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For additional information:
Mark W. Funke
President & CEO
Joe T. Shockley, Jr.
EVP & CFO
(405) 372-2230 |
For Immediate Release
Southwest Bancorp, Inc. Reports Fourth Quarter 2014 Results
and Announces Increased Quarterly Dividend
January 20, 2015, Stillwater, Oklahoma . . . . Southwest Bancorp, Inc. (NASDAQ Global Select Market - OKSB), (“Southwest”), today reported net income for the fourth quarter of 2014 of $5.9 million, or $0.30 per diluted share, compared to $5.3 million, or $0.27 per diluted share, for the third quarter of 2014. Net income for the year ended December 31, 2014 totaled $21.0 million, or $1.07 per diluted share, compared to $17.4 million, or $0.89 per diluted share, for the year ended December 31, 2013.
Southwest announced that its board of directors has approved an increase in the quarterly cash dividend from $0.04 per share to $0.06 per share payable February 13, 2015 to shareholders of record as of January 30, 2015.
Mark Funke, President and CEO, stated, “The quarterly and annual results reflect continued improvement in asset quality and our focus on growing loans and customer relationships. Our efforts produced several highlights.
| · | | Loan growth in the fourth quarter was $32.6 million and $129.1 million or 10% for the year. |
| · | | The quarterly net interest margin was 3.47% (normalized) for December 31, 2014 compared to 3.44% for September 30, 2014 and 3.42% for December 31, 2013. |
| · | | Asset quality improved as nonperforming loans decreased $5.6 million, or 37%, and potential problem loans decreased $30.3 million, or 47%, during the fourth quarter. The improved asset quality resulted in a negative provision of $2.4 million for the quarter.” |
“Our positive financial results for 2014 reflect the good work of our associates at Bank SNB and a growing customer base. Additionally, our earnings reflect several positive one-time events, including the divestiture of three branches during the second quarter resulting in $4.4 million in pre-tax income. We will continue to focus our company on growing consistent, conservative, and sustainable earnings through the expansion of our revenue base while prudently managing our expenses.”
On November 19, 2014, Southwest’s banking subsidiary, Bank SNB, welcomed five established bankers from the Fort Worth, Texas area, and announced the filing of an application for a full-service branch in Fort Worth, Texas, which was approved and the branch formally opened on January 9, 2015.
In the third quarter, Southwest’s board of directors authorized the repurchase of up to 5.0% or 990,000 shares, of its outstanding common stock, par value $1.00 per share. The share repurchases are expected to be made primarily on the open market from time to time until August 14, 2015. Repurchases under the program are available at the discretion of management based upon market, business, legal, and other factors. During the third and fourth quarters, Southwest repurchased 617,818 shares for a total of $10.3 million in treasury stock.
Financial Overview
Condition: At December 31, 2014, total assets of $1.9 billion increased $41.1 million from September 30, 2014. Total loans of $1.4 billion increased $32.6 million from September 30, 2014 and total investment securities of $365.6 million decreased $5.0 million compared to September 30, 2014. Cash and cash equivalents at December 31, 2014 were $140.9 million, up $10.8 million from September 30, 2014.
At December 31, 2014, the allowance for loan losses was $28.5 million, compared to $36.7 million at December 31, 2013 and $30.9 million at September 30, 2014. The allowance for loan losses to portfolio loans was 2.03% as of December 31, 2014, compared to 2.89% as of December 31, 2013 and 2.27% as of September 30, 2014. The allowance for loan losses to nonperforming loans was 302.26% as of December 31, 2014, compared to 184.5% as of December 31, 2013 and 205.29% as of September 30, 2014.
Nonperforming loans were $9.4 million at December 31, 2014, a decrease of $10.5 million from December 31, 2013, and a decrease of $5.6 million from September 30, 2014. Other real estate at December 31, 2014 was $3.1 million, an increase of $0.4 million from December 31, 2013, but a decrease of $0.4 million when compared to September 30, 2014. Nonperforming assets were $12.5 million, or 0.89% of portfolio loans and other real estate, as of December 31, 2014, compared to $22.5 million, or 1.77% of portfolio loans and other real estate, as of December 31, 2013, and $18.5 million, or 1.36% of portfolio loans and other real estate, as of September 30, 2014.
