields, and Rates-YTDTable 5
Unaudited Quarterly Summary Loan DataTable 6
Unaudited Quarterly Summary Financial DataTable 7
Unaudited Quarterly Supplemental Analytical DataTable 8


SOUTHWEST BANCORP, INC. Table 1
UNAUDITED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share)
Second Quarter First Quarter
QUARTERLY HIGHLIGHTS 2017 2016 % Change 2017 % Change
Operations
Net interest income $21,370 $19,695 9% $20,163 6%
Provision for loan losses 1,729 10 17,190 1,776 (3)
Noninterest income 4,521 3,871 17 4,880 (7)
Noninterest expense 15,155 15,268 (1) 15,303 (1)
Income before taxes 9,007 8,288 9 7,964 13
Taxes on income 3,189 2,876 11 2,685 19
Net income 5,818 5,412 8 5,279 10
Diluted earnings per share 0.31 0.28 11 0.28 11
Balance Sheet
Total assets 2,572,935 2,402,262 7 2,522,594 2
Loans held for sale 6,036 7,090 (15) 4,980 21
Portfolio loans 1,965,598 1,814,287 8 1,931,463 2
Total deposits 2,013,834 1,902,865 6 1,977,265 2
Total shareholders' equity 295,546 282,360 5 290,914 2
Book value per common share 15.82 15.06 5 15.57 2
Key Ratios
Net interest margin 3.53% 3.48% 3.43%
Efficiency ratio 57.77 65.70 63.30
Total capital to risk-weighted assets 15.48 15.56 15.44
Nonperforming loans to portfolio loans 1.17 1.23 0.86
Shareholders' equity to total assets 11.49 11.75 11.53
Tangible common equity to tangible assets* 10.95 11.16 10.98
Return on average assets (annualized) 0.92 0.91 0.86
Return on average common equity (annualized) 7.93 7.67 7.40
Return on average tangible common equity (annualized)** 8.37 8.13 7.83
Six Months
YEAR-TO-DATE HIGHLIGHTS 2017 2016 % Change
Operations
Net interest income $41,533 $39,535 5%
Provision for loan losses 3,505 4,385 (20)
Noninterest income 9,401 7,286 29
Noninterest expense 30,458 31,264 (3)
Income before taxes 16,971 11,172 52
Taxes on income 5,874 3,891 51
Net income 11,097 7,281 52
Diluted earnings per share 0.59 0.38 55
Balance Sheet
Total assets 2,572,935 2,402,262 7
Loans held for sale 6,036 7,090 (15)
Portfolio loans 1,965,598 1,814,287 8
Total deposits 2,013,834 1,902,865 6
Total shareholders' equity 295,546 282,360 5
Book value per common share 15.82 15.06 5
Key Ratios
Net interest margin 3.48% 3.51%
Efficiency ratio 60.47 66.58
Total capital to risk-weighted assets 15.48 15.56
Nonperforming loans to portfolio loans 1.17 1.23
Shareholders' equity to total assets 11.49 11.75
Tangible common equity to tangible assets* 10.95 11.16
Return on average assets (annualized) 0.89 0.62
Return on average common equity (annualized) 7.67 5.07
Return on average tangible common equity (annualized)** 8.10 5.38
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. Table 2
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
June 30, December 31, June 30,
2017 2016 2016
Assets
Cash and due from banks$37,898 $36,831 $35,822
Interest-bearing deposits 41,941 38,819 32,266
Cash and cash equivalents 79,839 75,650 68,088
Securities held to maturity (fair values of $10,632, $10,677 and $12,660, respectively) 10,382 10,443 12,161
Securities available for sale (amortized cost of $424,172, $427,113 and $406,427, respectively) 424,031 426,218 410,135
Loans held for sale 6,036 4,386 7,090
Loans receivable 1,965,598 1,872,746 1,814,287
Less: Allowance for loan losses (27,318) (27,546) (26,876)
Net loans receivable 1,938,280 1,845,200 1,787,411
Accrued interest receivable 6,328 6,194 5,730
