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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, 2004
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 74074
Stillwater, Oklahoma (Zip Code)
(Address of principal executive office)
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 registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[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.
12,077,857
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1 of 27
SOUTHWEST BANCORP, INC.
INDEX TO FORM 10-Q
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition at
March 31, 2004 and December 31, 2003 3
Unaudited Consolidated Statements of Operations for the
three months ended March 31, 2004 and 2003 4
Unaudited Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and 2003 5
Unaudited Consolidated Statements of Shareholders' Equity
for the three months ended March 31, 2004 6
Unaudited Consolidated Statements of Comprehensive Income
for the three months ended March 31, 2004 and 2003 6
Notes to Unaudited Consolidated Financial Statements 7
Unaudited Average Balances, Yields and Rates 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 21
ITEM 4. CONTROLS AND PROCEDURES 21
PART II. OTHER INFORMATION 22
SIGNATURES 23
2
SOUTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
MARCH 31,
2004 DECEMBER 31,
(UNAUDITED) 2003
----------- ------------
ASSETS:
Cash and cash equivalents $ 27,729 $ 33,981
Investment securities:
Held to maturity, fair value $12,867 (2004) and $16,144 (2003) 12,736 15,916
Available for sale, amortized cost $185,633 (2004) and $176,470 (2003) 187,141 177,074
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost 11,360 11,276
Loans held for sale 278,927 218,422
Loans receivable, net of allowance for loan losses
of $16,228 (2004) and $15,848 (2003) 1,124,127 1,074,566
Accrued interest receivable 11,939 11,321
Premises and equipment, net 19,454 19,818
Other assets 21,044 18,351
----------- -----------
Total assets $ 1,694,457 $ 1,580,725
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Noninterest-bearing demand $ 171,350 $ 167,332
Interest-bearing demand 61,280 53,955
Money market accounts 389,147 376,016
Savings accounts 7,418 6,903
Time deposits of $100,000 or more 412,659 358,130
Other time deposits 249,772 241,789
----------- -----------
Total deposits 1,291,626 1,204,125
Accrued interest payable 2,661 3,375
Income tax payable 5,688 2,850
Other liabilities 4,718 4,410
Other borrowings 202,678 183,850
Subordinated Debentures 72,180 72,180
----------- -----------
Total liabilities 1,579,551 1,470,790
Shareholders' equity:
Common stock - $1 par value; 20,000,000 shares authorized;
12,243,042 shares issued and outstanding 12,243 12,243
Capital surplus 7,653 6,997
Retained earnings 96,017 92,657
Accumulated other comprehensive income (loss) 896 360
Treasury stock, at cost; 205,809 (2004) and 287,410 (2003) shares (1,903) (2,322)
----------- -----------
Total shareholders' equity 114,906 109,935
----------- -----------
Total liabilities & shareholders' equity $ 1,694,457 $ 1,580,725
=========== ===========
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,
2004 2003
------- -------
Interest income:
Interest and fees on loans $20,804 $17,722
Investment securities:
U.S. Government and agency obligations 1,464 1,284
Mortgage-backed securities 188 371
State and political subdivisions 158 275
Other securities 143 143
Other interest-earning assets 1 4
------- -------
Total interest income 22,758 19,799
Interest expense:
Interest-bearing demand 86 81
Money market accounts 1,354 1,176
Savings accounts 5 4
Time deposits of $100,000 or more 1,954 2,243
Other time deposits 1,438 1,823
Other borrowings 1,222 1,295
Subordinated Debentures 1,081 600
------- -------
Total interest expense 7,140 7,222
------- -------
Net interest income 15,618 12,577
Provision for loan losses 1,649 1,722
Other income:
Service charges and fees 2,267 2,251
Other noninterest income 244 292
Gain on sales of loans receivable 606 937
Gain on sales of investment securities 1 2
------- -------
Total other income 3,118 3,482
Other expenses:
Salaries and employee benefits 5,159 4,312
Occupancy 2,231 1,922
FDIC and other insurance 95 78
Other real estate 17 161
General and administrative 3,010 2,421
------- -------
Total other expenses 10,512 8,894
------- -------
Income before taxes 6,575 5,443
Taxes on income 2,373 1,930
------- -------
Net income $ 4,202 $ 3,513
======= =======
Basic earnings per share $ 0.35 $ 0.30
======= =======
Diluted earnings per share $ 0.34 $ 0.29
======= =======
Cash dividends declared per share $ 0.07 $ 0.06
======= =======
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,
2004 2003
--------- ---------
Operating activities:
Net income $ 4,202 $ 3,513
Adjustments to reconcile net income to net
cash (used in) provided from operating activities:
Provision for loan losses 1,649 1,722
