FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 2000
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 Identification No.)
incorporation or organization)
608 South Main Street, Stillwater, Oklahoma 74074
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (405) 372-2230.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
---------------------------------------
(Title of Class)
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 12 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 90 days.
YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The registrant's Common Stock is traded on the NASDAQ National Market under the
symbol OKSB. The aggregate market value of the 2,474,426 shares of Common Stock
of the registrant issued and outstanding held by nonaffiliates on March 20, 2001
was approximately $55.7 million based on the closing sales price of $22.50 per
share of the registrant's Common Stock on March 27, 2001. Solely for purposes of
this calculation, it is assumed that directors, officers and 5% stockholders of
the registrant are affiliates..
As of the close of business on March 20, 2001, 3,794,953 shares of the
registrant's Common Stock were outstanding.
Documents Incorporated By Reference
Parts I and II: Portions of the Annual Report to Shareholders for the year
ended December 31, 2000 (the "Annual Report").
Part III: Portions of the definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 26, 2001 (the
"Proxy Statement").
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
Southwest Bancorp, Inc. ("Southwest") makes forward-looking statements
in this Form 10-K that are subject to risks and uncertainties. These
forward-looking statements include:
o Statements of goals, intentions, and expectations;
o Estimates of risks and of future costs and benefits;
o Assessments of loan quality and of probable loan losses; and
o 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 or are affected by:
o Management's estimates and projections of future interest
rates and other economic conditions;
o Future laws and regulations; and
o 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 results of operations do not
necessarily indicate its future results.
PART I
ITEM 1. BUSINESS
General
Southwest is a financial holding company headquartered in Stillwater,
Oklahoma. Southwest provides commercial and consumer banking services through
its sole banking subsidiary, Stillwater National Bank & Trust Company
("Stillwater National" or the "Bank"). Southwest was organized in 1981 as the
holding company for Stillwater National, which was chartered in 1894. Southwest
is registered as a bank holding company pursuant to the Bank Holding Company Act
of 1956, as amended (the "Holding Company Act"). As such, Southwest is subject
to supervision and regulation by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). Southwest became a financial holding company
during 2000 pursuant to the Holding Company Act. The Bank is a national bank
subject to supervision and regulation by the Office of the Comptroller of the
Currency (the "OCC"). The Bank's deposit accounts are insured by the Bank
Insurance Fund (the "BIF") administered by the Federal Deposit Insurance
Corporation (the "FDIC") to the maximum permitted by law.
Products and Services
Southwest offers a wide variety of commercial and consumer lending and
deposit services. Southwest has developed internet banking services, called
"DirectBanker," for consumer and commercial customers, a highly automated
lockbox, imaging and information service for commercial customers called
"Business Mail Processing," and a deposit product that automatically sweeps
excess funds from commercial demand deposit accounts and invests them in
short-term borrowings ("Sweep Repurchase Agreements"). The commercial loans
offered by Southwest include (i) commercial real estate loans, (ii) working
capital and other commercial loans, (iii) construction loans, and (iv) Small
Business Administration ("SBA") guaranteed loans. Consumer lending services
include (i) government-guaranteed student loans, (ii) residential real estate
loans and mortgage banking services, and (iii) personal lines of credit and
other installment loans. Southwest also offers deposit and personal banking
services, including (i) commercial deposit services such as Business Mail
Processing, commercial checking and other deposit accounts, and (ii) retail
deposit services such as certificates of deposit, money market accounts,
checking accounts, NOW accounts, savings accounts and automatic teller machine
("ATM") access. Trust services, personal brokerage and credit cards are offered
through independent institutions.
Strategic Focus
Southwest's banking philosophy is to provide a high level of customer
service, a wide range of financial services, and products
1
responsive to customer needs. This philosophy has led to the development of a
line of deposit and lending products that responds to customer needs for speed,
efficiency and information. These include Southwest's Sweep Repurchase
Agreements, Business Mail Processing, and Southwest's DirectBanker and other
internet banking products, which complement Southwest's more traditional banking
products. Southwest also emphasizes marketing to highly educated, professional
and business persons in its markets. Southwest seeks to build close
relationships with businesses, professionals and their principals and to service
their banking needs throughout their business development and professional
lives.
