SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-23064
SOUTHWEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1136584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
608 South Main Street
Stillwater, Oklahoma 74074
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (405) 372-2230
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
[ x ] YES [ ] NO
Indicate by check mark whether the issuer is an accelerated filer (as defined in
Rule 12b-2 of the Exchange At).
[ x ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.
5,907,601
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1 of 24
SOUTHWEST BANCORP, INC.
INDEX TO FORM 10-Q
Page No.
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Statements of Financial Condition at
March 31, 2003 and December 31, 2002 3
Unaudited Consolidated Statements of Operations for the
three months ended March 31, 2003 and 2002 4
Unaudited Consolidated Statements of Cash Flows for the
three months ended March 31, 2003 and 2002 5
Unaudited Consolidated Statements of Shareholders' Equity for the
three months ended March 31, 2003 6
Unaudited Consolidated Statements of Comprehensive Income for the
three months ended March 31, 2003 and 2002 6
Notes to Unaudited Consolidated Financial Statements 7
Average Balances, Yields and Rates 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 18
ITEM 4. CONTROLS AND PROCEDURES 18
PART II. OTHER INFORMATION 19
SIGNATURES 20
2
SOUTHWEST BANCORP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
MARCH 31, DECEMBER 31,
2003 2002
---- ----
ASSETS:
Cash and cash equivalents $ 40,272 $ 34,847
Federal funds sold 7,300 --
Investment securities:
Held to maturity, fair value $27,030 (2003) and $32,000 (2002) 26,357 31,154
Available for sale, amortized cost $142,735 (2003) and $145,141 (2002) 145,207 148,476
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost 10,861 9,059
Loans held for sale 9,408 10,638
Loans receivable, net of allowance for loan losses
of $13,152 (2003) and $11,888 (2002) 1,207,162 1,078,586
Accrued interest receivable 10,148 9,283
Premises and equipment, net 20,663 20,202
Other assets 8,671 7,523
----------- -----------
Total assets $ 1,486,049 $ 1,349,768
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand $ 145,790 $ 135,945
Interest-bearing demand 55,553 50,162
Money market accounts 282,941 258,712
Savings accounts 6,246 5,700
Time deposits of $100,000 or more 398,416 309,205
Other time deposits 262,686 262,033
----------- -----------
Total deposits 1,151,632 1,021,757
Accrued interest payable 3,914 4,486
Income tax payable 1,987 --
Other liabilities 3,305 2,858
Other borrowings 200,401 199,282
Long-term debt:
Guaranteed preferred beneficial interests in the Company's
subordinated debentures 25,013 25,013
----------- -----------
Total liabilities 1,386,252 1,253,396
Shareholders' equity:
Common stock - $1 par value; 20,000,000 shares authorized; 6,121,521 shares
issued and outstanding 6,122 6,122
Capital surplus 12,397 12,317
Retained earnings 83,504 80,724
Accumulated other comprehensive income (loss) 1,485 2,201
Treasury stock, at cost; 258,660 (2003) and 348,142 (2002) shares (3,711) (4,992)
----------- -----------
Total shareholders' equity 99,797 96,372
----------- -----------
Total liabilities & shareholders' equity $ 1,486,049 $ 1,349,768
=========== ===========
The accompanying notes are an integral part of this statement.
3
SOUTHWEST BANCORP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except earnings per share data)
FOR THE THREE MONTHS
ENDED MARCH 31,
2003 2002
------- -------
Interest income:
Interest and fees on loans $17,722 $15,980
Investment securities:
U.S. Government and agency obligations 1,284 1,513
Mortgage-backed securities 371 932
State and political subdivisions 266 388
Other securities 152 143
Other interest-earning assets 4 7
------- -------
Total interest income 19,799 18,963
Interest expense:
Interest-bearing demand 81 82
Money market accounts 1,176 872
Savings accounts 4 6
Time deposits of $100,000 or more 2,243 2,374
Other time deposits 1,823 2,710
Other borrowings 1,295 1,275
Long-term debt 582 582
------- -------
Total interest expense 7,204 7,901
------- -------
Net interest income 12,595 11,062
Provision for loan losses 1,722 1,250
Other income:
Service charges and fees 2,251 1,774
Other noninterest income 274 228
Gain on sales of loans receivable 937 644
Gain on sales of investment securities 2 2
------- -------
Total other income 3,464 2,648
Other expenses:
Salaries and employee benefits 4,312 3,802
Occupancy 1,922 1,717
FDIC and other insurance 78 72
Other real estate 161 22
General and administrative 2,421 2,198
------- -------
Total other expenses 8,894 7,811
------- -------
Income before taxes 5,443 4,649
Taxes on income 1,930 1,571
------- -------
Net income $ 3,513 $ 3,078
======= =======
Basic earnings per share $ 0.60 $ 0.54
======= =======
Diluted earnings per share $ 0.58 $ 0.52
======= =======
Cash dividends declared per share $ 0.13 $ 0.11
======= =======
The accompanying notes are an integral part of this statement.