Deferred taxes (2,879) (844)
Depreciation and amortization expense 660 648
Amortization of premiums and accretion of
discounts on securities, net 30 44
Amortization of intangibles 79 67
Tax benefit from exercise of stock options 290 470
(Gain) Loss on sales/calls of securities (1) (2)
(Gain) Loss on sales of loans receivable (606) (937)
(Gain) Loss on sales of premises/equipment (6) (7)
(Gain) Loss on other real estate owned, net -- 109
Proceeds from sales of residential mortgage loans 16,565 47,083
Residential mortgage loans originated for resale (15,703) (43,998)
Proceeds from sales of government-guaranteed student loans 93,033 47,560
Government-guaranteed student loans originated for resale (162,593) (83,437)
Changes in assets and liabilities:
Accrued interest receivable (618) (865)
Other assets (21) (386)
Income taxes payable 2,838 1,987
Accrued interest payable (714) (572)
Other liabilities 213 349
--------- ---------
Net cash (used in) provided from operating activities (63,582) (27,496)
--------- ---------
Investing activities:
Proceeds from principal repayments, calls and maturities:
Held to maturity securities 3,175 4,785
Available for sale securities 26,631 25,978
Purchases of Federal Reserve Bank and Federal Home Loan
Bank stock (84) (1,802)
Purchases of available for sale securities (35,819) (23,602)
Loans originated and principal repayments, net (42,770) (95,339)
Purchases of premises and equipment (463) (1,116)
Proceeds from sales of premises and equipment 173 14
Proceeds from sales of other real estate owned 120 53
--------- ---------
Net cash (used in) provided from investing activities (49,037) (91,029)
--------- ---------
Financing activities:
Net increase (decrease) in deposits 87,501 129,875
Net increase (decrease) in other borrowings 18,828 1,119
Net proceeds from issuance of common stock 785 891
Common stock dividends paid (747) (635)
--------- ---------
Net cash (used in) provided from financing activities 106,367 131,250
--------- ---------
Net increase (decrease) in cash and cash equivalents (6,252) 12,725
Cash and cash equivalents,
Beginning of period 33,981 34,847
--------- ---------
End of period $ 27,729 $ 47,572
========= =========
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, 2004 12,243,042 $12,243 $6,997 $92,657 $360 $(2,322) $109,935
Cash dividends declared:
Common, $0.07 per share -- -- -- (842) -- -- (842)
Common stock issued:
Employee Stock Option Plan -- -- 336 -- -- 408 744
Employee Stock Purchase Plan -- -- 13 -- -- 5 18
Dividend Reinvestment Plan -- -- 17 -- -- 6 23
Tax benefit related to exercise
of stock options -- -- 290 -- -- -- 290
Other comprehensive income
(loss), net of tax -- -- -- -- 536 -- 536
Net income -- -- -- 4,202 -- -- 4,202
-------------------------------------------------------------------------
Balance, March 31, 2004 12,243,042 $12,243 $7,653 $96,017 $896 $(1,903) $114,906
=========================================================================
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 31,
2004 2003
------- -------
Net income $ 4,202 $ 3,513
Other comprehensive income (loss)
Unrealized holding gain (loss) on available
for sale securities 905 (861)
Reclassification adjustment for (gains) losses
arising during the period (1) (2)
------- -------
Other comprehensive income (loss), before tax 904 (863)
Tax (expense) benefit related to items
of other comprehensive income (loss) (368) 147
------- -------
Other comprehensive income (loss), net of tax 536 (716)
------- -------
Comprehensive income $ 4,738 $ 2,797
======= =======
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, 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, 2004 and the cash flows for the three months ended March 31, 2004
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, 2003.
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"), SNB Bank of Wichita ("SNB Wichita"), Healthcare Strategic Support,
Inc. ("HSSI"), and Business Consulting Group, Inc. ("BCG"). All significant
intercompany transactions and balances have been eliminated in consolidation.
NOTE 3: 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 the Dallas, Texas metropolitan area. 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, 2004 and December 31, 2003, substantially all of Southwest's
loans were collateralized with real estate, inventory, accounts receivable,
and/or other assets, or are guaranteed by agencies of the United States
Government.
At March 31, 2004, loans to individuals and businesses in the healthcare
industry totaled approximately $319.1 million, or 22% 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 $13.5 million at March 31, 2004. During the
first three months of 2004, $64 in interest income was received on nonaccruing
loans. If interest on those loans had been accrued for the three months ended
March 31, 2004, additional total interest income of $239,000 would have been
recorded.