Organization
Southwest's business operations are conducted through three regional
divisions that offer commercial, consumer, and real estate lending services and
retail and commercial deposit products in their market areas, and a home office
that provides technology driven products, residential mortgages, and
government-guaranteed student loans. Southwest's support and control functions
are centralized, although each region includes support and control staff. The
organizational structure is designed to facilitate high customer service, prompt
response, efficiency, and appropriate, uniform credit standards and other
controls.
Regional Divisions. The three regional divisions are the Stillwater
division, the Central Oklahoma division (which includes Oklahoma City and
Chickasha) and the Tulsa division. The Stillwater division serves the Stillwater
market as a full-service community bank emphasizing both commercial and consumer
lending. The Central Oklahoma division and the Tulsa division each have followed
a more focused marketing strategy, targeting managers and professionals and
Oklahoma-based businesses for lending, and offering more specialized services.
All of the regional divisions focus on consumer and commercial financial
services to local businesses and their senior employees and to other managers
and professionals living and working in Southwest's market areas. Southwest has
a high-service philosophy. Loan officers often meet at the customer's home or
place of business to close loans. Third-party courier services often are used to
collect commercial deposits.
Home Office Business Operations. Southwest manages and offers products
that are technology based, or that otherwise are more efficiently offered
centrally, through its home office. These include products that are marketed
through the regional offices, such as Southwest's internet banking products for
commercial and retail customers (DirectBanker), commercial information and item
processing services (Business Mail Processing), and residential mortgage loans,
and products marketed and managed directly by central staff, such as student
lending and cash dispensing machines.
Southwest's technology products are marketed both to existing customers
and to help develop new customer relationships. Use of these products by
customers enables Southwest to serve its customers more effectively, use its
resources more efficiently, and increase fee income.
Southwest also manages its mortgage and student lending operations
through its home office. Southwest markets its student lending program directly
to financial aid directors at Oklahoma colleges and universities. These loans
are generally sold as they enter repayment. Southwest also originates first
mortgage loans for sale to the Federal National Mortgage Association ("FNMA") or
private investors. Servicing on these loans may be released in connection with
the sale.
Support and Control Functions. Support and control functions are
centralized, although each regional division has support and control personnel.
Southwest's philosophy of customer service extends to its support and control
functions. Senior managers headquartered in the Stillwater offices travel to
Oklahoma City and Tulsa to help in marketing and management. Southwest's Chief
Executive Officer, Chief Lending Officer, and others meet in committee in the
regional offices to consider credit proposals in order to ensure customers are
given prompt decisions while maintaining uniform credit standards.
Banking Offices
Banking Offices. Southwest has six full-service banking offices, two of
which are located in each of Stillwater and Tulsa, Oklahoma, and one each in
Oklahoma City and Chickasha, Oklahoma, loan production offices on the campuses
of the University of Oklahoma Health Sciences Center and Oklahoma State
University-Tulsa and a marketing presence in the Student Union at Oklahoma State
University-Stillwater and in two AAA Oklahoma offices, and the Internet, through
DirectBanker. See "Item 2. Properties." Before 1999, laws of the state of
Oklahoma limited the number and location of de novo branches that a bank could
establish. Southwest has
2
developed a business strategy that does not rely on an extensive branch network.
National banks in Oklahoma now have broad ability to establish de novo branches
anywhere in the state.
Regulation, Supervision, and Governmental Policy
Following is a brief summary of certain statutes and regulations that
significantly affect Southwest and Stillwater National. A number of other
statutes and regulations affect Southwest and Stillwater National but are not
summarized below.
Bank Holding Company Regulation. Southwest is registered as a bank
holding company under the Holding Company Act and, as such, is subject to
supervision and regulation by the Federal Reserve. As a bank holding company,
Southwest is required to furnish to the Federal Reserve annual and quarterly
reports of its operations and additional information and reports. Southwest is
also subject to regular examination by the Federal Reserve.
Under the Holding Company Act, a bank holding company must obtain the
prior approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of any class of voting securities of any bank or bank
holding company if, after the acquisition, the bank holding company would
directly or indirectly own or control more than 5% of the class; (2) acquiring
all or substantially all of the assets of another bank or bank holding company;
or (3) merging or consolidating with another bank holding company.