Non-hedge derivative asset 2,698 1,235 5,163
Premises and equipment, net 21,901 22,808 22,971
Other real estate 0 350 2,122
Goodwill 13,545 13,545 13,467
Other intangible assets, net 5,727 5,790 5,934
Other assets 64,168 63,573 61,990
Total assets$2,572,935 $2,475,392 $2,402,262
Liabilities
Deposits:
Noninterest-bearing demand$557,159 $551,709 $545,421
Interest-bearing demand 176,724 152,656 160,886
Money market accounts 599,122 567,058 547,415
Savings accounts 57,905 56,410 55,209
Time deposits of $100,000 or more 403,918 360,307 323,137
Other time deposits 219,006 257,878 270,797
Total deposits 2,013,834 1,946,018 1,902,865
Accrued interest payable 1,259 1,132 931
Non-hedge derivative liability 2,698 1,235 5,163
Other liabilities 9,500 10,171 10,982
Other borrowings 203,705 183,814 153,568
Subordinated debentures 46,393 46,393 46,393
Total liabilities 2,277,389 2,188,763 2,119,902
Shareholders' equity
Common stock - $1 par value; 40,000,000 shares authorized;
21,260,352, 21,230,714 and 21,223,613 shares issued, respectively 21,260 21,231 21,224
Additional paid-in capital 123,772 123,112 122,293
Retained earnings 192,961 184,840 177,373
Accumulated other comprehensive (loss) gain (292) (907) 1,503
Treasury stock, at cost, 2,574,079, 2,555,987 and 2,472,830 shares, respectively (42,155) (41,647) (40,033)
Total shareholders' equity 295,546 286,629 282,360
Total liabilities and shareholders' equity$2,572,935 $2,475,392 $2,402,262


SOUTHWEST BANCORP, INC. Table 3
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
For the three months ended For the six months
June 30, March 31, June 30, ended June 30,
2017 2017 2016 2017 2016
Interest income
Loans$22,562 $20,944 $20,031 $43,506 $40,061
Investment securities 2,035 2,052 1,962 4,087 3,927
Other interest-earning assets 111 75 51 186 104
Total interest income 24,708 23,071 22,044 47,779 44,092
Interest expense
Interest-bearing deposits 2,124 1,840 1,428 3,964 2,735
Other borrowings 610 478 342 1,088 651
Subordinated debentures 604 590 579 1,194 1,171
Total interest expense 3,338 2,908 2,349 6,246 4,557
Net interest income 21,370 20,163 19,695 41,533 39,535
Provision for loan losses 1,729 1,776 10 3,505 4,385
Net interest income after provision for loan losses 19,641 18,387 19,685 38,028 35,150
Noninterest income
Service charges and fees 2,800 2,681 2,556 5,481 5,105
Gain on sales of mortgage loans 695 552 722 1,247 1,123
Gain on sale/call of investment securities, net - 451 165 451 291
Other noninterest income 1,026 1,196 428 2,222 767
Total noninterest income 4,521 4,880 3,871 9,401 7,286
Noninterest expense
Salaries and employee benefits 9,675 9,900 9,587 19,575 18,929
Occupancy 2,318 2,373 2,669 4,691 5,340
Data processing 459 409 430 868 900
FDIC and other insurance 273 273 432 546 800
Other real estate, net 50 3 8 53 21
Provision (credit) for unfunded loan commitments 30 (388) (263) (358) (48)
General and administrative 2,350 2,733 2,405 5,083 5,322
Total noninterest expense 15,155 15,303 15,268 30,458 31,264
Income before taxes 9,007 7,964 8,288 16,971 11,172
Taxes on income 3,189 2,685 2,876 5,874 3,891
Net income$5,818 $5,279 $5,412 $11,097 $7,281
Pre-tax, pre-provision income*$10,766 $9,352 $8,035 $20,118 $15,509
Basic earnings per common share$0.31 $0.28 $0.29 $0.59 $0.38
Diluted earnings per common share 0.31 0.28 0.28 0.59 0.38
Common dividends declared per share 0.08 0.08 0.08 0.16 0.16