7
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, 2004 DECEMBER 31, 2003
-------------- -----------------
(Dollars in thousands)
Balance at beginning of period $ 15,848 $ 11,888
Loans charged-off:
Real estate mortgage 280 717
Real estate construction -- 3
Commercial 1,057 3,915
Installment and consumer 112 442
---------- ----------
Total charge-offs 1,449 5,077
Recoveries:
Real estate mortgage 102 173
Real estate construction -- --
Commercial 52 230
Installment and consumer 26 112
---------- ----------
Total recoveries 180 515
---------- ----------
Net loans charged-off 1,269 4,562
Provision for loan losses 1,649 8,522
---------- ----------
Balance at end of period $ 16,228 $ 15,848
========== ==========
Loans outstanding:
Average $1,379,726 $1,269,216
End of period 1,419,282 1,308,836
Net charge-offs to total average loans (annualized) 0.37% 0.36%
Allowance for loan losses to total loans 1.14% 1.21%
Nonperforming assets and other risk elements of the loan portfolio are shown
below as of the indicated dates.
AT AT
MARCH 31, 2004 DECEMBER 31, 2003
-------------- -----------------
(Dollars in thousands)
Nonaccrual loans (1) $13,497 $14,530
Past due 90 days or more (2) 2,284 1,384
------- -------
Total nonperforming loans 15,781 15,914
Other real estate owned 1,938 1,699
------- -------
Total nonperforming assets $17,719 $17,613
======= =======
Nonperforming loans to loans receivable 1.11% 1.22%
Allowance for loan losses to nonperforming loans 102.83% 99.59%
Nonperforming assets to loans receivable and
other real estate owned 1.25% 1.34%
(1) The government-guaranteed portion of loans included in these totals was
$968,000 (2004) and $1.4 million (2003).
(2) The government-guaranteed portion of loans included in these totals was
$96,000 (2004) and $96,000 (2003).
The $1.0 million reduction in nonaccrual loans is primarily the result of
write-downs on three problem credits classified as nonaccrual at December 31,
2003 and $448,000 in nonaccrual loans that were returned to accrual status.
8
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. 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 a general 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
eighteen months or twelve months, but may be adjusted for categories where
eighteen and twelve month loss experience is historically unusual. 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 losses 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 on the fair value of the
collateral for certain collateral dependent loans. All of Southwest's nonaccrual
loans are considered to be impaired loans. The general 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. There were no changes in
estimation methods or assumptions that affected the methodology for assessing
the appropriateness of the allowance during the first quarter of 2004. Southwest
determined the level of the allowance for loan losses at March 31, 2004, was
appropriate, based on that methodology.
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.
NOTE 5: STOCK OPTION PLAN
The Southwest Bancorp, Inc. 1994 Stock Option Plan and 1999 Stock Option Plan
(the "Stock Plans") provide selected key employees with the opportunity to
acquire common stock. The exercise price of all options granted under the Stock
Plans is the fair market value on the grant date. Depending upon terms of the
stock option agreements, stock options generally become exercisable on an annual
basis and expire from five to ten years after the date of grant. Southwest
applies Accounting Principles Board Opinion No. 25 and related interpretations
in accounting for the Stock Plans; accordingly, no compensation expense related
to the grants of stock options has been recorded in the accompanying
consolidated statements of operations. Had compensation cost for the Stock Plans
been determined based upon the fair value of the options at their grant date as
prescribed in Statement of Financial Accounting Standard ("SFAS") No. 123,
Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure, Southwest's proforma
data would have been as follows:
9
FOR THE THREE MONTHS
ENDED MARCH 31,
2004 2003
------ ------
(Dollars in thousands,
except per share data)
Net income, as reported $4,202 $3,513
Less: Stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects (126) (106)
------ ------
Proforma net income $4,076 $3,407
====== ======
Earnings per share:
Basic -- as reported $ 0.35 $0.30
Basic -- proforma $ 0.34 $0.29
Diluted -- as reported $ 0.34 $0.29
Diluted -- proforma $ 0.33 $0.28
NOTE 6: 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, 2004 and 2003, there were zero and 221,588 antidilutive options to
purchase common shares, respectively. Per share amounts in this report have been
restated to reflect the 2-for-1 stock split declared on July 24, 2003.
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,
2004 2003
---------- ----------
Weighted average shares outstanding:
Basic earnings per share 11,995,400 11,654,998
Effect of dilutive securities:
Stock options 500,853 469,974
---------- ----------
Weighted average shares outstanding:
Diluted earnings per share 12,496,253 12,124,972
========== ==========
NOTE 7: SHAREHOLDERS' EQUITY
SHARE REPURCHASE PROGRAM
On April 22, 2004, the Board of Directors of Southwest authorized a program for
the repurchase of up to 5% (603,675 shares) of Southwest's outstanding common
stock, par value $1.00 per share, in connection with shares expected to be
issued under Southwest's dividend reinvestment, stock option, and employee
benefit plans and for other corporate purposes. The share repurchases are
expected to be made primarily on the open market from time to time until April
1, 2005, or earlier termination of the repurchase program by the Board.
