April 28, 2006, Stillwater, Oklahoma . . . . Southwest Bancorp, Inc. (Nasdaq National Market–OKSB), (“Southwest”), today reported net income for the first quarter of 2006 was $6.3 million, a 17% increase from the $5.4 million reported for the first quarter of 2005. Diluted earnings per share were $0.44 compared to $0.43 per share for the 2005 period, an increase of 2%. In late June 2005, Southwest completed a public offering of its common stock to provide funds for future growth. The difference between the percentage growth in net income and growth in earnings per share reflects the effects of the additional shares issued in this offering.
Rick Green, President and Chief Executive Officer, stated, “The first quarter net income growth was the result of increased yields on loans, portfolio loan growth, our focus on careful management of interest margins and funding, and increased noninterest income. During the quarter, we continued to pursue our long-range strategies for growth and market expansion.”
Lending Activities
Portfolio loans grew by $39.4 million, or 3%, during the first quarter. Portfolio loans exclude loans held for sale, almost all of which are student loans. Southwest expects its portfolio loans to grow at a faster rate during 2006, and plans to reduce the levels of student lending.
Southwest’s Texas and Kansas offices were primarily responsible for the 2006 growth in portfolio loans. At March 31, 2006, Southwest’s four Texas and two Kansas offices accounted for $545.8 million in loans, or 39% of total portfolio loans. Southwest expects to open additional offices in Texas in the months ahead. The timing of new office openings in these targeted markets depends primarily on executive staffing.
At March 31, 2006, student lending balances were up less than 1% from year-end 2005, however, student lending remains an important and profitable part of Southwest’s business. During the first quarter 2006, Southwest originated $217.4 million in student loans for sale, a reduction of $3.5 million, or 2%, from the same period in 2005, and received sales proceeds on student loans of $216.8 million, up $36.8 million, or 20%.
Additional Financial Information for the First Quarter 2006
Net interest income for the first quarter 2006 increased $1.2 million, or 5% from the first quarter 2005, mainly as a result of increased portfolio loan yields and loan volume, offset in part by increased cost of funds on money market accounts and time deposits, and increased levels of interest bearing deposits. Noninterest income for the first quarter 2006 increased $248,000 from the $3.7 million reported for the first quarter 2005 due primarily to a $279,000 increase in service charges and fees.
The provision for loan losses of $2.7 million for the first quarter 2006 decreased $1.6 million, or 38%, from the first quarter 2005. Noninterest expense of $13.2 million for the first quarter 2006 increased $1.1 million, or 9%, from the $12.1 million reported for the first quarter 2005, primarily as a result of a $1.0 million increase in salaries and employee benefits.
Allowance for Loan Losses and Reserve for Unfunded Loan Commitments
At March 31, 2006, the allowance for loan losses was $24.8 million, an increase of $948,000, or 4%, from the allowance for loan losses at year-end 2005. At March 31, 2006, the allowance for loan losses was 1.39% of total loans, compared to 1.37% at year-end 2005. Management believes the amount of the allowance is appropriate, given its systematic methodology for calculating the allowance. Changes in the amount of the allowance resulted from the application of that methodology, which is designed to estimate inherent losses on total loans in the portfolio, including those on nonperforming loans.
At March 31, 2006, the reserve for unfunded loan commitments was $1.5 million, a reduction of $368,000, or 19%, from year-end 2005.
Nonperforming Assets
Nonaccrual loans totaled $23.6 million at March 31, 2006 compared to $22.1 million at December 31, 2005. Total nonperforming loans of $25.3 million increased $1.7 million, or 7%, from year-end 2005, and represented 1.43% of total loans, compared to 1.36% of total loans at year-end 2005. At March 31, 2006, $1.5 million, or 6%, of loans classified as nonperforming were guaranteed by United States agencies or U.S. government sponsored entities.
Mr. Green said, “Much of our business is commercial lending. As a result, weakness in one or a few large credits can have a significant impact on our nonperforming loan totals. Through the years, however, we have demonstrated the ability to resolve problem commercial loans.”