Total core funding, which includes all non-brokered deposits and sweep repurchase agreements, comprised 94% and 92% of total funding as of December 31, 2014 and September 30, 2014, respectively. Wholesale funding, including Federal Home Loan Bank borrowings, federal funds purchased, and brokered deposits, accounted for 6% and 8% of total funding at December 31, 2014 and September 30, 2014, respectively. See Table 7 for details on core funding and non-brokered deposits, which are non-GAAP financial measures.
The capital ratios of Southwest and Bank SNB as of December 31, 2014 exceeded the criteria for regulatory classification as “well-capitalized”. Southwest’s total regulatory capital was $334.3 million, for a total risk-based capital ratio of 20.96%, and Tier 1 capital was $314.2 million, for a Tier 1 risk-based capital ratio of 19.70%. Bank SNB had total regulatory capital of $298.2 million, for a total risk-based capital ratio of 18.81% and Tier 1 capital of $278.2 million, for a Tier 1 risk-based capital ratio of 17.55%. Designation as a well-capitalized institution under regulations does not constitute a recommendation or endorsement by bank regulators.
Fourth Quarter Results:
Summary: For the fourth quarter of 2014, net income was $5.9 million, compared to $6.8 million for the fourth quarter of 2013 and $5.3 million for the third quarter of 2014.
The $0.9 million decrease in our net income compared to the fourth quarter of 2013 was primarily the result of a $4.1 million decrease in the negative provision for loan losses, offset in part by a $1.5 million increase in noninterest income, a $1.0 million decrease in noninterest expense, and a $0.8 million increase in net interest income.
The $0.6 million increase in net income compared to the third quarter of 2014 was primarily due to the $0.8 million increase in net interest income and the $1.5 million increase in noninterest income, due to the current quarter’s gain recognized on the divestiture of a private equity investment and interest rate swap income recognized in the quarter. These increases were offset in part by a $0.5 million decrease in the negative provision for loan losses and a $0.7 million increase in noninterest expense, primarily driven by increased other real estate expenses and a write-down of certain leasehold improvements.
Net Interest Income: Net interest income totaled $16.6 million for both the fourth quarter of 2014 and 2013, and $15.8 million for the third quarter of 2014, an increase of $0.8 million, or 5%. Net interest margin was 3.52% for the fourth quarter of 2014, compared to 3.42% for the fourth quarter of 2013 and 3.44% for the third quarter of 2014. Included in interest income for the fourth quarter of 2014 was $0.2 million due to interest recovery on nonaccrual loans. The net effect of this additional income on the net interest margin was a 5 basis point increase in the fourth quarter of 2014. Loans (including loans held for sale) increased $32.6 million, or 2%, when compared to September 30, 2014.
Provision for Loan Losses and Net Charge-offs: The provision for loan losses is the amount that is required to maintain the allowance for losses at an appropriate level based upon the inherent risks in the loan portfolio after
the effects of net charge-offs or net recoveries for the period. The provision for loan losses was a negative provision (or credit) of $2.4 million for the fourth quarter of 2014, compared to a negative provision of $6.5 million for the fourth quarter of 2013, and a negative provision of $2.9 million for the third quarter of 2014. During the fourth quarter of 2014, net charge-offs totaled $0.1 million, or 0.02% (annualized) of average portfolio loans, compared to net recoveries of $3.1 million, or (0.96)% (annualized) of average portfolio loans for the fourth quarter of 2013 and net recoveries of $0.7 million, or (0.21)% (annualized) of average portfolio loans for the third quarter of 2014.
Noninterest Income: Noninterest income totaled $4.6 million for the fourth quarter of 2014, compared to $3.1 million for both the fourth quarter of 2013 and the third quarter of 2014.
The $1.5 million increase from the fourth quarter of 2013 is primarily the result of a $1.1 million gain on sale of a private equity investment during the fourth quarter of 2014 and a $0.4 million increase in other noninterest income, which is primarily due to swap fee income.
The $1.5 million increase from the third quarter of 2014 is primarily the result of a $1.1 million gain on sale of a private equity investment during the fourth quarter of 2014, a $0.2 million increase in other noninterest income primarily due to 2014 swap fee income, and a $0.1 million increase in gain on sale of mortgage loans.
Noninterest Expense: Noninterest expense totaled $14.1 million for the fourth quarter of 2014, compared to $15.1 million for the fourth quarter of 2013 and $13.4 million for the third quarter of 2014.
The $1.0 million decrease in noninterest expense from the fourth quarter of 2013 consisted of a $0.1 million decrease in other real estate expense due to a reduction of income from income producing properties compared to the prior year, a $0.6 million decrease in personnel expense, and a $0.1 million decrease in general and administrative expense, primarily due to the reduction in expense related to the 2013 charter consolidation and rebranding, offset in part by an increase in the provision for unfunded loan commitments.