4
SOUTHWEST BANCORP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS
ENDED MARCH 31,
2003 2002
---- ----
Operating activities:
Net income $ 3,513 $ 3,078
Adjustments to reconcile net income to net
cash (used in) provided from operating activities:
Provision for loan losses 1,722 1,250
Depreciation and amortization expense 648 634
Amortization of premiums and accretion of
discounts on securities, net 44 915
Amortization of intangibles 67 46
Tax benefit from exercise of stock options 470 --
(Gain) Loss on sales/calls of securities (2) (2)
(Gain) Loss on sales of loans receivable (937) (644)
(Gain) Loss on sales of premises/equipment (7) 6
(Gain) Loss on other real estate owned, net 109 (2)
Proceeds from sales of residential mortgage loans 47,083 22,718
Residential mortgage loans originated for resale (43,998) (18,555)
Changes in assets and liabilities:
Accrued interest receivable (865) 337
Other assets (1,230) (35)
Income taxes payable 1,987 1,151
Accrued interest payable (572) (337)
Other liabilities 349 396
--------- ---------
Net cash (used in) provided from operating activities 8,381 10,956
--------- ---------
Investing activities:
Proceeds from principal repayments, calls and maturities:
Held to maturity securities 4,785 4,400
Available for sale securities 25,978 16,210
Proceeds from redemptions of Federal Home Loan Bank stock -- 562
Purchases of Federal Reserve Bank and Federal Home Loan
Bank stock (1,802) --
Purchases of held to maturity securities -- (1,022)
Purchases of available for sale securities (23,602) (6,100)
Loans originated and principal repayments, net (178,776) (60,148)
Proceeds from sales of guaranteed student loans 47,560 30,460
Purchases of premises and equipment (1,116) (638)
Proceeds from sales of premises and equipment 14 34
Proceeds from sales of other real estate owned 53 259
--------- ---------
Net cash (used in) provided from investing activities (126,906) (15,983)
--------- ---------
Financing activities:
Net increase (decrease) in deposits 129,875 30,818
Net increase (decrease) in other borrowings 1,119 (30,835)
Net proceeds from issuance of common stock 891 605
Purchases of treasury stock -- (918)
Common stock dividends paid (635) (456)
--------- ---------
Net cash (used in) provided from financing activities 131,250 (786)
--------- ---------
Net increase (decrease) in cash and cash equivalents 12,725 (5,813)
Cash and cash equivalents,
Beginning of period 34,847 32,406
--------- ---------
End of period $ 47,572 $ 26,593
========= =========
The accompanying notes are an integral part of this statement.
5
SOUTHWEST BANCORP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
ACCUMULATED TOTAL
OTHER SHARE-
COMMON STOCK CAPITAL RETAINED COMPREHENSIVE TREASURY HOLDERS'
SHARES AMOUNT SURPLUS EARNINGS INCOME (LOSS) STOCK EQUITY
----------------------------------------------------------------------------------------
Balance, January 1, 2003 6,121,521 $ 6,122 $ 12,317 $ 80,724 $ 2,201 $ (4,992) $ 96,372
Cash dividends declared:
Common, $0.125 per share -- -- -- (733) -- -- (733)
Common stock issued:
Employee Stock Option Plan -- -- (404) -- -- 1,263 859
Employee Stock Purchase Plan -- -- 6 -- -- 8 14
Dividend Reinvestment Plan -- -- 8 -- -- 10 18
Tax benefit related to exercise
of stock options -- -- 470 -- -- -- 470
Other comprehensive income
(loss), net of tax -- -- -- -- (716) -- (716)
Net income -- -- -- 3,513 -- -- 3,513
--------- --------- --------- --------- --------- --------- ---------
Balance, March 31, 2003 6,121,521 $ 6,122 $ 12,397 $ 83,504 $ 1,485 $ (3,711) $ 99,797
========= ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of this statement.
SOUTHWEST BANCORP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
FOR THE THREE MONTHS
ENDED MARCH,
2003 2002
---- ----
Net income $ 3,513 $ 3,078
Other comprehensive income (loss)
Unrealized holding gain (loss) on available
for sale securities (862) (1,334)
Reclassification adjustment for (gains) losses
arising during the period (2) (2)
------- -------
Other comprehensive income (loss), before tax (864) (1,336)
Tax (expense) benefit related to items
of other comprehensive income (loss) 148 456
------- -------
Other comprehensive income (loss), net of tax (716) (880)
------- -------
Comprehensive income $ 2,797 $ 2,198
======= =======
The accompanying notes are an integral part of this statement.
6
SOUTHWEST BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
information and notes necessary for a complete presentation of financial
position, results of operations, changes in shareholders' equity, cash flows and
comprehensive income in conformity with accounting principles generally accepted
in the United States of America. However, the unaudited consolidated financial
statements include all adjustments which, in the opinion of management, are
necessary for a fair presentation. Those adjustments consist of normal,
recurring adjustments. The results of operations for the three months ended
March 31, 2003 and 2002 and the cash flows for the three months ended March 31,
2003 and 2002 should not be considered indicative of the results to be expected
for the full year. These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Southwest Bancorp, Inc. Annual Report on Form 10-K for the year
ended December 31, 2002.
NOTE 2: PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements include the
accounts of Southwest Bancorp, Inc. ("Southwest") and its wholly owned
subsidiaries, the Stillwater National Bank and Trust Company ("Stillwater
National"), SBI Capital Trust ("SBI Capital") and Business Consulting Group,
Inc. ("BCG"). All significant intercompany transactions and balances have been
eliminated in consolidation.