Other real estate at March 31, 2006, was $7.1 million, a reduction of $6,000 from year-end 2005. Total nonperforming assets at March 31, 2006, were $32.4 million, an increase of $1.7 million, or 6%, from year-end 2005.
Page 2 of 8
Financial Condition
At March 31, 2006, total assets were $2.1 billion, a $46.2 million increase from the end of 2005. Total portfolio loans (loans other than those held for sale) at March 31, 2006 were $1.4 billion, up $39.4 million, or 3%, from year-end 2005. Loans held for sale, which are primarily guaranteed student loans, decreased by $283,000 during the first quarter 2006. Shareholders’ equity at March 31, 2006 totaled $176.9 million, a $6.5 million, or 4%, increase from December 31, 2005. The increase was the result of net income, proceeds of common stock issued through the employee stock option plan, the employee stock purchase plan, and the dividend reinvestment plan, and the tax benefit related to the exercise of stock options partially offset by the declaration of dividends and other comprehensive income (net of tax).
Southwest Bancorp and Subsidiaries
Southwest Bancorp is the financial holding company for Stillwater National Bank and Trust Company (“Stillwater National”), SNB Bank of Wichita (“SNB Wichita”), Healthcare Strategic Support, Inc., and Business Consulting Group, Inc. Through its subsidiaries, Southwest offers commercial and consumer lending, deposit, and investment services, and specialized cash management, consulting, and other financial services from offices in Oklahoma City, Stillwater, Tulsa, and Chickasha, Oklahoma; Austin, Dallas and San Antonio, Texas; and Kansas City and Wichita, Kansas and on the Internet, through SNB DirectBanker®.
At Southwest, we focus on converting our strategic vision into long-term shareholder value. This vision includes long-term goals for increasing our earnings and banking assets from our operations in Oklahoma, Texas, and Kansas that specialize in serving medical, professional, business and commercial real estate customers and from our more traditional, banking operations, including community banking and student lending. Our strategic growth goals include growth from existing and additional offices in carefully selected markets in Texas and other states with concentrations of healthcare and health professionals, businesses, and their managers and owners, and commercial and commercial real estate borrowers, and careful expansion of our community banking operations.
Southwest was organized in 1981 as the holding company for Stillwater National, which was chartered in 1894. At March 31, 2006, Southwest had total assets of $2.1 billion, deposits of $1.7 billion, and shareholders’ equity of $176.9 million. Southwest became a public company in late 1993 with assets of approximately $434.0 million. Southwest’s growth to date has been accomplished without banking acquisitions, however acquisitions of other financial institutions and other companies are considered from time to time.
Southwest’s banking philosophy is to provide a high level of customer service, a wide range of financial services, and products responsive to customer needs with a focus on serving healthcare and health professionals, businesses and their managers and owners, and commercial and commercial real estate borrowers. This philosophy has led to the development of a line of deposit, lending, and other financial products that respond to professional and commercial customer needs for speed, efficiency, and information, and which complement more traditional banking products. Southwest has developed a highly automated lockbox, imaging, and information service for commercial customers called “SNB Digital Lockbox,” and deposit products that automatically sweep excess funds from commercial demand deposit accounts and invest them in interest bearing funds. Other specialized financial services include integrated document imaging and cash management services designed to help our customers in the healthcare industry and other record-intensive enterprises operate more efficiently.
Southwest seeks to build close relationships with businesses, professionals and their principals and to service their evolving banking needs throughout their business development and professional lives.
Southwest’s two management consulting subsidiaries complement its banking services and help differentiate Southwest from competitors. Healthcare Strategic Support, Inc. provides management consulting services for physicians, hospitals, and healthcare groups. Business Consulting Group, Inc. provides marketing, strategic, logistics, and operations consulting for both small and large commercial enterprises.
Southwest’s common stock is traded on the NASDAQ National Market under the symbol OKSB.