Repurchases under the program will be made at the discretion of management based
upon market, business, legal, accounting, and other factors. This program, which
has been publicly announced, replaced a publicly announced program than expired
on March 31, 2004. No shares were repurchased under the expired program during
the first quarter of 2004.
10
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
$36.67. 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.
NOTE 8: OPERATING SEGMENTS
Southwest operates four principal segments: Oklahoma banking, Other states
banking, loans originated for sale in the secondary market ("Secondary market"),
and an Other operations segment. The Oklahoma banking segment consists of three
operating units that provide lending and deposit services to customers in the
state of Oklahoma. The Other states banking segment consists of two operating
units that provide lending and deposit services to the customers in the states
of Texas and Kansas. The Secondary market segment consists of two operating
units that provide government-guaranteed student lending services to
post-secondary students in Oklahoma and several other states and residential
mortgage lending services to customers in Oklahoma, Texas, and Kansas.
Southwest's fund management unit is included in Other operations. The primary
purpose of this unit is to manage Southwest's overall liquidity needs and
interest rate risk. Each segment borrows funds from and provides funds to the
funds management unit as needed to support its operations.
Southwest identifies reportable segments by type of service provided and
geographic location. Operating results are adjusted for intercompany loan
participations and borrowings, allocated service costs, and management fees.
The accounting policies of each reportable segment are the same as those of
Southwest. Expenses for consolidated back-office operations are allocated to
operating segments based on estimated uses of those services. General overhead
expenses such as executive administration, accounting and internal audit are
allocated based on the direct expense and/or deposit and loan volumes of the
operating segment. Income tax expense for the operating segments is calculated
essentially at statutory rates. The Other operations segment records the tax
expense or benefit necessary to reconcile the consolidated financial statements.
The following table summarizes financial results by operating segment:
For the Three Months Ended March 31, 2004
-------------------------------------------------------------
Oklahoma Other States Secondary Other Total
Banking Banking Market Operations Company
-------------------------------------------------------------
(Dollars in thousands)
Net interest income $ 10,106 $ 2,874 $ 3,556 $ (918) $ 15,618
Provision for loan losses 1,133 516 -- -- 1,649
Other income 1,727 283 513 595 3,118
Other expenses 6,818 1,334 1,264 1,096 10,512
- ------------------------------------------------------------------------------------------
Income before taxes 3,882 1,307 2,805 (1,419) 6,575
Taxes on income 1,444 427 1,051 (549) 2,373
- ------------------------------------------------------------------------------------------
Net income $ 2,438 $ 880 $ 1,754 $ (870) $ 4,202
==========================================================================================
Fixed asset expenditures $ 81 $ 173 $ 2 $ 207 $ 463
Total assets at period end $892,058 $261,602 $278,797 $262,000 $1,694,457
11
For the Three Months Ended March 31, 2003
-------------------------------------------------------------
Oklahoma Other States Secondary Other Total
Banking Banking Market Operations Company
-------------------------------------------------------------
(Dollars in thousands)
Net interest income $ 10,059 $ 1,358 $ 1,786 $ (626) $ 12,577
Provision for loan losses 1,114 608 -- -- 1,722
Other income 1,566 15 947 954 3,482
Other expenses 6,213 653 966 1,062 8,894
- ------------------------------------------------------------------------------------------
Income before taxes 4,298 112 1,767 (734) 5,443
Taxes on income 1,607 43 667 (387) 1,930
- ------------------------------------------------------------------------------------------
Net income $ 2,691 $ 69 $ 1,100 $ (347) $ 3,513
==========================================================================================
Fixed asset expenditures $ 71 $ 519 $ 28 $ 498 $ 1,116
Total assets at period end $927,347 $154,784 $164,405 $240,299 $1,486,835
12
SOUTHWEST BANCORP, INC.