Under the Holding Company Act, any company must obtain approval of the
Federal Reserve prior to acquiring control of Southwest or Stillwater National.
For purposes of the Holding Company Act, "control" is defined as ownership of
more than 25% of any class of voting securities of Southwest or Stillwater
National, the ability to control the election of a majority of the directors, or
the exercise of a controlling influence over management or policies of Southwest
or Stillwater National.
The federal Change in Bank Control Act and the related regulations of
the Federal Reserve require any person or persons acting in concert (except for
companies required to make application under the Holding Company Act), to file a
written notice with the Federal Reserve before the person or persons acquire
control of Southwest or Stillwater National. The Change in Bank Control Act
defines "control" as the direct or indirect power to vote 25% or more of any
class of voting securities or to direct the management or policies of a bank
holding company or an insured bank.
The Holding Company Act also limits the investments and activities of
bank holding companies. In general, a bank holding company is prohibited from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of a company that is not a bank or a bank holding company or from
engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, providing services for its subsidiaries, non-bank
activities that are closely related to banking, and other financially related
activities. However, as a result of the Gramm-Leach-Bliley Act of 1999 (the "GLB
Act"), bank holding companies that qualify as financial holding companies under
the Holding Company Act also may engage in a broad range of additional non-bank
activities. Southwest qualified as a financial holding company in 2000.
The activities of Southwest are subject to these legal and regulatory
limitations under the Holding Company Act and Federal Reserve regulations. The
GLB Act also created a new regulatory framework by expanding the extent to which
non-bank and financially related activities of bank holding companies, including
companies that become financial holding companies, are subject to regulation and
oversight by regulators other than the Federal Reserve.
The Federal Reserve also has the power to order a holding company or
its subsidiaries to terminate any activity, or to terminate its ownership or
control of any subsidiary, when it has reasonable cause to believe that the
continuation of such activity or such ownership or control constitutes a serious
risk to the financial safety, soundness, or stability of any bank subsidiary of
that holding company.
The Federal Reserve has adopted guidelines regarding the capital
adequacy of bank holding companies, which require bank holding companies to
maintain specified minimum ratios of capital to total assets and capital to
risk-weighted assets. See "Regulatory Capital Requirements."
The Federal Reserve has the power to prohibit dividends by bank holding
companies if their actions constitute unsafe or unsound
3
practices. The Federal Reserve has issued a policy statement on the payment of
cash dividends by bank holding companies, which expresses the Federal Reserve's
view that a bank holding company should pay cash dividends only to the extent
that the company's net income for the past year is sufficient to cover both the
cash dividends and a rate of earnings retention that is consistent with the
company's capital needs, asset quality, and overall financial condition.
Bank Regulation. As a national bank, Stillwater National is subject to
the primary supervision of the OCC under the National Bank Act. The prior
approval of the OCC is required for a national bank to establish or relocate an
additional branch office or to engage in any merger, consolidation, or
significant purchase or sale of assets.
Before 1999, laws of the state of Oklahoma severely limited the number
and location of de novo branches that a bank could establish. National banks in
Oklahoma now have broad ability to establish de novo branches anywhere in the
state as a result of changes in state laws enacted in 1999, and interpretations
of those laws by the OCC.
The OCC regularly examines the operations and condition of Stillwater
National, including but not limited to its capital adequacy, reserves, loans,
investments, and management practices. These examinations are for the protection
of Stillwater National's depositors and the BIF. In addition, Stillwater
National is required to furnish quarterly and annual reports to the OCC. The
OCC's enforcement authority includes the power to remove officers and directors
and the authority to issue cease-and-desist orders to prevent a bank from
engaging in unsafe or unsound practices or violating laws or regulations
governing its business.
The OCC has adopted regulations regarding the capital adequacy of
national banks, which require national banks to maintain specified minimum
ratios of capital to total assets and capital to risk-weighted assets. See
"Regulatory Capital Requirements."