Forward-Looking Statements
This Press Release includes forward-looking statements, such as: statements of Southwest's goals, intentions, and expectations; estimates of risks and of future costs and benefits; assessments of the amount and timing of problem loan payoffs and loan losses; off-balance sheet risk and market 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: future interest rates, market behavior, 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.
Page 3 of 8
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| UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION |
| | | | | | | | |
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|
|
(Dollars in thousands, except per share data) | | | March 31,
2006 | | | December 31,
2005 | |
|
|
|
|
|
|
|
|
| Assets | | | | | | | |
| Cash and cash equivalents | | $ | 44,335 | | $ | 50,277 | |
| Federal funds sold | | | 8,000 | | | — | |
|
|
|
|
|
|
|
|
| Cash and cash equivalents | | | 52,335 | | | 50,277 | |
| Investment securities: | | | | | | | |
| Held to maturity, fair value $1,528 (2006) and $1,530 (2005) | | | 1,534 | | | 1,538 | |
| Available for sale, amortized cost $264,669 (2006) and $262,180 (2005) | | | 258,409 | | | 256,751 | |
| Federal Reserve Bank and Federal Home Loan Bank Stock, at cost | | | 11,915 | | | 9,804 | |
| Loans held for sale | | | 383,164 | | | 383,447 | |
| Loans receivable, net of allowance for loan losses of $24,760 (2006) and $23,812 (2005) | | | 1,367,057 | | | 1,328,621 | |
| Accrued interest receivable | | | 15,173 | | | 14,382 | |
| Premises and equipment, net | | | 20,862 | | | 20,584 | |
| Other assets | | | 35,390 | | | 34,235 | |
|
|
|
|
|
|
|
|
| Total assets | | $ | 2,145,839 | | $ | 2,099,639 | |
|
|
|
|
|
|
|
|
| | | | | | | | |
| Liabilities and shareholders' equity | | | | | | | |
| Deposits: | | | | | | | |
| Noninterest-bearing demand | | $ | 229,979 | | $ | 224,555 | |
| Interest-bearing demand | | | 58,188 | | | 49,235 | |
| Money market accounts | | | 389,688 | | | 402,709 | |
| Savings accounts | | | 9,233 | | | 8,765 | |
| Time deposits of $100,000 or more | | | 637,574 | | | 608,989 | |
| Other time deposits | | | 374,550 | | | 363,567 | |
|
|
|
|
|
|
|
|
| Total deposits | | | 1,699,212 | | | 1,657,820 | |
| Accrued interest payable | | | 8,906 | | | 8,953 | |
| Income tax payable | | | 3,022 | | | 288 | |
| Other liabilities | | | 7,745 | | | 11,233 | |
| Other borrowings | | | 203,616 | | | 204,508 | |
| Subordinated debentures | | | 46,393 | | | 46,393 | |
|
|
|
|
|
|
|
|
| Total liabilities | | | 1,968,894 | | | 1,929,195 | |
| Shareholders' equity: | | | | | | | |
| Common stock – $1 par value; 20,000,000 shares authorized;14,658,042 shares issued and outstanding | | | 14,658 | | | 14,658 | |
| Paid in capital | | | 45,563 | | | 45,672 | |
| Retained earnings | | | 129,996 | | | 124,882 | |
| Accumulated other comprehensive loss | | | (3,832 | ) | | (3,325 | ) |
| Treasury stock, at cost; 524,867 (2006) and 636,125 (2005) shares | | | (9,440 | ) | | (11,443 | ) |
|
|
|
|
|
|
|
|
| Total shareholders' equity | | | 176,945 | | | 170,444 | |
|
|
|
|
|
|
|
|
| Total liabilities & shareholders' equity | | $ | 2,145,839 | | $ | 2,099,639 | |
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Page 4 of 8
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| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
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| | | | For the three months
ended March 31, | |
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|