NOTE 3: RECENTLY ADOPTED ACCOUNTING STANDARD
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards Board Interpretation (FIN) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others - an Interpretation of FASB Statements No.
5, 57 and 107 and Rescission of FASB Interpretation No. 34." FIN 45 elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. Implementation of the provisions of FIN 45 did not have a significant
impact on Southwest's financial statements.
On December 31, 2002, the Financial Accounting Standards Board issued FASB
Statement No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure. Statement No. 148 amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for
Statement 123's fair value method of accounting for stock-based employee
compensation. Statement 148 also amends the disclosure provisions of Statement
123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure
in the summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
While the Statement does not amend Statement 123 to require companies to account
for employee stock options using the fair value method, the disclosure
provisions of Statement 148 are applicable to all companies with stock-based
employee compensation, regardless of whether they account for stock options
using the fair value method of Statement 123 or the intrinsic value method of
Opinion 25. Statement 148's amendment of the transition and annual disclosure
requirements of Statement 123 are effective for fiscal years ending after
December 15, 2002. Statement 148's amendment of the disclosure requirements of
Opinion 28 is effective for financial reports containing condensed consolidated
financial statements for interim periods beginning after December 15, 2002. As
allowed by Statement 123, Southwest follows the recognition requirements of
Opinion No. 25, which results in no charge to earnings when options are issued
at fair market value. Therefore, the adoption of this statement did not have any
impact on Southwest's financial position or results of operations.
7
The following table illustrates the effect on net income and earnings per share
as if the fair value based method had been applied to all outstanding and
unvested awards in each period:
FOR THE THREE MONTHS
ENDED MARCH 31,
2003 2002
---- ----
Net earnings, as reported $3,513 $3,078
Less: Stock-based employee compensation expense determined under
fair value based method for all awards, net of related tax effects (106) (150)
------ ------
Proforma net income $3,407 $2,928
====== ======
Earnings per share:
Basic -- as reported $0.60 $0.54
Basic -- proforma $0.58 $0.51
Diluted -- as reported $0.58 $0.52
Diluted -- proforma $0.56 $0.49
NOTE 4: ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is shown below for the indicated
periods.
FOR THE THREE FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
(Dollars in thousands)
Balance at beginning of period $ 11,888 $ 11,492
Loans charged-off:
Real estate mortgage 62 777
Real estate construction 3 --
Commercial 373 4,248
Installment and consumer 211 371
---------- ----------
Total charge-offs 649 5,396
Recoveries:
Real estate mortgage 46 93
Real estate construction -- --
Commercial 128 107
Installment and consumer 17 149
---------- ----------
Total recoveries 191 349
---------- ----------
Net loans charged-off 458 5,047
Provision for loan losses 1,722 5,443
---------- ----------
Balance at end of period $ 13,152 $ 11,888
========== ==========
Loans outstanding:
Average $1,184,985 $1,012,487
End of period 1,229,722 1,101,112
Net charge-offs to total average loans (annualized) 0.16% 0.50%
Allowance for loan losses to total loans 1.07% 1.08%
8
Nonperforming assets and other risk elements of the loan portfolio are shown
below as of the indicated dates.
AT AT
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
(Dollars in thousands)
Nonaccrual loans (1) $11,990 $11,455
Past due 90 days or more (2) 2,657 1,452
------- -------
Total nonperforming loans 14,647 12,907
Other real estate owned 585 747
------- -------
Total nonperforming assets $15,232 $13,654
======= =======
Nonperforming loans to loans receivable 1.19% 1.17%
Allowance for loan losses to nonperforming loans 89.79% 92.11%
Nonperforming assets to loans receivable and
other real estate owned 1.24% 1.24%
(1) The government-guaranteed portion of loans included in these totals was $1.4
million (2003) and $988,000 (2002).
(2) The government-guaranteed portion of loans included in these totals was
$96,000 (2003) and $29,000 (2002).
Southwest makes provisions for loan losses in amounts necessary to maintain the
allowance for loan losses at the level Southwest deems appropriate. The
allowance is based on careful, continuous review and evaluation of the loan
portfolio and ongoing, quarterly assessments of the probable losses inherent in
the loan and lease portfolio and unused commitments to provide financing.
Southwest's systematic methodology for assessing the appropriateness of the
allowance includes determination of a formula allowance, specific allowances and
an unallocated reserve. During the quarter ended March 31, 2003, there were no
changes in estimation methods or assumptions that affected the methodology for
assessing the appropriateness of the allowance. The formula allowance is
calculated by applying loss factors to corresponding categories of outstanding
loans and leases. Loss factors generally are based on Southwest's historical
loss experience in the various portfolio categories over the prior six quarters
or four quarters, but may be adjusted for categories where six and four quarter
loss experience is historically unusual. Such an adjustment was made in the
first quarter of 2003 in order to moderate, but not eliminate, the effects of
losses on two credit relationships that had resulted in an historically
anomalous loss factor for non-classified, secured commercial loans. The use of
these loss factors is intended to reduce the differences between estimated
losses inherent in the portfolio and observed losses. Formula allowances also
are established for loans that do not have specific allowances according to the
application of credit risk factors. These factors are set by management to
reflect its assessment of the relative level of risk inherent in each grade.