No national bank may pay dividends from its paid-in capital. All
dividends must be paid out of current or retained net profits, after deducting
reserves for losses and bad debts. The National Bank Act further restricts the
payment of dividends out of net profits by prohibiting a national bank from
declaring a dividend on its shares of common stock until the surplus fund equals
the amount of capital stock or, if the surplus fund does not equal the amount of
capital stock, until one-tenth of a bank's net profits for the preceding half
year in the case of quarterly or semi-annual dividends, or the preceding two
half-year periods in the case of annual dividends, are transferred to the
surplus fund.
The approval of the OCC is required prior to the payment of a dividend
if the total of all dividends declared by a national bank in any calendar year
would exceed the total of its net profits for that year combined with its
retained net profits for the two preceding years, less any required transfers to
surplus or a fund for the retirement of any preferred stock. In addition,
Stillwater National is prohibited by federal statute from paying dividends or
making any other capital distribution that would cause Stillwater National to
fail to meet its regulatory capital requirements. Further, the OCC also has
authority to prohibit the payment of dividends by a national bank when it
determines that their payment would be an unsafe and unsound banking practice.
Stillwater National is a member of the Federal Reserve System and its
deposits are insured by the FDIC to the legal maximum of $100,000 for each
insured depositor. Some of the aspects of the lending and deposit business of
Stillwater National that are subject to regulation by the Federal Reserve and
the FDIC include reserve requirements and disclosure requirements in connection
with personal and mortgage loans and deposit accounts. In addition, Stillwater
National is subject to numerous federal and state laws and regulations that
include specific restrictions and procedural requirements with respect to the
establishment of branches, investments, interest rates on loans, credit
practices, the disclosure of credit terms, and discrimination in credit
transactions.
Stillwater National is subject to restrictions imposed by federal law
on extensions of credit to, and certain other transactions with, Southwest and
other affiliates, and on investments in their stock or other securities. These
restrictions prevent Southwest and Stillwater National's other affiliates from
borrowing from Stillwater National unless the loans are secured by specified
collateral, and require those transactions to have terms comparable to terms of
arms-length transactions with third persons. In addition, secured loans and
other transactions and investments by Stillwater National are generally limited
in amount as to Southwest and as to any other affiliate to 10% of Stillwater
National's capital and surplus and as to Southwest and all other affiliates
together to an aggregate of 20% of Stillwater National's capital and surplus.
Certain exemptions to these limitations apply to extensions of credit by, and
other transactions between, Stillwater National to its subsidiaries. These
regulations and restrictions may limit Southwest's ability to obtain funds from
Stillwater National for its cash needs, including funds for acquisitions and for
payment of dividends, interest, and operating expenses.
4
Under OCC regulations, national banks must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit secured by liens or interests in real estate or are made for the purpose
of financing permanent improvements to real estate. These policies must
establish loan portfolio diversification standards; prudent underwriting
standards, including loan-to-value limits, that are clear and measurable; loan
administration procedures; and documentation, approval, and reporting
requirements. A bank's real estate lending policy must reflect consideration of
the Guidelines for Real Estate Lending Policies (the "Guidelines") adopted by
the federal bank regulators. The Guidelines, among other things, call for
internal loan-to-value limits for real estate loans that are not in excess of
the limits specified in the Guidelines. The Guidelines state, however, that it
may be appropriate in individual cases to originate or purchase loans with
loan-to-value ratios in excess of the supervisory loan-to-value limits.
The FDIC has established a risk-based deposit insurance premium
assessment system for insured depository institutions. Under the system, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, based upon the
institution's capital level and supervisory evaluations. Institutions are
assigned to one of three capital groups -- well-capitalized, adequately
capitalized, or undercapitalized -- based on the data reported to regulators.