|
|
|
|
|
| (Dollars in thousands) | | | 2006 | | | 2005 | |
| | |
|
| |
|
| |
| Interest income: | | | | | | | |
| Interest and fees on loans | | $ | 36,718 | | $ | 29,923 | |
| Investment securities | | | 2,670 | | | 2,003 | |
| Other interest-bearing assets | | | 20 | | | 20 | |
|
|
|
|
|
|
|
|
| Total interest income | | | 39,408 | | | 31,946 | |
| | | | | | | | |
| Interest expense: | | | | | | | |
| Interest-bearing deposits | | | 13,405 | | | 7,941 | |
| Other borrowings | | | 2,889 | | | 1,668 | |
| Subordinated debentures | | | 872 | | | 1,245 | |
|
|
|
|
|
|
|
|
| Total interest expense | | | 17,166 | | | 10,854 | |
|
|
|
|
|
|
|
|
| | | | | | | | |
| Net interest income | | | 22,242 | | | 21,092 | |
| | | | | | | | |
| Provision for loan losses | | | 2,676 | | | 4,309 | |
| | | | | | | | |
| Other income: | | | | | | | |
| Service charges and fees | | | 2,774 | | | 2,495 | |
| Other noninterest income | | | 552 | | | 372 | |
| Gain on sales of loans | | | 905 | | | 853 | |
| Gain (loss) on investment securities | | | (263 | ) | | — | |
|
|
|
|
|
|
|
|
| Total other income | | | 3,968 | | | 3,720 | |
| | | | | | | | |
| Other expense: | | | | | | | |
| Salaries and employee benefits | | | 7,240 | | | 6,212 | |
| Occupancy | | | 2,567 | | | 2,346 | |
| FDIC and other insurance | | | 127 | | | 117 | |
| Other real estate | | | 108 | | | 164 | |
| General and administrative | | | 3,148 | | | 3,305 | |
|
|
|
|
|
|
|
|
| Total other expenses | | | 13,190 | | | 12,144 | |
|
|
|
|
|
|
|
|
| Income before taxes | | | 10,344 | | | 8,359 | |
| Taxes on income | | | 4,065 | | | 2,973 | |
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|
|
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|
|
| Net income | | $ | 6,279 | | $ | 5,386 | |
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Page 5 of 8
| |
UNAUDITED AVERAGE BALANCES, YIELDS AND RATES |
| | | | | |
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| | | | For the three months ended March 31, | |
| (Dollars in thousands) | | | 2006 | | | 2005 | |
|
|
|
|
|
| | | | Average
Balance | | | Average
Yield/Rate | | | Average
Balance | | | Average
Yield/Rate | |
|
|
|
|
|
| Assets | | | | | | | | | | | | | |
| Total loans | | $ | 1,806,159 | | | 8.24 | % | $ | 1,713,666 | | | 7.08 | % |
| Investment securities | | | 272,088 | | | 3.98 | | | 218,570 | | | 3.72 | |
| Other interest-earning assets | | | 1,918 | | | 4.23 | | | 3,393 | | | 2.39 | |
| | |
|
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|
|
|
|
|
|
|
|
|
|
| Total interest-earning assets | | | 2,080,165 | | | 7.68 | | | 1,935,629 | | | 6.69 | |
| Other assets | | | 96,913 | | | | | | 83,676 | | | | |
| | |
|
| | | | |
|
| | | | |
| Total assets | | $ | 2,177,078 | | | | | $ | 2,019,305 | | | | |
| | |
|
| | | | |
|
| | | | |
| Liabilities and shareholders' equity | | | | | | | | | | | | | |
| Interest-bearing demand deposits | | $ | 55,455 | | | 0.46 | % | $ | 64,266 | | | 0.48 | % |
| Money market accounts | | | 397,990 | | | 3.82 | | | 377,642 | | | 2.04 | |
| Savings accounts | | | 8,890 | | | 0.23 | | | 8,539 | | | 0.24 | |
| Time deposits | | | 987,972 | | | 3.94 | | | 943,008 | | | 2.56 | |
| | |
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|
|
|
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|
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|
| Total interest-bearing deposits | | | 1,450,307 | | | 3.75 | | | 1,393,455 | | | 2.31 | |
| Other borrowings | | | 268,112 | | | 4.37 | | | 222,330 | | | 3.04 | |