UNAUDITED AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)
FOR THE THREE MONTHS ENDED MARCH 31,
2004 2003
-------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD/RATE BALANCE YIELD/RATE
-------------------------------------------------
ASSETS:
Loans receivable $1,379,726 6.06% $1,184,985 6.07%
Investment securities 206,834 3.80 182,557 4.61
Other interest-earning assets 671 0.60 1,434 1.13
----------------------------------------------
Total interest-earning assets 1,587,231 5.77 1,368,976 5.87
Noninterest-earning asset 62,751 54,282
---------- ----------
Total assets $1,649,982 $1,423,258
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing demand $ 59,614 0.58% $ 54,226 0.61%
Money market accounts 385,886 1.41 271,671 1.76
Savings accounts 7,330 0.27 6,147 0.26
Time deposits 631,719 2.16 612,908 2.69
----------------------------------------------
Total interest-bearing deposits 1,084,549 1.79 944,952 2.29
Other borrowings 212,318 2.31 215,796 2.43
Long-term debt 72,180 5.92 25,787 9.30
----------------------------------------------
Total interest-bearing liabilities 1,369,047 2.10 1,186,535 2.47
Noninterest-bearing demand 158,485 124,019
Other noninterest-bearing liabilities 9,736 15,077
Shareholders' equity 112,714 97,627
---------- ----------
Total liabilities and shareholders' equity $1,649,982 $1,423,258
========== ==========
Interest rate spread 3.67% 3.40%
==== ====
Net interest margin (1) 3.96% 3.73%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 115.94% 115.38%
====== ======
(1) Net interest margin = annualized net interest income / average
interest-earning assets
13
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; expectations regarding future financial performance of Southwest and
its operating segments; assessments of loan quality, probable loan losses, and
the amount and timing of loan payoffs; liquidity, contractual obligations,
off-balance sheet risk, 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, market behavior, and
other economic conditions; future laws, regulations, and accounting principles;
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"), SNB Bank of
Wichita ("SNB Wichita"), Healthcare Strategic Support, Inc., and Business
Consulting Group, Inc. ("BCG"). Southwest is an independent institution.
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, Wichita, Kansas and metropolitan Dallas, Texas;
loan production offices 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 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 received regulatory approval to expand further in Texas by opening
a second branch office in the Dallas metropolitan area. The office will be
located in Preston Center at 5950 Berkshire Lane, Dallas, Texas.
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 nearly $1.7 billion
at March 31, 2004, without acquiring other financial institutions. Southwest
considers acquisitions of other financial institutions and other companies 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.
14
FINANCIAL CONDITION
TOTAL ASSETS
Southwest's total assets were $1.7 billion at March 31, 2004 and $1.6 billion at
December 31, 2003.
LOANS
Total loans, including loans held for sale, were $1.4 billion at March 31, 2004,
an 8% increase ($110.4 million) from December 31, 2003. Southwest experienced
increases in all categories of loans other than real estate construction loans
as shown in the following table:
MARCH 31, DECEMBER 31,
2004 2003 $ CHANGE % CHANGE
-------------------------------------------------
(Dollars in thousands)
Real estate mortgage
Commercial $ 431,240 $ 402,596 $ 28,644 7.11 %
One-to-four residential 83,897 83,250 647 0.78
Real estate construction 225,727 230,292 (4,565) (1.98)
Commercial 384,680 355,965 28,715 8.07
Installment and consumer
Government-guaranteed student loans 268,270 211,546 56,724 26.81
Other 25,468 25,187 281 1.12
---------- ---------- -------- ----
Total loans $1,419,282 $1,308,836 $110,446 8.44 %
========== ========== ======== ====
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 $380,000, or 2%, from December 31, 2003 to March 31, 2004.
At March 31, 2004, the allowance for loan losses was $16.2 million, or 1.14% of
total loans and 102.83% of nonperforming loans, compared to $15.8 million, or
1.21% of total loans and 99.59% of nonperforming loans, at December 31, 2003.
(See "Results of Operations-Provision for Loan Losses.")
DEPOSITS AND OTHER BORROWINGS
Southwest's deposits were $1.3 billion at March 31, 2004, an increase of $87.5
million, or 7%, from $1.2 billion at December 31, 2003. Increases occurred in
all categories of deposits as shown in the following table:
MARCH 31, DECEMBER 31,
2004 2003 $ CHANGE % CHANGE
-------------------------------------------------
(Dollars in thousands)
Noninterest-bearing demand $ 171,350 $ 167,332 $ 4,018 2.40%
Interest-bearing demand 61,280 53,955 7,325 13.58
Money market accounts 389,147 376,016 13,131 3.49
Savings accounts 7,418 6,903 515 7.46
Time deposits of $100,000 or more 412,659 358,130 54,529 15.23
Other time deposits 249,772 241,789 7,983 3.30
---------- ---------- -------- ----
Total deposits $1,291,626 $1,204,125 $ 87,501 7.27%
========== ========== ======== ====
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, Citigroup Global Markets, Inc.,
Wachovia Securities LLC, UBS Financial Services, Inc., RBC Dain Rauscher, Inc.
and CountryWide Securities that total $675.0 million. At March 31, 2004, $270.0
million in these retail certificates of deposit were included in total deposits.