Specific allowances are established in cases where management has identified
significant conditions or circumstances related to individual loans that
management believes indicate the probability that a loss may be incurred in an
amount different from the amounts determined by application of the formula
allowance. Specific allowances include amounts related to loans that are
identified for evaluation of impairment, which is based on discounted cash flows
using each loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. All of Southwest's nonaccrual
loans are considered to be impaired loans. The unallocated allowance is based
upon management's evaluation of various factors that are not directly measured
in the determination of the formula and specific allowances. These factors may
include general economic and business conditions affecting lending areas, credit
quality trends (including trends in delinquencies and nonperforming loans
expected to result from existing conditions), loan volumes and concentrations,
specific industry conditions within portfolio categories, recent loss experience
in particular loan categories, duration of the current business cycle, bank
regulatory examination results, findings of internal credit examiners, and
management's judgment with respect to various other conditions including credit
administration and management and the quality of risk identification systems.
Management reviews these conditions quarterly.
Management strives to carefully monitor credit quality and to identify loans
that may become nonperforming. At any time, however, there are loans included in
the portfolio that will result in losses to Southwest, but that have not been
identified as nonperforming or potential problem loans. Because the loan
portfolio contains a significant number of commercial and commercial real estate
loans with relatively large balances, the unexpected deterioration of one or a
few such loans may cause a significant increase in nonperforming assets, and may
lead to a material increase in charge-offs and the provision for loan losses in
future periods.
9
NOTE 5: LOANS RECEIVABLE
Southwest extends commercial and consumer credit primarily to customers in the
states of Oklahoma, Kansas and Texas. Its commercial lending operations are
concentrated in the Stillwater, Tulsa, and Oklahoma City areas of Oklahoma, in
Wichita, Kansas and in Frisco, Texas. As a result, the collectibility of
Southwest's loan portfolio can be affected by changes in the general economic
conditions in these three states and in those metropolitan areas. At March 31,
2003 and December 31, 2002, substantially all of Southwest's loans are
collateralized with real estate, inventory, accounts receivable and/or other
assets, or are guaranteed by agencies of the United States Government.
At March 31, 2003, loans to individuals and businesses in the healthcare
industry totaled approximately $243.9 million, or 20% of total loans. Southwest
does not have any other concentrations of loans to individuals or businesses
involved in a single industry totaling 5% or more of total loans.
The principal balance of loans for which accrual of interest has been
discontinued totaled approximately $12.0 million at March 31, 2003. During the
first three months of 2002, $5,000 in interest income was received on
nonaccruing loans. If interest on those loans had been accrued, additional total
interest income of $218,000 would have been recorded.
NOTE 6: LONG-TERM DEBT
The guaranteed preferred beneficial interests in Southwest's subordinated
debentures represent interests in 9.30% subordinated debentures ("Subordinated
Debentures"), due July 31, 2027, issued by Southwest to its subsidiary, SBI
Capital, in connection with SBI Capital's Cumulative Trust Preferred Securities
(the "Preferred Securities"). The Subordinated Debentures and related payments
are SBI Capital's only assets. The Preferred Securities meet the regulatory
criteria for Tier I capital, subject to Federal Reserve guidelines that limit
the amount of the Preferred Securities and cumulative perpetual preferred stock
to an aggregate of 25% of Tier I capital.
NOTE 7: EARNINGS PER SHARE
Basic earnings per share is computed based upon net income divided by the
weighted average number of shares outstanding during each period. Diluted
earnings per share is computed based upon net income divided by the weighted
average number of shares outstanding during each period adjusted for the effect
of dilutive potential shares calculated using the treasury stock method. At
March 31, 2003 and 2002, there were 110,794 and 5,000 antidilutive options to
purchase common shares, respectively.
The following is a reconciliation of the shares used in the calculations of
basic and diluted earnings per share:
FOR THE THREE MONTHS
ENDED MARCH 31,
2003 2002
--------- ---------
Weighted average shares outstanding:
Basic earnings per share 5,827,499 5,702,426
Effect of dilutive securities:
Stock options 234,987 230,088
--------- ---------
Weighted average shares outstanding:
Diluted earnings per share 6,062,486 5,932,514
========= =========
NOTE 8: SHAREHOLDERS' EQUITY
SHARE REPURCHASE PROGRAM
In March 2002, Southwest authorized the repurchase of up to 5% of its current
outstanding common stock in the period ending March 31, 2003. As of March 31,
2003, Southwest had purchased 15,000 shares under this program at an average
price of $21.79 per share. These repurchases reduced shareholders' equity by
$327,000 in 2002.
10
In March 2003, Southwest authorized the repurchase of up to an additional 5% of
its current outstanding common stock. Share repurchases under the current
program are expected to be made primarily on the open market, from time to time,
until March 31, 2004, or earlier termination of the repurchase program by the
Board of Directors. Repurchases under the program will be made at the discretion
of management based upon market, business, legal, accounting and other factors.
As of March 31, 2003, no share repurchases had been made under this program.
SHAREHOLDER RIGHTS PLAN
On April 22, 1999, Southwest adopted a Rights Plan designed to protect its
shareholders against acquisitions that the Board of Directors believes are
unfair or otherwise not in the best interests of Southwest and its shareholders.
Under the Rights Plan, each holder of record of Southwest's common stock, as of
the close of business on April 22, 1999, received one right per common share.