Well-capitalized institutions are institutions satisfying the following capital
ratio standards: (i) total risk-based capital ratio of 10.0% or greater; (ii)
Tier 1 risk-based capital ratio of 6.0% or greater; and (iii) Tier 1 leverage
ratio of 5.0% or greater. Adequately capitalized institutions are institutions
that do not meet the standards for well-capitalized institutions but that
satisfy the following capital ratio standards: (i) total risk-based capital
ratio of 8.0% or greater; (ii) Tier 1 risk-based capital ratio of 4.0% or
greater; and (iii) Tier 1 leverage ratio of 4.0% or greater. Institutions that
do not qualify as either well-capitalized or adequately capitalized are deemed
to be undercapitalized. Within each capital group, institutions are assigned to
one of three subgroups on the basis of supervisory evaluations by the
institution's primary supervisory authority and such other information as the
FDIC determines to be relevant to the institution's financial condition and the
risk it poses to the deposit insurance fund. Subgroup A consists of financially
sound institutions with only a few minor weaknesses. Subgroup B consists of
institutions with demonstrated weaknesses that, if not corrected, could result
in significant deterioration of the institution and increased risk of loss to
the deposit insurance fund. Subgroup C consists of institutions that pose a
substantial probability of loss to the deposit insurance fund unless effective
corrective action is taken. Stillwater National has been informed that it is in
the lowest-cost/best risk assessment category for the first assessment period of
2001.
Regulatory Capital Requirements. The Federal Reserve and the OCC have
established guidelines for maintenance of appropriate levels of capital by bank
holding companies and national banks, respectively. The regulations impose two
sets of capital adequacy requirements: minimum leverage rules, which require
bank holding companies and banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which require the
maintenance of specified minimum ratios of capital to "risk-weighted" assets.
The regulations of the Federal Reserve and the OCC require bank holding
companies and national banks, respectively, to maintain a minimum leverage ratio
of "Tier 1 capital" (as defined in the risk-based capital guidelines discussed
in the following paragraphs) to total assets of 3.0%. The capital regulations
state, however, that only the strongest bank holding companies and banks, with
composite examination ratings of 1 under the rating system used by the federal
bank regulators, would be permitted to operate at or near this minimum level of
capital. All other bank holding companies and banks are expected to maintain a
leverage ratio of at least 1% to 2% above the minimum ratio, depending on the
assessment of an individual organization's capital adequacy by its primary
regulator. A bank or bank holding company experiencing or anticipating
significant growth is expected to maintain capital well above the minimum
levels. In addition, the Federal Reserve has indicated that it also may consider
the level of an organization's ratio of tangible Tier 1 capital (after deducting
all intangibles) to total assets in making an overall assessment of capital.
The risk-based capital rules of the Federal Reserve and the OCC require
bank holding companies and national banks to maintain minimum regulatory capital
levels based upon a weighting of their assets and off-balance sheet obligations
according to risk. The risk-based capital rules have two basic components: a
core capital (Tier 1) requirement and a supplementary capital (Tier 2)
requirement. Core capital consists primarily of common stockholders' equity,
certain perpetual preferred stock (noncumulative perpetual preferred stock with
respect to banks), and minority interests in the equity accounts of consolidated
subsidiaries; less all intangible assets, except for certain mortgage servicing
rights and purchased credit card relationships. Supplementary capital elements
include, subject to certain limitations, the allowance for losses on loans and
leases; perpetual preferred stock that does not qualify as Tier 1 capital;
long-term preferred stock with an original maturity of at least 20 years from
issuance; hybrid capital instruments, including perpetual debt and mandatory
convertible securities; subordinated debt, intermediate-term preferred stock,
and up to 45% of pre-tax net unrealized gains on available for sale equity
securities.
5
The risk-based capital regulations assign balance sheet assets and
credit equivalent amounts of off-balance sheet obligations to one of four broad
risk categories based principally on the degree of credit risk associated with
the obligor. The assets and off-balance sheet items in the four risk categories
are weighted at 0%, 20%, 50% and 100%. These computations result in the total
risk-weighted assets.
The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital. For the purpose of calculating
these ratios: (i) supplementary capital is limited to no more than 100% of core
capital; and (ii) the aggregate amount of certain types of supplementary capital
is limited. In addition, the risk-based capital regulations limit the allowance
for loan losses that may be included in capital to 1.25% of total risk-weighted
assets.
The federal bank regulatory agencies, including the OCC, have
established a joint policy regarding the evaluation of commercial banks' capital
adequacy for interest rate risk. Under the policy, the OCC's assessment of a
bank's capital adequacy includes an assessment of Stillwater National's exposure
to adverse changes in interest rates. The OCC has determined to rely on its
examination process for such evaluations rather than on standardized measurement
systems or formulas. The OCC may require banks that are found to have a high
level of interest rate risk exposure or weak interest rate risk management
systems to take corrective actions. Management believes its interest rate risk
management systems and its capital relative to its interest rate risk are
adequate.