Stillwater National has other brokered certificates of deposit totaling $38.6
million included in total deposits at March 31, 2004.
15
Other borrowings increased $18.8, or 10%, during the first three months of 2004.
SHAREHOLDERS' EQUITY
Shareholders' equity increased by $5.0 million, or 5%, due primarily to earnings
for the first three months of 2004, stock option exercises, and an increase in
accumulated other comprehensive income (net, after tax, unrealized gains on
investment securities available for sale), offset in part by common stock
dividends. At March 31, 2004, Southwest, Stillwater National and SNB Wichita
continued to exceed all applicable regulatory capital requirements.
RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2004 and 2003
Net income for the first quarter of 2004 of $4.2 million represented an increase
of $689,000, or 20%, over the $3.5 million earned in the first quarter of 2003.
Diluted earnings per share were $0.34 compared to $0.29, a 17% increase. The
increase in net income was primarily the result of a $3.0 million, or 24%,
increase in net interest income fueled by substantial loan growth, offset in
part by a $364,000, or 10%, decline in other income due mainly to lower gains on
loans sold, and a $1.6 million, or 18%, increase in other expense, mainly as a
result of increased salaries and benefits from increased staff and a one-time
executive retirement expense, and increased occupancy and general and
administrative expenses.
On an operating segment basis, the increase in net income was led by an $811,000
increase in net income for Other states banking and a $654,000 increase in the
contribution from the Secondary market segment, offset by a decline in Oklahoma
banking and an increased deficit in Other operations. The decrease in Oklahoma
banking was largely the result of increased operating expenses, which included
the one-time executive retirement charge, as well as increases in other
expenses. Oklahoma banking continues to provide the majority ($2.4 million) of
Southwest's net income. However, in the first quarter, the contribution of Other
states banking was approximately 21%, while the Secondary market segment
contributed $1.8 million, or over 40%. The contribution from the Secondary
market segment may vary significantly from period to period as a result of
changes in interest rates and market behavior; the number of schools
participating in Southwest's student lending programs, the sizes of their
enrolment, and the graduation status of student borrowers; and other factors.
16
NET INTEREST INCOME
MARCH 31,
2004 2003 $ CHANGE % CHANGE
-----------------------------------------
(Dollars in thousands)
Interest income:
Interest and fees on loans $20,804 $17,722 $3,082 17.39 %
Investment securities:
U.S. Government and agency obligations 1,464 1,284 180 14.02
Mortgage-backed securities 188 371 (183) (49.33)
State and political subdivisions 158 275 (117) (42.55)
Other securities 143 143 0 0.00
Other interest-earning assets 1 4 (3) (75.00)
---------------------------------------
Total interest income 22,758 19,799 2,959 14.95
Interest expense:
Interest-bearing demand 86 81 5 6.17
Money market accounts 1,354 1,176 178 15.14
Savings accounts 5 4 1 25.00
Time deposits of $100,000 or more 1,954 2,243 (289) (12.88)
Other time deposits 1,438 1,823 (385) (21.12)
Other borrowings 1,222 1,295 (73) (5.64)
Subordinated Debentures 1,081 600 481 80.17
---------------------------------------
Total interest expense 7,140 7,222 (82) (1.14)
---------------------------------------
Net interest income $15,618 $12,577 $3,041 24.18 %
=======================================
Yields on Southwest's interest-earning assets declined by 10 basis points, and
the rates paid on Southwest's interest-bearing liabilities declined by 37 basis
points, resulting in an increase in the interest rate spread to 3.67% for the
first quarter of 2004 from 3.40% for the first quarter of 2003. During the same
periods, annualized net interest margin increased from 3.73% to 3.96%. The ratio
of average interest-earning assets to average interest-bearing liabilities
increased to 115.94% for the first quarter of 2004 from 115.38% for the first
quarter of 2003.
The principal factor in the increase of interest income was the $218.3 million,
or 16%, increase in average interest-earning assets, which was partially offset
by the 10 basis point reduction in the yield earned on interest-earning assets.
Southwest's average loans increased $194.7 million, or 16%, and the related
yield was reduced to 6.06% for the first quarter of 2004 from 6.07% in 2003.
During the same period, average investment securities increased $24.3 million,
or 13%, and the related yield was reduced to 3.80% from 4.61%.
The decline in total interest expense can be attributed to the 37 basis point
reduction in the rates paid on interest-bearing liabilities, which was partially
offset by the $182.5 million, or 15%, increase in average interest-bearing
liabilities. The increase in interest expense on subordinated debentures is due
to the additional interest expense from two new issuances of subordinated
debentures that occurred in the third and fourth quarters of 2003. Rates paid on
deposits decreased for all categories other than savings deposits, which
increased one basis point.