*This is a non-GAAP 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. Table 4
UNAUDITED AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands)
For the three months ended
June 30, 2017 March 31, 2017 June 30, 2016
Average Average Average Average Average Average
Balance Yield/Rate Balance Yield/Rate Balance Yield/Rate
Assets
Loans$1,940,684 4.66% $1,899,047 4.47% $1,799,591 4.48%
Investment securities 435,091 1.88 431,542 1.93 428,275 1.84
Other interest-earning assets 54,634 0.81 56,089 0.54 48,569 0.42
Total interest-earning assets 2,430,409 4.08 2,386,678 3.92 2,276,435 3.89
Other assets 101,033 102,331 103,566
Total assets$2,531,442 $2,489,009 $2,380,001
Liabilities and Shareholders' Equity
Interest-bearing demand deposits$178,206 0.20% $187,269 0.19% $165,011 0.16%
Money market accounts 598,346 0.55 573,364 0.33 537,734 0.25
Savings accounts 57,749 0.13 58,021 0.13 54,808 0.13
Time deposits 616,870 0.78 611,170 0.84 589,029 0.69
Total interest-bearing deposits 1,451,171 0.59 1,429,824 0.52 1,346,582 0.43
Other borrowings 180,920 1.35 174,362 1.11 141,623 0.97
Subordinated debentures 46,393 5.21 46,393 5.09 46,393 4.99
Total interest-bearing liabilities 1,678,484 0.80 1,650,579 0.71 1,534,598 0.62
Noninterest-bearing demand deposits 545,896 536,101 547,963
Other liabilities 12,630 13,070 13,598
Shareholders' equity 294,432 289,259 283,842
Total liabilities and shareholders' equity$2,531,442 $2,489,009 $2,380,001
Net interest income and spread 3.28% 3.21% 3.27%
Net interest margin (1) 3.53% 3.43% 3.48%
Average interest-earning assets
to average interest-bearing liabilities 144.80% 144.60% 148.34%
(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 six months ended June 30,
2017 2016
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
Assets
Loans$1,919,981 4.57% $1,794,291 4.49%
Investment securities 433,326 1.90 420,291 1.88
Other interest-earning assets 55,358 0.68 49,800 0.42
Total interest-earning assets 2,408,665 4.00 2,264,382 3.92
Other assets 101,679 105,720
Total assets$2,510,344 $2,370,102
Liabilities and Shareholders' Equity
Interest-bearing demand deposits$182,712 0.20% $162,825 0.16%
Money market accounts 585,924 0.44 540,267 0.24
Savings accounts 57,884 0.13 55,321 0.13
Time deposits 614,037 0.81 576,621 0.67
Total interest-bearing deposits 1,440,557 0.55 1,335,034 0.41
Other borrowings 177,659 1.23 129,397 1.01
Subordinated debentures 46,393 5.15 47,469 4.93
Total interest-bearing liabilities 1,664,609 0.76 1,511,900 0.61
Noninterest-bearing demand deposits 541,025 555,493
Other liabilities 12,850 14,184
Shareholders' equity 291,860 288,525
Total liabilities and shareholders' equity$2,510,344 $2,370,102
Net interest income and spread 3.24% 3.31%
Net interest margin (1) 3.48% 3.51%
Average interest-earning assets
to average interest-bearing liabilities 144.70% 149.77%
(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)
2017 2016
Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
LOAN COMPOSITION
Real estate mortgage:
Commercial$ 961,085 $ 925,458 $ 882,071 $ 893,807 $ 862,287 $ 878,822
One-to-four family residential 241,140 210,495 199,123 193,678 183,693 158,078
Real estate construction:
Commercial 182,620 193,937 199,113 184,211 175,805 156,454
One-to-four family residential 14,523 18,426 20,946 22,460 20,347 24,202
Commercial 554,094 570,001 556,248 566,403 558,472 543,822