The rights generally become exercisable if an acquiring party accumulates, or
announces an offer to acquire, 10% or more of Southwest's voting stock. The
rights will expire on April 22, 2009. Each right will entitle the holder (other
than the acquiring party) to buy, at the right's then current exercise price,
Southwest's common stock or equivalent securities having a value of twice the
right's exercise price. The exercise price of each right was initially set at
$73.34. In addition, upon the occurrence of certain events, holders of the
rights would be entitled to purchase, at the then current exercise price, common
stock or equivalent securities of an acquiring entity worth twice the exercise
price. Under the Rights Plan, Southwest also may exchange each right, other than
rights owned by an acquiring party, for a share of its common stock or
equivalent securities.
11
SOUTHWEST BANCORP, INC.
AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)
FOR THE THREE MONTHS ENDED MARCH 31,
2003 2002
------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD/RATE BALANCE YIELD/RATE
------------------------------------------------------------
ASSETS:
Loans receivable $1,184,985 6.07% $ 952,909 6.80%
Investment securities 182,557 4.61 219,125 5.51
Other interest-earning assets 1,434 1.13 1,748 1.62
---------- ----------
Total interest-earning assets 1,368,976 5.87 1,173,782 6.55
Noninterest-earning assets 53,508 53,384
---------- ----------
Total assets $1,422,484 $1,227,166
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing demand $ 54,226 0.61% $ 50,710 0.66%
Money market accounts 271,671 1.76 169,851 2.08
Savings accounts 6,147 0.26 5,659 0.43
Time deposits 612,908 2.69 580,236 3.55
---------- ----------
Total interest-bearing deposits 944,952 2.29 806,456 3.04
Other borrowings 215,796 2.43 183,596 2.82
Long-term debt 25,013 9.30 25,013 9.30
---------- ----------
Total interest-bearing liabilities 1,185,761 2.46 1,015,065 3.16
Noninterest-bearing demand 124,022 113,211
Other noninterest-bearing liabilities 15,074 12,937
Shareholders' equity 97,627 85,953
---------- ----------
Total liabilities and shareholders' equity $1,422,484 $1,227,166
========== ==========
Interest rate spread 3.41% 3.39%
==== ====
Net interest margin (1) 3.73% 3.82%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 115.45% 115.64%
========== ==========
(1) Net interest margin = annualized net interest income / average
interest-earning assets
12
SOUTHWEST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements. This management's discussion and analysis of
financial condition and results of operations and other portions of this report
include forward-looking statements such as: statements of Southwest's goals,
intentions, and expectations; estimates of risks and of future costs and
benefits; assessments of loan quality, and probable loan losses, liquidity, and
market or interest rate risk; 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 and other economic conditions; future laws and
regulations; and a variety of other matters. 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 its future results.
You should read this management's discussion and analysis of Southwest's
consolidated financial condition and results of operations in conjunction with
Southwest's unaudited consolidated financial statements and the accompanying
notes.
GENERAL
Southwest Bancorp, Inc. ("Southwest") is a financial holding company for the
Stillwater National Bank and Trust Company ("Stillwater National"), SBI Capital
Trust, and Business Consulting Group, Inc. Southwest is an independent
institution, and is not controlled by out of state organizations or individuals.
Southwest offers a broad range of commercial and consumer banking and other
financial services through full service offices in Stillwater, Oklahoma City,
Tulsa and Chickasha, Oklahoma and Frisco, Texas; loan production offices in
Wichita, Kansas and on the campuses of the University of Oklahoma Health
Sciences Center and Oklahoma State University-Tulsa; a marketing presence in the
Student Union at Oklahoma State University-Stillwater; and on the Internet,
through SNB DirectBanker(R). Southwest has applied to create SNB Bank of
Wichita, which it expects to open on the site of its Kansas loan production
office during 2003. Southwest devotes substantial efforts to marketing and
providing services to local businesses, their primary employees, and to other
managers and professionals living and working in Southwest's market areas.
Southwest has developed a marketing and delivery system that does not rely on an
extensive branch network.
Southwest has established and pursued a strategy of independent operation for
the benefit of all of its shareholders. Southwest has grown from $434 million in
assets since becoming a public company at year-end 1993, to $1.5 billion at
March 31, 2003, without acquiring other financial institutions. Southwest
considers acquisitions of other financial institutions and other companies,
however, from time to time, although it does not have any specific agreements or
understandings for any such acquisition at present. Southwest also considers,
from time to time, the establishment of new lending, banking and other offices
in additional geographic markets. Southwest also extends loans to borrowers in
Oklahoma and neighboring states through participations with correspondent banks.
13
FINANCIAL CONDITION
TOTAL ASSETS
Southwest's total assets were $1.5 billion at March 31, 2003 and $1.3 billion at
December 31, 2002.
LOANS
Total loans, including loans held for sale, were $1.2 billion at March 31, 2003,
a 12% increase ($128.6 million) from December 31, 2002. Southwest experienced
increases in the categories of real estate construction loans ($53.9 million, or
41%); commercial and industrial loans ($48.1 million, or 14%);
government-guaranteed student loans ($31.1 million, or 26%); and commercial real
estate mortgages ($6.9 million, or 2%). These increases in loans were offset by
reductions in residential mortgage loans ($10.0 million, or 10%) and other
consumer loans ($1.4 million, or 6%). Loans held for sale, consisting of certain
residential mortgages and business loans, decreased $1.2 million, or 12%, while
portfolio loans increased $129.8 million, or 12%.