17
OTHER INCOME
MARCH 31,
2004 2003 $ CHANGE % CHANGE
-----------------------------------------
(Dollars in thousands, except share data)
Other income:
Service charges and fees $2,267 $2,251 $ 16 0.71 %
Other noninterest income 244 292 (48) (16.44)
Gain on sales of loans receivable 606 937 (331) (35.33)
Gain on sales of investment securities 1 2 (1) (50.00)
------------------------------------
Total other income $3,118 $3,482 $ (364) (10.45)%
====================================
Gain on sales of loans receivable, the major factor in the reduction of other
income, declined due primarily to a $421,000 reduction in gain on sales of
mortgage loans, which occurred due to the lower refinancing demand created by
slightly higher mortgage interest rates during the first quarter of 2004 as
compared to those prevalent during the first quarter of 2003.
OTHER EXPENSES
MARCH 31,
2004 2003 $ CHANGE % CHANGE
-----------------------------------------
(Dollars in thousands, except share data)
Other expenses:
Salaries and employee benefits $ 5,159 $4,312 $ 847 19.64 %
Occupancy 2,231 1,922 309 16.08
FDIC and other insurance 95 78 17 21.79
Other real estate 17 161 (144) (89.44)
General and administrative 3,010 2,421 589 24.33
-------------------------------------
Total other expenses $10,512 $8,894 $1,618 18.19 %
=====================================
Salaries and employee benefits increased $847,000 primarily as a result of an
increase in the number of employees, a one-time charge relating to executive
retirement in the first quarter of 2004 of approximately $492,000, as well as
normal compensation increases. The number of full-time equivalent employees
increased to 346 at the end of March 2004 from 323 at the end of March 2003.
The primary factor in the increase of occupancy expense was a $222,000 increase
in data processing charges for government-guaranteed student loans due to a
larger volume of loans being processed.
The increase in general and administrative expenses reflected increased fees
paid in connection with government-guaranteed loans, which increased by $92,000
and expenses related to the development of business relationships in our new and
current market areas, which increased by $66,000.
* * * * * * *
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 $16.2 million increased $380,000, or 2%, from
year-end 2003, and represented 1.14% of total loans, compared with 1.21% of
total loans at December 31, 2003. Loans of $1.4 billion at March 31, 2004 grew
$110.4 million, or 8%, from year-end 2003. A provision for loan losses of $1.6
million was recorded in the first three months of 2004, a decrease of $73,000,
or 4%, from the first three months of 2003.
18
Total nonaccrual loans decreased $1.0 million, or 7%, from December 31, 2003,
while total nonperforming loans decreased $133,000, or 1%. Total nonperforming
assets of $17.7 million (which includes other real estate owned) increased
$106,000, or 1%, and equaled 1.25% of total loans and other real estate. As
shown in Note 4, total nonperforming loans at March 31, 2004 represented 1.11%
of total loans, compared to $15.9 million, or 1.22% of total loans, at December
31, 2003.
TAXES ON INCOME
Southwest's income tax expense was $2.4 million and $1.9 million for the first
three months of 2004 and 2003, respectively, an increase of $443,000, or 23%.
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 as well as
tax credits generated by certain lending and investment activities.
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 $1.2 million at March 31,
2004. Stillwater National has approved federal funds purchase lines totaling
$166.5 million with two other banks and four institutional brokers; $26.5
million was outstanding on these lines at March 31, 2004. In addition,
Stillwater National has available a $35.0 million line of credit from the SLMA
and a $313.5 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, 2004. The FHLB
line of credit had an outstanding balance of $131.7 million at March 31, 2004.
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, Citigroup Global Markets,
Inc., Wachovia Securities LLC, UBS Financial Services, Inc., RBC Dain Rauscher
Inc., and CountryWide Securities that total $675.0 million. At March 31, 2004,
$270.0 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 2004, the only categories of other borrowings
whose averages exceeded 30% of ending shareholders' equity were repurchase
agreements and funds borrowed from the FHLB.
19
MARCH 31, 2004 MARCH 31, 2003
-------------------------- ---------------------------
FUNDS FUNDS
REPURCHASE BORROWED REPURCHASE BORROWED
AGREEMENTS FROM THE FHLB AGREEMENTS FROM THE FHLB
-------------------------- ---------------------------
(DOLLARS IN THOUSANDS)
Amount outstanding at end of period $ 43,243 $131,715 $ 58,233 $141,500
Weighted average rate paid at end of period 0.62% 3.16% 0.89% 3.09%
Average Balance:
For the three months ended $ 39,408 $142,344 $ 50,778 $155,371
Average Rate Paid:
For the three months ended 0.62% 3.06% 0.89% 2.99%
Maximum amount outstanding at any month end $ 43,243 $144,470 $ 58,233 $166,500
During the first three months of 2004, cash and cash equivalents decreased by
$6.2 million, or 18%, to $27.7 million. This decrease was the net result of cash
used in net loan origination and other investing activities of $49.0 million and
cash used in operating activities of $63.6 million offset in part by cash
provided from financing activities of $106.4 million (primarily from an increase
in deposits).