Federal banking regulations also require banks with significant trading
assets or liabilities to maintain supplemental risk-based capital based upon
their levels of market risk. Stillwater National did not have any trading assets
or liabilities during 2000 or 1999, and was not required to maintain such
supplemental capital.
The OCC has established regulations that classify national banks by
capital levels and provide for the OCC to take various "prompt corrective
actions" to resolve the problems of any bank that fails to satisfy the capital
standards. Under these regulations, a well-capitalized bank is one that is not
subject to any regulatory order or directive to meet any specific capital level
and that has a total risk-based capital ratio of 10% or more, a Tier 1
risk-based capital ratio of 6% or more, and a leverage ratio of 5% or more. An
adequately capitalized bank is one that does not qualify as well-capitalized but
meets or exceeds the following capital requirements: a total risk-based capital
ratio of 8%, a Tier 1 risk-based capital ratio of 4%, and a leverage ratio of
either (i) 4% or (ii) 3% if Stillwater National has the highest composite
examination rating. A bank that does not meet these standards is categorized as
undercapitalized, significantly undercapitalized, or critically
undercapitalized, depending on its capital levels. A national bank that falls
within any of the three undercapitalized categories established by the prompt
corrective action regulation is subject to severe regulatory sanctions. As of
December 31, 2000, Stillwater National was well-capitalized as defined in the
OCC's regulations.
For information regarding Southwest's and Stillwater National's
compliance with their respective regulatory capital requirements, see
"Management's Discussion and Analysis -- Capital Resources" on page 14 of the
Annual Report, and, in the Notes to Consolidated Financial Statements in the
Annual Report "Note 6-Long-Term Debt" on pages 32 and 33, and "Note 9- Capital
Requirements" on pages 35 and 36.
6
Supervision and Regulation of Mortgage Banking Operations
Southwest's mortgage banking business is subject to the rules and
regulations of the U.S. Department of Housing and Urban Development ("HUD"), the
Federal Housing Administration ("FHA"), the Veterans' Administration ("VA"), and
FNMA with respect to originating, processing, selling and servicing mortgage
loans. Those rules and regulations, among other things, prohibit discrimination
and establish underwriting guidelines which include provisions for inspections
and appraisals, require credit reports on prospective borrowers, and fix maximum
loan amounts. Lenders such as Southwest are required annually to submit to FNMA,
FHA and VA audited financial statements, and each regulatory entity has its own
financial requirements. Southwest's affairs are also subject to examination by
the Federal Reserve, FNMA, FHA and VA at all times to assure compliance with the
applicable regulations, policies and procedures. Mortgage origination activities
are subject to, among others, the Equal Credit Opportunity Act, Federal
Truth-in-Lending Act, Fair Housing Act, Fair Credit Reporting Act, the National
Flood Insurance Act and the Real Estate Settlement Procedures Act and related
regulations that prohibit discrimination and require the disclosure of certain
basic information to mortgagors concerning credit terms and settlement costs.
Southwest's mortgage banking operations also are affected by various state and
local laws and regulations and the requirements of various private mortgage
investors.
Competition
Stillwater National encounters competition primarily in seeking
deposits and in obtaining loan customers. The level of competition for deposits
is high. Stillwater National's principal competitors for deposits are other
financial institutions, including other banks, credit unions, and savings
institutions. Competition among these institutions is based primarily on
interest rates and other terms offered, service charges imposed on deposit
accounts, the quality of services rendered, and the convenience of banking
facilities. Additional competition for depositors' funds comes from U.S.
Government securities, private issuers of debt obligations and suppliers of
other investment alternatives for depositors, such as securities firms.
Competition from credit unions has intensified in recent years as historic
federal limits on membership have been relaxed. Because federal law subsidizes
credit unions by giving them a general exemption from federal income taxes,
credit unions have a significant cost advantage over banks and savings
associations, which are fully subject to federal income taxes. Credit unions may
use this advantage to offer rates that are highly competitive with those offered
by banks and thrifts.