Management determines the appropriate level of the allowance for loan losses
using a systematic methodology. (See Note 4, "Allowance for Loan Losses," in the
Notes to Unaudited Consolidated Financial Statements.) The allowance for loan
losses increased by $1.3 million, or 11%, from December 31, 2002 to March 31,
2003. At March 31, 2003, the allowance for loan losses was $13.2 million, or
1.07% of total loans and 89.79% of nonperforming loans, compared to $11.9
million, or 1.08% of total loans and 92.11% of nonperforming loans, at December
31, 2002. (See "Results of Operations-Provision for Loan Losses.")
DEPOSITS AND OTHER BORROWINGS
Southwest's deposits were $1.2 billion at March 31, 2003, an increase of $129.9
million, or 13%, from $1.0 billion at December 31, 2002. Increases occurred in
all categories of deposits: time deposits increased $89.9 million, or 16%; money
market accounts increased $24.2 million, or 9%; noninterest-bearing demand
accounts increased $9.8 million, or 7%; interest-bearing demand accounts
increased $5.4 million, or 11%; and savings accounts increased $546,000, or 10%.
Stillwater National has unsecured brokered certificate of deposit lines of
credit in connection with its retail certificate of deposit program from Merrill
Lynch & Co., Morgan Stanley Dean Witter, Salomon Smith Barney, Prudential
Securities Inc., PaineWebber Inc., RBC Dain Rauscher Inc., and CountryWide
Securities that total $675.0 million. At March 31, 2003, $249.8 million in these
retail certificates of deposit were included in total deposits. Stillwater
National has other brokered certificates of deposit totaling $45.8 million
included in total deposits at March 31, 2003.
During the same period, other borrowings increased $1.1 million, or less than
1%.
SHAREHOLDERS' EQUITY
Shareholders' equity increased by $3.4 million, or 4%, due primarily to earnings
for the first three months of 2003 and stock option exercises, offset in part by
common stock dividends and a decrease in accumulated other comprehensive income
(net, after tax, unrealized gains on investment securities available for sale).
At March 31, 2003, Southwest and Stillwater National continued to exceed all
applicable regulatory capital requirements.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 and 2002
NET INCOME
For the first quarter of 2003, Southwest recorded net income of $3.5 million.
This was $435,000, or 14%, more than the $3.1 million in net income recorded for
the first quarter of 2002. Average shares outstanding were 5,827,499 for the
first quarter of 2003 and 5,702,426 for the same period in 2002. Basic and
diluted earnings per share increased to $0.60 and $0.58 per share for the first
quarter of 2003 from $0.54 and $0.52 per share for the same period in 2002,
respectively.
14
Net interest income increased $1.5 million, or 14%, for the first quarter of
2003 compared to the same period in 2002. This increase in net interest income
as well as an $816,000, or 31%, increase in other income was offset by a
$472,000, or 38%, increase in the provision for loan losses; a $1.1 million, or
14%, increase in other expense; and a $359,000, or 23%, increase in taxes on
income. For the first quarter of 2003, the return on average total equity was
14.59% compared to a 14.52% return on average total equity for the first quarter
of 2002.
NET INTEREST INCOME
Net interest income increased to $12.6 million for the first quarter of 2003
from $11.1 million for the same period in 2002 due to an $836,000, or 4%,
increase in interest income combined with a $697,000, or 9%, reduction in
interest expense. Yields on Southwest's interest-earning assets declined by 68
basis points, and the rates paid on Southwest's interest-bearing liabilities
declined by 70 basis points, resulting in an increase in the interest rate
spread to 3.41% for the first quarter of 2003 from 3.39% for the first quarter
of 2002. During the same periods, annualized net interest margin declined from
3.82% to 3.73%. The ratio of average interest-earning assets to average
interest-bearing liabilities decreased to 115.45% for the first quarter of 2003
from 115.64% for the first quarter of 2002.
Total interest income for the first quarter of 2003 was $19.8 million, a 4%
increase from $19.0 million during the same period in 2002. The principal factor
in the increase of interest income was the $195.2 million, or 17%, increase in
average interest-earning assets, which was partially offset by the 68 basis
point reduction in the yield earned on interest-earning assets. Southwest's
average loans increased $232.1 million, or 24%, and the related yield was
reduced to 6.07% for the first quarter of 2003 from 6.80% in 2002. During the
same period, average investment securities declined $36.6 million, or 17%, and
the related yield was reduced to 4.61% from 5.51%.
Total interest expense for the first quarter of 2003 was $7.2 million, a decline
of 9% from $7.9 million for the same period in 2002. The decline in total
interest expense can be attributed to the 70 basis point reduction in the rates
paid on interest-bearing liabilities, which was partially offset by the $170.7
million, or 17%, increase in average interest-bearing liabilities. Rates paid on
deposits decreased for all categories.
OTHER INCOME
Other income increased by $816,000, or 31%, for the first quarter of 2003
compared to the same period of 2002 primarily as a result of a $477,000, or 27%,
increase in service charges; a $293,000, or 46%, increase in gains on sales of
loans; and a $46,000, or 20%, increase in other noninterest income.