During the first three months of 2003, cash and cash equivalents increased by
$12.7 million, or 37%, to $47.6 million. This increase was the net result of
cash used in net loan origination and other investing activities of $91.0
million and cash used in operating activities of $27.5 million offset in part by
cash provided from financing activities of $131.2.
CAPITAL RESOURCES
In the first three months of 2004, total shareholders' equity increased $5.0
million, or 5%, to $114.9 million. Earnings, net of cash dividends declared on
common stock, contributed $3.4 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 $1.1 million to shareholders' equity in
the first three months of 2004, including tax benefits realized by Southwest
relating to option exercises. Accumulated comprehensive income, consisting of
net unrealized gains on investment securities available for sale (net of tax),
increased to $896,000 at March 31, 2004 compared to $360,000 at December 31,
2003.
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, 2004, Southwest
exceeded all applicable capital requirements, having a total risk-based capital
ratio of 14.63%, a Tier I risk-based capital ratio of 11.10%, and a leverage
ratio of 9.21%. As of March 31, 2004, 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. SNB Wichita began operating in November
2003 and has not yet received notification from the Office of Thrift Supervision
concerning its capital position.
Southwest declared a dividend of $0.07 per common share payable on April 1, 2004
to shareholders of record as of March 17, 2004.
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
20
financial institution are monetary in nature. As a result, interest rates have a
more significant impact on a financial institution's performance than do the
effects of general levels of inflation.
* * * * * * *
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,
2003.
CONTROLS AND PROCEDURES
Southwest's management, under the supervision and with the participation of its
Chief Executive Officer and the Chief Financial Officer, evaluated, as of the
last day of the period covered by this report, the effectiveness of the design
and operation of Southwest's disclosure controls and procedures, as defined in
Rule 13a-15 under the Securities Exchange Act of 1934. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that
Southwest's disclosure controls and procedures were adequate. There were no
significant changes in Southwest's internal controls over financial reporting
(as defined in Rule 13a-15 under the Securities Exchange Act of 1934) during the
quarter ended March 31, 2004, that have materially affected, or are reasonably
likely to materially affect, Southwest's internal controls over financial
reporting.
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. Accordingly, some of the measures used in this report
may not be directly comparable with non-GAAP measures used by some other
financial institutions.
21
PART II. OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in securities, use of proceeds, and issuer purchases of Equity
Securities
There were no purchases of Southwest common stock made by or on behalf
of Southwest or any affiliated purchasers of Southwest (as defined in
Securities and Exchange Commission Rule 10b-18) during the first three
months of 2004. On April 22, 2004, the Board of Directors of Southwest
authorized a program for the repurchase of up to 5% (603,675 shares) of
Southwest's outstanding common stock, par value $1.00 per share, in
connection with shares expected to be issued under Southwest's dividend
reinvestment, stock option, and employee benefit plans and for other
corporate purposes. The share repurchases are expected to be made
primarily on the open market from time to time until April 1, 2005, or
earlier termination of the repurchase program by the Board. Repurchases
under the program will be made at the discretion of management based
upon market, business, legal, accounting, and other factors. This
program, which has been publicly announced, replaced a publicly
announced program that expired on March 31, 2004.
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 31(a),(b) Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 32(a),(b) 18 U.S.C. Section 1350 Certifications
(b) Reports on Form 8-K.
Southwest filed a report on Form 8-K, dated February 2, 2004,
announcing, under items 7, 9 and 12 of that form, earnings for the
fourth quarter of 2003.
Southwest filed a report on Form 8-K, dated April 16, 2004, announcing,
under item 5 of that form, a proposal of certain changes to the
Registrant's 1999 Stock Option Plan.
Southwest filed a report on Form 8-K, dated April 21, 2004, announcing,
under items 7, 9 and 12 of that form, earnings for the first quarter of
2004.
Southwest filed a report on Form 8-K, dated April 22, 2004, announcing,
under items 5 and 7 of that form, the establishment of a share
repurchase program.
22
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 7, 2004
------------------------------------- ------------------
Rick Green Date
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Kerby Crowell May 7, 2004
------------------------------------- ------------------
Kerby Crowell Date
Executive Vice President, Chief Financial
Officer and Secretary
(Principal Financial Officer)
23