| Subordinated debentures | | | 46,393 | | | 7.52 | | | 72,180 | | | 6.90 | |
| | |
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|
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|
|
|
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|
|
|
|
|
| Total interest-bearing liabilities | | | 1,764,812 | | | 3.94 | | | 1,687,965 | | | 2.61 | |
| Noninterest-bearing demand deposits | | | 219,108 | | | | | | 185,636 | | | | |
| Other liabilities | | | 17,266 | | | | | | 15,126 | | | | |
| Shareholders' equity | | | 175,892 | | | | | | 130,578 | | | | |
| | |
|
| | | | |
|
| | | | |
| Total liabilities and shareholders' equity | | $ | 2,177,078 | | | | | $ | 2,019,305 | | | | |
| | |
|
| | | | |
|
| | | | |
| | | | | | | | | | | | | | |
| Interest rate spread | | | | | | 3.74 | % | | | | | 4.08 | % |
| | | | | |
|
| | | | |
|
| |
| Net interest margin (1) | | | | | | 4.34 | % | | | | | 4.42 | % |
| | | | | |
|
| | | | |
|
| |
| Ratio of average interest-earning assets to average interest-bearing liabilities | | | 117.87 | % | | | | | 114.67 | % | | | |
| | |
|
| | | | |
|
| | | | |
| | |
| (1) | Net interest margin = annualized net interest income / average interest-earning assets |
Page 6 of 8
| UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTS |
| | | | | |
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|
| | | | For the three months
ended March 31, | |
| (Dollars in thousands, except per share data) | | | 2006 | | | 2005 | |
|
|
|
|
|
| PER COMMON SHARE DATA: | | | | | | | |
|
|
|
|
|
| Basic Earnings | | $ | 0.45 | | $ | 0.44 | |
| Diluted Earnings | | | 0.44 | | | 0.43 | |
| Book value (at period end) | | | 12.52 | | | 10.64 | |
| Dividends declared | | | 0.0825 | | | 0.0750 | |
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|
|
|
|
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | | | | | | | |
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|
|
|
|
| Basic | | | 14,075,998 | | | 12,154,300 | |
| Diluted | | | 14,406,911 | | | 12,579,941 | |
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|
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|
| KEY RATIOS: | | | | | | | |
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|
|
|
| Return on average assets | | | 1.17 | % | | 1.08 | % |
| Return on average total shareholders' equity | | | 14.48 | % | | 16.73 | % |
| Efficiency ratio | | | 50.32 | % | | 48.94 | % |
| | | | | | | | |
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| LOAN COMPOSITION AT PERIOD END: | | | | | | | |
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|
| Real estate mortgage: | | | | | | | |
| Commercial | | $ | 573,842 | | $ | 527,137 | |
| One-to-four family residential | | | 91,007 | | | 91,738 | |
| Real estate construction | | | 302,698 | | | 244,491 | |
| Commercial | | | 401,820 | | | 394,772 | |
| Installment and consumer: | | | | | | | |
| Guaranteed student loans | | | 378,372 | | | 390,492 | |
| Other | | | 27,242 | | | 25,148 | |
| | |
|
| |
|
| |
| Total loans, including loans held for sale | | $ | 1,774,981 | | $ | 1,673,778 | |
| Less: Allowance for loan losses | | | (24,760 | ) | | (19,660 | ) |
| | |
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| |
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| |
| Total loans, net | | $ | 1,750,221 | | $ | 1,654,118 | |
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Page 7 of 8
| | |
| UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTS |
| | | | | | | | | | | |
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|