The $0.7 million increase in noninterest expense from third quarter of 2014 was due to a $0.5 million increase in other real estate expense, a $0.5 million increase in general and administrative expense primarily from increased professional fees and an increase in the provision for unfunded loan commitments, and a $0.2 million increase in occupancy expense, offset by a $0.4 million decrease in personnel expense.
Income Tax: Income tax expense totaled $3.5 million for the fourth quarter of 2014, compared to $4.3 million for the fourth quarter of 2013 and $3.2 million for the third quarter of 2014. The income tax expense fluctuates in relation to pre-tax income levels. The fourth quarter of 2014 effective tax rate was 37.5%.
Year-to-date Results:
Summary: Net income was $21.0 million for the year ended December 31, 2014, compared to $17.4 million for the year ended December 31, 2013. The $3.6 million increase in net income from 2013 is the result of a $2.3 million increase in net interest income, primarily driven by lower interest expense on deposits and a reduction in interest expense due to the redemption of the 10.5% Trust Preferred Securities in third quarter of 2013, a $5.3 million increase in noninterest income, primarily resulting from the pre-tax net gain on sale of community bank branches, offset in part by a $1.6 million increase in noninterest expense due to decreased gains recognized on sales of other real estate properties, offset in part by decreased write downs on other real estate properties, and a $0.6 million decrease in the negative provision for loan losses.
Net Interest Income: Net interest income totaled $65.0 million for 2014, compared to $62.7 million for 2013, an increase of $2.3 million, or 4%, primarily driven by lower interest expense on deposits and a reduction in interest expense due to the redemption of the 10.5% Trust Preferred Securities in third quarter of 2013. Year-to-date net interest margin was 3.45%, compared to 3.19% for 2013. Included in interest income for 2014 was $0.8 million due to accelerated discount accretion attributable to the sale of loans covered by the loss share agreement and $0.8 million due to interest recovery on nonaccrual loans. The net effects of these adjustments on the net interest margin was an 8 basis point increase for 2014. With the rate environment remaining low, earning assets are repricing at lower rates.
Provision for Loan Losses and Net Charge-offs: The provision for loan losses is the amount of expense that is required to maintain the allowance for losses at an appropriate level based upon the inherent risks in the loan portfolio after the effects of net charge-offs for the period. The provision for loan losses was a credit (or negative) of $6.6 million for 2014, compared to a credit of $7.2 million for 2013. Net charge-offs totaled $1.6 million, or
0.12% (annualized) of average portfolio loans for the year ended December 31, 2014, compared to $2.8 million, or 0.22% (annualized) of average portfolio loans for the year ended December 31, 2013.
Noninterest Income: Noninterest income totaled $18.9 million for 2014, compared to $13.6 million for 2013. The increase primarily consists of the $4.4 million recognized as the pre-tax net gain on sales of the community bank branches, a $1.9 million gain on the sale of a private equity investment and the sale of a stock investment acquired in a prior year repossession, a $0.4 million increase in other noninterest income, offset in part by the $1.1 million decline in gains on sales of mortgage loans and a $0.3 million decrease in service charges and fees.
Noninterest Expense: Noninterest expense totaled $56.9 million for 2014, compared to $55.3 million for 2013. The increase consists of a $1.7 million increase in other real estate expense, primarily from decreased gains on sales of other real estate properties, offset in part by decreased write downs on other real estate properties, a $0.2 million increase in occupancy expense, a $0.5 million decrease in FDIC and other insurance, and a $0.2 million increase in general and administrative expense, primarily the result of increased legal fees and consulting fees, offset in part by a decrease in the provision for unfunded loan commitments and the reduction in expense related to the 2013 charter consolidation and rebranding.
Income Tax: Income tax expense totaled $12.6 million for 2014, compared to $10.8 million for 2013. The income tax expense fluctuates in relation to pre-tax income levels. The year-to-date effective tax rate was 37.5% as of December 31, 2014.
Conference Call
Southwest will host a conference call to review these results on Wednesday, January 21, 2015 at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). Investors, news media, and others may pre-register for the call using the following link to receive a special dial-in number and PIN: http://dpregister.com/10058191. Telephone participants who are unable to pre-register may access the call by telephone at 866-218-2402 (toll-free) or 412-902-4190 (international). Participants are encouraged to dial into the call approximately 10 minutes prior to the start time. The call and corresponding presentation slides will be webcast live on Southwest’s website at www.oksb.com or http://services.choruscall.com/links/oksb150121.html. An audio replay will be available one hour after the call at 877-344-7529 (toll-free) or 412-317-0088 (international), conference number 10058191. Telephone replay access will be available until 9:00 a.m. Eastern Time on February 6, 2015.