Installment and consumer 18,172 18,126 19,631 19,553 20,773 20,506
Total loans, including held for sale 1,971,634 1,936,443 1,877,132 1,880,112 1,821,377 1,781,884
Less allowance for loan losses (27,318) (27,543) (27,546) (28,452) (26,876) (27,168)
Total loans, net$ 1,944,316 $ 1,908,900 $ 1,849,586 $ 1,851,660 $ 1,794,501 $ 1,754,716
LOANS BY SEGMENT
Oklahoma banking****$ 1,193,108 $ 1,153,417 $ 1,095,930 $ 1,117,716 $ 1,085,986 $ 1,060,482
Texas banking 636,709 639,945 636,643 605,682 577,333 560,421
Kansas banking 141,817 143,081 144,559 156,714 158,058 160,981
Total loans$ 1,971,634 $ 1,936,443 $ 1,877,132 $ 1,880,112 $ 1,821,377 $ 1,781,884
NONPERFORMING LOANS BY TYPE
Construction & development$ 579 $ 970 $ 970 $ 1,073 $ 1,436 $ 1,444
Commercial real estate 6,694 570 6,471 7,620 3,894 3,830
Commercial 12,884 12,183 6,142 12,791 13,800 13,461
One-to-four family residential 2,797 2,838 2,904 2,982 3,120 3,448
Consumer 106 30 123 58 75 84
Total nonperforming loans$23,060 $ 16,591 $ 16,610 $ 24,524 $ 22,325 $ 22,267
NONPERFORMING LOANS BY SEGMENT
Oklahoma banking$ 12,920 $ 7,479 $ 12,006 $ 12,275 $ 9,268 $ 7,978
Texas banking 10,035 8,987 4,140 11,805 12,586 13,521
Kansas banking 105 125 464 444 471 768
Total nonperforming loans$ 23,060 $ 16,591 $ 16,610 $ 24,524 $ 22,325 $ 22,267
OTHER REAL ESTATE BY TYPE
Construction & development$ - $ - $ - $ 1,756 $ 1,962 $ 2,060
Commercial real estate - 350 350 350 160 214
Total other real estate$ - $ 350 $ 350 $ 2,106 $ 2,122 $ 2,274
OTHER REAL ESTATE BY SEGMENT
Oklahoma banking$ - $ - $ - $ - $ 220 $ 274
Texas banking - 350 350 2,106 1,902 2,000
Total other real estate$ - $ 350 $ 350 $ 2,106 $ 2,122 $ 2,274
POTENTIAL PROBLEM LOANS BY TYPE
Construction & development$ 591 $ 588 $ 589 $ 588 $ - $ -
Commercial real estate 9,059 12,167 13,831 12,212 33,472 36,216
Commercial 17,852 27,372 27,621 30,555 29,537 29,931
One-to-four family residential 1,194 1,954 1,980 2,119 1,353 2,275
Consumer - 2 2 2 2 38
Total potential problem loans$ 28,696 $ 42,083 $ 44,023 $ 45,476 $ 64,364 $ 68,460
POTENTIAL PROBLEM LOANS BY SEGMENT
Oklahoma banking****$ 15,785 $ 22,001 $ 20,258 $ 21,780 $ 43,895 $ 46,102
Texas banking 10,762 16,346 19,807 21,029 17,726 18,801
Kansas banking 2,149 3,736 3,958 2,667 2,743 3,557
Total potential problem loans$ 28,696 $ 42,083 $ 44,023 $ 45,476 $ 64,364 $ 68,460
ALLOWANCE ACTIVITY
Balance, beginning of period$ 27,543 $ 27,546 $ 28,452 $ 26,876 $ 27,168 $ 26,106
Charge-offs 2,241 2,157 2,108 626 538 3,725
Recoveries 287 378 2,531 489 236 412
Net charge-offs (recoveries) 1,954 1,779 (423) 137 302 3,313
Provision (credit) for loan losses 1,729 1,776 (1,329) 1,713 10 4,375
Balance, end of period$ 27,318 $ 27,543 $ 27,546 $ 28,452 $ 26,876 $ 27,168
NET CHARGE-OFFS BY TYPE
Construction & development$(5) $ - $ - $ - $ - $ -
Commercial real estate (34) $ 1,847 $(84) $ 108 $(44) $(187)
Commercial 1,953 (105) (357) (64) 82 3,408
One-to-four family residential (17) (55) (16) 44 (12) 41
Consumer 57 92 34 49 276 51
Total net charge-offs (recoveries) by type$ 1,954 $ 1,779 $(423) $ 137 $ 302 $ 3,313
NET CHARGE-OFFS BY SEGMENT
Oklahoma banking$ 1,095 $ 1,950 $(178) $ 34 $ 127 $ 458
Texas banking 899 12 (168) 180 211 952
Kansas banking (40) (183) (77) (77) (36) 1,903
Total net charge-offs (recoveries) by segment$ 1,954 $ 1,779 $(423)$ 137 $ 302 $ 3,313