| (Dollars in thousands, except per share data) | | | March 31,
2006 | | | December 31
2005 | | | March 31,
2005 | |
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| ASSET QUALITY AT PERIOD END: | | | | | | | | | | |
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|
| Nonaccrual loans (1) | | $ | 23,555 | | $ | 22,099 | | $ | 12,737 | |
| 90 day past due and accruing (2) | | | 1,763 | | | 1,486 | | | 1,117 | |
| | |
|
| |
|
| |
|
| |
| Total nonperforming loans (3) | | $ | 25,318 | | $ | 23,585 | | $ | 13,854 | |
| | |
|
| |
|
| |
|
| |
| Other real estate owned | | $ | 7,124 | | $ | 7,130 | | $ | 11,902 | |
| Allowance for loan losses as a percentage of total loans | | | 1.39 | % | | 1.37 | % | | 1.17 | % |
| Allowance for loan losses as a percentage of nonperforming loans | | | 97.80 | % | | 100.96 | % | | 141.91 | % |
| Nonperforming loans as a percentage of total loans | | | 1.43 | % | | 1.36 | % | | 0.83 | % |
| Nonperforming assets as a percentage of total loans and other real estate | | | 1.82 | % | | 1.76 | % | | 1.53 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total charge-offs | | $ | 1,808 | | $ | 12,020 | | $ | 3,858 | |
| Total recoveries | | | 80 | | | 1,056 | | | 218 | |
| | |
|
| |
|
| |
|
| |
| Net charge-offs | | $ | 1,728 | | $ | 10,964 | | $ | 3,640 | |
| | |
|
| |
|
| |
|
| |
| Net charge-offs as a percentage of average loans (annualized) | | | 0.39 | % | | 0.63 | % | | 0.86 | % |
| | | | | | | | | | | |
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| CAPITAL RATIOS AT PERIOD END: | | | | | | | | | | |
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|
| Leverage ratio | | | 10.37 | % | | 10.24 | % | | 8.75 | % |
| Tier I capital ratio | | | 12.62 | % | | 12.95 | % | | 11.03 | % |
| Total capital ratio | | | 13.87 | % | | 14.21 | % | | 13.89 | % |
| Tier I capital | | $ | 225,595 | | $ | 218,587 | | $ | 176,397 | |
| Total capital | | | 248,014 | | | 239,759 | | | 222,289 | |
| Total risk adjusted assets | | | 1,788,001 | | | 1,687,519 | | | 1,599,780 | |
| | | | | | | | | | | |
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| OTHER MISCELLANEOUS INFORMATION AT PERIOD END: | | | | | | | | | | |
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| Goodwill | | $ | 194 | | $ | 194 | | $ | 194 | |
| Mortgage Servicing Rights | | | 1,343 | | | 1,353 | | | 1,217 | |
| Non-mortgage Servicing Rights | | | 53 | | | 54 | | | 72 | |
| | |
|
| |
|
| |
|
| |
| Total Intangible Assets | | $ | 1,590 | | $ | 1,601 | | $ | 1,483 | |
| | |
|
| |
|
| |
|
| |
| | | | | | | | | | | |
| 1-4 family mortgage loans serviced for others | | $ | 132,825 | | $ | 133,470 | | $ | 126,202 | |
| Intangible amortization expense | | | 93 | | | 379 | | | 86 | |
| | | | | | | | | | | |
| FTE employees | | | 390 | | | 381 | | | 367 | |
| Number of ATMs | | | 297 | | | 291 | | | 292 | |
| Number of branches (4) | | | 13 | | | 13 | | | 13 | |
| Number of loan production offices | | | 2 | | | 3 | | | 3 | |
| | |
| (1) | The government-guaranteed portion of loans included in these totals were $1.5 million, $1.6 million, and $2.0 million, respectively. |
| (2) | The government-guaranteed portion of loans included in these totals were zero, zero, and $27,000, respectively. |
| (3) | The government-guaranteed portion of loans included in these totals were $1.5 million, $1.6 million, and $2.0 million, respectively. |
| (4) | Includes branches for which regulatory approval has been received, but which were not accepting deposits at period end. |
Page 8 of 8