Southwest Bancorp and Subsidiaries
Southwest is the holding company for Bank SNB, an Oklahoma state banking corporation (“Bank SNB”). Bank SNB offers commercial and consumer lending, deposit and investment services, specialized cash management, and other financial services from offices in Oklahoma, Texas, and Kansas. Bank SNB was chartered in 1894 and Southwest was organized in 1981 as the holding company. At December 31, 2014, Southwest had total assets of $1.9 billion, deposits of $1.5 billion, and shareholders’ equity of $270.8 million.
Southwest’s area of expertise focuses on the special financial needs of healthcare and health professionals, businesses and their managers and owners, commercial lending, energy banking, and commercial real estate borrowers. The strategic focus on healthcare lending was established in 1974. Southwest and its banking subsidiary provide credit and other services, such as deposits, cash management, and document imaging for physicians and other healthcare practitioners to start or develop their practices and finance the development and purchase of medical offices, clinics, surgical care centers, hospitals, and similar facilities. As of December 31, 2014, approximately $413.8 million, or 30%, of loans were loans to individuals and businesses in the healthcare industry. Regular market reviews are conducted of (i) current and potential healthcare lending business, and (ii) the appropriate concentrations within healthcare based upon economic and regulatory conditions.
Southwest’s common stock is traded on the NASDAQ Global Select Market under the symbol OKSB.
Caution About Forward-Looking Statements
Southwest makes forward-looking statements in this news release that are subject to risks and uncertainties. These statements are intended to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include:
| · | | Statements of Southwest's goals, intentions, and expectations; |
| · | | Estimates of risks and of future costs and benefits; |
| · | | Expectations regarding Southwest’s future financial performance and the financial performance of its operating segments; |
| · | | Expectations regarding regulatory actions; |
| · | | Expectations regarding Southwest’s ability to utilize tax loss benefits; |
| · | | Expectations regarding Southwest’s stock repurchase program; |
| · | | Expectations regarding dividends; |
| · | | Expectations regarding acquisitions and divestitures; |
| · | | Assessments of loan quality, probable loan losses, and the amount and timing of loan payoffs; |
| · | | Estimates of the value of assets held for sale or available for sale; and |
| · | | Statements of Southwest’s ability to achieve financial and other goals. |
These forward-looking statements are subject to significant uncertainties because they are based upon: the amount and timing of future changes in interest rates, market behavior, and other economic conditions; future laws, regulations, and accounting principles; changes in regulatory standards and examination policies, and a variety of other matters. These other matters include, among other things, the direct and indirect effects of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators. Because of these uncertainties, the actual future results may be materially different from the results indicated by these forward-looking statements. In addition, Southwest's past growth and performance do not necessarily indicate future results. For other factors, risks, and uncertainties that could cause actual results to differ materially from estimates and projections contained in forward-looking statements, please read Southwest’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2013. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors”.
The cautionary statements in this release also identify important factors and possible events that involve risk and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made. Southwest does not intend, and undertakes no obligation, to update or revise any forward-looking statements contained in this release, whether as a result of differences in actual results, changes in assumptions, or changes in other factors affecting such statements, except as required by law.
Southwest is required under generally accepted accounting principles to evaluate subsequent events and their impact, if any, on its financial statements as of December 31, 2014 through the date its financial statements are filed with the Securities and Exchange Commission. The December 31, 2014 financial statements included in this release will be adjusted if necessary to properly reflect the impact of subsequent events on estimates used to prepare those statements.
The Southwest Bancorp, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=8074
The Bank SNB logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=23106
Financial Tables
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Unaudited Financial Highlights | Table 1 |
Unaudited Consolidated Statements of Financial Condition | Table 2 |
Unaudited Consolidated Statements of Operations | Table 3 |
Unaudited Average Balances, Yields, and Rates-Quarterly | Table 4 |
Unaudited Average Balances, Yields, and Rates-Year-to-date | Table 5 |
Unaudited Quarterly Summary Loan Data | Table 6 |
Unaudited Quarterly Summary Financial Data | Table 7 |
Unaudited Quarterly Supplemental Analytical Data | Table 8 |