OTHER EXPENSES
Southwest's other expenses increased $1.1 million, or 14%, for the first quarter
of 2003 compared to the same period in 2002. This increase was primarily the
result of a $510,000, or 13%, increase in salaries and employee benefits; a
$223,000, or 10%, increase in general and administrative expenses; a $205,000,
or 12%, increase in occupancy expense; a $139,000, or 632%, increase in other
real estate expense; and a $6,000, or 8%, increase in FDIC and other insurance.
* * * * * * *
PROVISION FOR LOAN LOSSES
Southwest makes provisions for loan losses in amounts necessary to maintain the
allowance for loan losses at the level Southwest determines is appropriate based
on a systematic methodology. (See Note 4, "Allowance for Loan Losses," in the
Notes to Unaudited Consolidated Financial Statements.)
The allowance for loan losses of $13.2 million increased $1.3 million, or 11%,
from year-end 2002, and represented 1.07% of total loans, compared with 1.08% of
total loans at December 31, 2002. Loans of $1.2 billion at March 31, 2003 grew
$128.6 million, or 12%, from year-end 2002. A provision of $1.7 million was
recorded in the first three months of 2003, an increase of $472,000, or 38%,
from the first three months of 2002. The primary cause of the increase in the
allowance was growth in loans, particularly in real estate construction and
commercial loans.
15
Total nonaccrual loans increased $535,000, or 5%, from December 31, 2002, while
total nonperforming loans increased by $1.7 million, or 13%. Total nonperforming
assets of $15.2 million (which includes other real estate owned) increased by
$1.6 million, or 12%, and equaled 1.24% of total loans and other real estate,
the same percentage as at December 31, 2002. As shown in Note 4, total
nonperforming loans at March 31, 2003 represented 1.19% of total loans, compared
to $12.9 million, or 1.17% of total loans, at December 31, 2002.
TAXES ON INCOME
Southwest's income tax expense was $1.9 million and $1.6 million for the first
three months of 2003 and 2002, respectively. Southwest's effective tax rates
have been lower than federal and state statutory rates primarily because of
tax-exempt income on municipal obligations and loans and the organization in
July 2001 of a real estate investment trust.
LIQUIDITY
Liquidity is measured by a financial institution's ability to raise funds
through deposits, borrowed funds, capital, or the sale of highly marketable
assets such as residential mortgage loans and available for sale investments.
Southwest's portfolio of government-guaranteed student loans and SBA loans are
also readily salable. Additional sources of liquidity, including cash flow from
the repayment of loans, are also considered in determining whether liquidity is
satisfactory. Liquidity is also achieved through growth of deposits and liquid
assets, and accessibility to the capital and money markets. These funds are used
to meet deposit withdrawals, maintain reserve requirements, fund loans, and
operate the organization.
Southwest has available various forms of short-term borrowings for cash
management and liquidity purposes. These forms of borrowings include federal
funds purchased, securities sold under agreements to repurchase, and borrowings
from the Federal Reserve Bank ("FRB"), the Student Loan Marketing Association
("SLMA"), the F&M Bank of Tulsa ("F&M"), and the Federal Home Loan Bank of
Topeka ("FHLB"). Stillwater National also carries interest-bearing demand notes
issued by the U.S. Treasury in connection with the Treasury Tax and Loan note
program; the outstanding balance of those notes was $668,000 at March 31, 2003.
Stillwater National has approved federal funds purchase lines totaling $111.5
million with three other banks and one institutional broker; no amounts were
outstanding on these lines at March 31, 2003. In addition, Stillwater National
has available a $35.0 million line of credit from the SLMA and a $272.8 million
line of credit from the FHLB. Borrowings under the SLMA line would be secured by
student loans. Borrowings under the FHLB line are secured by all unpledged
securities and other loans. The SLMA line expires April 20, 2007; no amount was
outstanding on this line at March 31, 2003. The FHLB line of credit had an
outstanding balance of $141.5 million at March 31, 2003. Stillwater National
also has available unsecured brokered certificate of deposit lines of credit in
connection with its retail certificate of deposit program from Merrill Lynch &
Co., Morgan Stanley Dean Witter, Salomon Smith Barney, Prudential Securities
Inc., PaineWebber Inc., RBC Dain Rauscher Inc., and CountryWide Securities that
total $675.0 million. At March 31, 2003, $249.8 million in these retail
certificates of deposit were included in total deposits.
Stillwater National sells securities under agreements to repurchase with
Stillwater National retaining custody of the collateral. Collateral consists of
direct obligations of U.S. Government Agency issues, which are designated as
pledged with Stillwater National's safekeeping agent. These transactions are for
one-to-four day periods.
During the first three months of 2003, the only categories of other borrowings
whose averages exceeded 30% of ending shareholders' equity were repurchase
agreements and funds borrowed from the FHLB.
16
MARCH 31, 2003 MARCH 31, 2002
----------------------------- ---------------------------
FUNDS FUNDS
REPURCHASE BORROWED REPURCHASE BORROWED
AGREEMENTS FROM THE FHLB AGREEMENTS FROM THE FHLB
----------------------------- ---------------------------
(DOLLARS IN THOUSANDS)
Amount outstanding at end of period $58,233 $141,500 $57,994 $105,272
Weighted average rate paid at end of period 0.89% 3.09% 1.22% 3.81%
Average Balance:
For the three months ended $50,778 $155,371 $51,814 $129,844
Average Rate Paid:
For the three months ended 0.89% 2.99% 1.21% 3.47%
Maximum amount outstanding at any month end $58,233 $166,500 $57,994 $141,500
During the first three months of 2003, cash and cash equivalents increased by
$12.7 million. This increase was the net result of cash provided from financing
activities of $131.2 million (primarily from an increase in deposits) and cash
provided from operating activities of $8.4 million offset in part by cash used
in net loan origination and other investing activities of $126.9 million.