****Due to immateriality, Colorado banking is included within Oklahoma banking.

SOUTHWEST BANCORP, INC. Table 7
UNAUDITED QUARTERLY SUMMARY FINANCIAL DATA
(Dollars in thousands, except per share)
2017 2016
Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PER SHARE DATA
Basic earnings per common share$0.31 $0.28 $0.33 $0.23 $0.29 $0.10
Diluted earnings per common share 0.31 0.28 0.33 0.23 0.28 0.10
Common dividends declared per share 0.08 0.08 0.08 0.08 0.08 0.08
Book value per common share 15.82 15.57 15.35 15.19 15.06 14.81
Tangible book value per share* 14.98 14.72 14.50 14.33 14.20 13.97
COMMON STOCK
Shares issued 21,260,352 21,275,434 21,230,714 21,223,895 21,223,613 21,225,034
Less treasury shares 2,574,079 2,586,412 2,555,987 2,538,510 2,472,830 1,939,989
Outstanding shares 18,686,273 18,689,022 18,674,727 18,685,385 18,750,783 19,285,045
Diluted outstanding shares 18,492,739 18,532,499 18,551,005 18,545,614 18,677,912 19,267,473
OTHER FINANCIAL DATA
Investment securities$434,413 $433,053 $436,661 $427,938 $422,296 $423,030
Loans held for sale 6,036 4,980 4,386 7,899 7,010 1,803
Portfolio loans 1,965,598 1,931,463 1,872,746 1,872,213 1,814,367 1,780,081
Total loans 1,971,634 1,936,443 1,877,132 1,880,112 1,821,377 1,781,884
Total assets 2,572,935 2,522,594 2,475,392 2,468,042 2,402,262 2,360,819
Total deposits 2,013,834 1,977,265 1,946,018 1,947,924 1,902,865 1,895,248
Other borrowings 203,705 194,645 183,814 173,971 153,568 117,763
Subordinated debentures 46,393 46,393 46,393 46,393 46,393 46,393
Total shareholders' equity 295,546 290,914 286,629 283,820 282,360 285,661
Mortgage servicing portfolio 463,849 458,961 460,646 453,988 443,568 434,340
INTANGIBLE ASSET DATA
Goodwill$13,545 $13,545 $13,545 $13,545 $13,467 $13,467
Core deposit intangible 2,061 2,177 2,299 2,438 2,584 2,734
Mortgage servicing rights 3,666 3,516 3,491 3,381 3,350 3,411
Total intangible assets$19,272 $19,238 $19,335 $19,364 $19,401 $19,612
Intangible amortization expense$197 $229 $275 $344 $350 $341
DEPOSIT COMPOSITION
Non-interest bearing demand$557,159 $541,021 $551,709 $550,121 $545,421 $552,499
Interest-bearing demand 176,724 177,676 152,656 146,583 160,886 168,210
Money market accounts 599,122 591,368 567,058 576,550 547,415 540,323
Savings accounts 57,905 58,387 56,410 54,849 55,209 56,235
Time deposits of $100,000 or more 403,918 353,244 360,307 347,976 323,137 314,496
Other time deposits 219,006 255,569 257,878 271,845 270,797 263,485
Total deposits**$2,013,834 $1,977,265 $1,946,018 $1,947,924 $1,902,865 $1,895,248
OFFICES AND EMPLOYEES
FTE Employees 388 380 387 393 410 411
Banking Centers 30 30 30 30 32 32
Loan production offices 1 1 1 1 1 0
Assets per employee$6,631 $6,638 $6,396 $6,280 $5,859 $5,744
*This is a non-GAAP financial measure.
**Calculation of non-brokered deposits and core funding (non-GAAP financial measures)
Total deposits$2,013,834 $1,977,265 $1,946,018 $1,947,924 $1,902,865 $1,895,248
Less:
Brokered time deposits 84,229 59,698 64,652 65,398 61,709 55,901
Other brokered deposits 211,866 205,004 206,590 214,175 175,367 140,372
Non-brokered deposits$1,717,739 $1,712,563 $1,674,776 $1,668,351 $1,665,789 $1,698,975
Plus:
Sweep repurchase agreements 11,705 9,645 45,814 46,971 42,568 42,763
Core funding$1,729,444 $1,722,208 $1,720,590 $1,715,322 $1,708,357 $1,741,738
Balance sheet amounts are as of period end unless otherwise noted.


SOUTHWEST BANCORP, INC. Table 8
UNAUDITED QUARTERLY SUPPLEMENTAL ANALYTICAL DATA
(Dollars in thousands)
2017 2016
Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
PERFORMANCE RATIOS
Return on average assets (annualized) 0.92% 0.86% 1.00% 0.70% 0.91% 0.32%
Return on average common equity (annualized) 7.93 7.40 8.59 5.97 7.67 2.56
Return on average tangible common equity
(annualized)* 8.37 7.83 9.10 6.33 8.13 2.71
Net interest margin (annualized) 3.53 3.43 3.40 3.42 3.48 3.54
Total dividends declared to net income 25.70 28.33 24.23 35.14 28.35 84.66
Effective tax rate 35.41 33.71 37.38 34.45 34.70 35.19
Efficiency ratio 57.77 63.30 64.34 66.09 65.70 67.48
NONPERFORMING ASSETS
Nonaccrual loans$22,929 $16,481 $16,267 $24,109 $22,259 $22,161
90 days past due and accruing 131 110 343 415 66 106
Total nonperforming loans 23,060 16,591 16,610 24,524 22,325 22,267
Other real estate - 350 350 2,106 2,122 2,274
Total nonperforming assets$23,060 $16,941 $16,960 $26,630 $24,447 $24,541
Potential problem loans$28,696 $42,083 $44,023 $45,476 $64,364 $68,460
ASSET QUALITY RATIOS
Nonperforming assets to portfolio loans and
other real estate 1.17% 0.88% 0.91% 1.42% 1.35% 1.38%
Nonperforming loans to portfolio loans 1.17 0.86 0.89 1.31 1.23 1.25
Allowance for loan losses to portfolio loans 1.39 1.43 1.47 1.52 1.48 1.53
Allowance for loan losses to
nonperforming loans 118.46 166.01 165.84 116.02 120.39 122.01
Net loan charge-offs (recoveries) to average portfolio
loans (annualized) 0.40 0.38 (0.09) 0.03 0.07 0.75
CAPITAL RATIOS
Average total shareholders' equity to
average assets 11.63% 11.62% 11.62% 11.75% 11.93% 12.42%
Leverage ratio 12.95 12.98 13.02 13.07 13.18 13.45
Common equity tier 1 capital 12.26 12.20 12.36 11.95 12.22 12.13
Tier 1 capital to risk-weighted assets 14.23 14.19 14.40 13.95 14.28 14.14
Total capital to risk-weighted assets 15.48 15.44 15.66 15.21 15.53 15.39
Tangible common equity to tangible assets** 10.95 10.98 11.01 10.92 11.16 11.49
REGULATORY CAPITAL DATA
Common equity tier 1 capital$280,927 $276,205 $272,882 $268,045 $266,612 $270,564
Tier I capital 325,927 321,205 317,882 313,045 311,612 315,326
Total capital 354,675 349,615 345,597 341,196 338,968 343,287
Total risk adjusted assets 2,291,118 2,263,998 2,207,508 2,243,895 2,182,051 2,230,326
Average total assets 2,516,167 2,474,481 2,440,918 2,395,991 2,363,834 2,344,259
*This is a non-GAAP financial measure.
**Calculation of tangible common equity to tangible assets (non-GAAP financial measure)
Total shareholders' equity$295,546 $290,914 $286,629 $283,820 $282,360 $285,661
Less goodwill and core deposit intangible 15,606 15,722 15,844 15,983 16,051 16,201
Tangible common equity$279,940 $275,192 $270,785 $267,837 $266,309 $269,460
Total assets$2,572,935 $2,522,594 $2,475,392 $2,468,042 $2,402,262 $2,360,819
Less goodwill and core deposit intangible 15,606 15,722 15,844 15,983 16,051 16,201
Tangible assets$2,557,329 $2,506,872 $2,459,548 $2,452,059 $2,386,211 $2,344,618
Total shareholders' equity to total assets 11.49% 11.53% 11.58% 11.50% 11.75% 12.10%
Tangible common equity to tangible assets 10.95% 10.98% 11.01% 10.92% 11.16% 11.49%
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.