During the first three months of 2002, cash and cash equivalents decreased by
$5.8 million. This reduction was the net result of cash used in net loan
origination and other investing activities of $16.0 million and cash used in
financing activities of $786,000 offset in part by cash provided from operating
activities of $11.0 million.
CAPITAL RESOURCES
In the first three months of 2003, total shareholders' equity increased $3.4
million, or 4%. Earnings, net of cash dividends declared on common stock,
contributed $2.8 million to shareholders' equity during this three-month period.
The sale or issuance of common stock through the dividend reinvestment plan, the
employee stock purchase plan and the employee stock option plan contributed an
additional $1.4 million to shareholders' equity in the first three months of
2003, including tax benefits realized by Southwest relating to option exercises.
Accumulated comprehensive income, consisting of net unrealized gains (losses) on
investment securities available for sale (net of tax), declined to $1.5 million
at March 31, 2003 compared to $2.2 million at December 31, 2002.
Bank holding companies are required to maintain capital ratios in accordance
with guidelines adopted by the Federal Reserve Board ("FRB"). The guidelines are
commonly known as Risk-Based Capital Guidelines. At March 31, 2003, Southwest
exceeded all applicable capital requirements, having a total risk-based capital
ratio of 11.11%, a Tier I risk-based capital ratio of 10.04%, and a leverage
ratio of 8.66%. As of March 31, 2003, Stillwater National also met the criteria
for classification as a "well-capitalized" institution under the prompt
corrective action rules promulgated under the Federal Deposit Insurance Act.
Designation of the bank as a "well-capitalized" institution under these
regulations does not constitute a recommendation or endorsement of Stillwater
National by Federal bank regulators.
Southwest declared a dividend of $0.125 per common share payable on April 1,
2003 to shareholders of record as of March 18, 2003.
EFFECTS OF INFLATION
The unaudited consolidated financial statements and related unaudited
consolidated financial data presented herein have been prepared in accordance
with accounting principles generally accepted in the United States of America
and practices within the banking industry which require the measurement of
financial position and operating results in terms of historical dollars without
considering fluctuations in the relative purchasing power of money over time due
to inflation. Unlike most industrial companies, virtually all the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation.
17
* * * * * * *
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management has determined that no additional disclosures are necessary to assess
changes in information about market risk that have occurred since December 31,
2002.
CONTROLS AND PROCEDURES
Within the ninety days prior to the filing of this report, Southwest's
management, under the supervision and with the participation of its Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation of Southwest's disclosure controls and procedures, as
defined in Rule 13a-14 under the Securities Exchange Act of 1934. Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that Southwest's disclosure controls and procedures were adequate.
There were no significant changes (including corrective actions with regard to
significant or material weaknesses) in Southwest's internal controls or in other
factors subsequent to the date of the evaluation that could significantly affect
those controls.
NON-GAAP FINANCIAL MEASURES
None of the financial measures used in this report are defined as non-GAAP
financial measures under federal securities regulations. Other banking
organizations, however, may present such non-GAAP financial measures, which
differ from measures based upon accounting principles generally accepted in the
United States. For example, such non-GAAP measures may exclude certain income or
expense items in calculating operating income or efficiency ratios, or may
increase yields and margins to reflect the benefits of tax-exempt
interest-earning assets. Readers of this report should be aware that certain
measures, such as the efficiency ratio, are calculated using accounting
principles generally accepted in the United States.
18
PART II. OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits.
Exhibit 99.1 Certification of Principal Executive Officer
pursuant to 18 U.S.C. Section 1350
Exhibit 99.2 Certification of Principal Financial Officer
pursuant to 18 U.S.C. Section 1350
(b) Reports on Form 8-K.
Southwest filed a report on Form 8-K, dated January 22, 2003,
announcing, under item 9 of that form, the intention of Rick
Green, President and Chief Executive Officer, to sell a
portion of his holdings of Southwest common stock in order to
diversify his holdings for estate and retirement planning
purposes.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHWEST BANCORP, INC.
(Registrant)
By: /s/ Rick Green May 12, 2003
---------------------------------------- --------------------
Rick Green Date
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Kerby E Crowell May 12, 2003
---------------------------------------- -------------------
Kerby E. Crowell Date
Executive Vice President, Chief Financial
Officer and Secretary
(Principal Financial Officer)
20
CERTIFICATION
I, Rick Green, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Southwest Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 12, 2003 /s/ Rick Green
------------------- -----------------------------------------
Rick Green
President and Chief Executive Officer
(Principal Executive Officer)
21
CERTIFICATION
I, Kerby Crowell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Southwest Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 12, 2003 /s/ Kerby E. Crowell
-------------------- ---------------------------------------
Kerby E. Crowell
Executive Vice President, Chief Financial
Officer and Secretary
(Principal Financial Officer)
22