Stillwater National also competes in its lending activities with other
financial institutions such as savings institutions, credit unions, securities
firms, insurance companies, small loan companies, finance companies, mortgage
companies and other sources of funds. Many of Stillwater National's nonbank
competitors are not subject to the same extensive federal regulations that
govern bank holding companies and federally-insured banks and state regulations
governing state chartered banks. As a result, such nonbank competitors have
advantages over Stillwater National in providing certain services. A number of
the financial institutions with which Stillwater National competes in both
lending and deposit activities are larger than Stillwater National. In recent
periods, competition has increased in Stillwater National's market area as new
entrants and existing competitors have sought to more aggressively expand their
loan and deposit market share, and as a result of Stillwater National's efforts
to solicit larger loan customers, for whom there is greater competition.
Southwest anticipates that competition may intensify as a result of acquisition
of Oklahoma banks by out-of-state bank holding companies, increased branching by
financial institutions taking advantage of Oklahoma's expanded branching powers,
and the special advantages given to federal credit unions under current law.
The business of mortgage banking is highly competitive. Southwest
competes for loan origination with other financial institutions, such as
mortgage bankers, state and national commercial banks, savings and loan
associations, credit unions and insurance companies. Many of Southwest's
competitors have financial resources that are substantially greater than those
available to Southwest. Southwest competes principally by providing competitive
pricing, by motivating its sales force through the payment of commissions on
loans originated, and by providing high quality service to builders, borrowers,
and realtors.
The Holding Company Act permits the Federal Reserve to approve an
application of an adequately capitalized and adequately managed bank holding
company to acquire control of, or acquire all or substantially all of the assets
of, a bank located in a state other than that holding company's home state. The
Federal Reserve may not approve the acquisition of a bank that has not been in
existence for the minimum time period (not exceeding five years) specified by
the statutory law of the host state. The Holding Company Act also prohibits the
Federal Reserve from approving an application if the applicant (and its
depository institution affiliates) controls or would control more than 10% of
the insured deposits in the United States or 30% or more of the deposits in the
target bank's home state or in any state in which
7
the target bank maintains a branch. The Holding Company Act does not affect the
authority of states to limit the percentage of total insured deposits in the
state which may be held or controlled by a bank or bank holding company to the
extent such limitation does not discriminate against out-of-state banks or bank
holding companies.
Federal banking laws also authorize the federal banking agencies to
approve interstate merger transactions without regard to whether such
transactions are prohibited by the law of any state, unless the home state of
one of the banks expressly prohibits merger transactions involving out-of-state
banks. The State of Oklahoma allows out-of-state financial institutions to merge
with Oklahoma banks and to establish branches in Oklahoma, subject to certain
limitations.
The GLB Act permits the creation of a new type of regulated entity, the
financial holding company, that can offer a broad range of financial products.
These new financial holding companies may engage in banking as well as types of
securities, insurance, and other financial activities that had been prohibited
for bank holding companies under prior law. The GLB Act also permits banks with
or without holding companies to establish and operate financial subsidiaries
that may engage in most financial activities in which financial holding
companies may engage. Competition may increase as bank holding companies and
other large financial service companies take advantage of the new activities and
provide a wider array of products. By removing historical restrictions on
affiliations between banks and certain types of companies, the GLB Act expands
the number of potential acquirors of existing banks and bank holding companies,
and makes it possible for bank holding companies to acquire new types of
existing businesses.
Employees
As of December 31, 2000, Southwest and Stillwater National employed 312
persons on a full-time equivalent basis, including executive officers, loan and
other banking officers, branch personnel, and others. None of Southwest's or
Stillwater National's employees is represented by a union or covered under a
collective bargaining agreement. Management of Southwest and Stillwater National
consider their employee relations to be excellent.
Executive Officers
The following table sets forth information regarding the executive
officers of Southwest and Stillwater National who are not directors.
Name Age Position
- ---- --- --------
Kerby E. Crowell......................... 51 Executive Vice President and Chief Financial
Officer of Southwest and the Bank
Jerry L. Lanier.......................... 52 Executive Vice President, Credit Administration of the Bank
Mark A. Poole............................ 41 President, Tulsa division of the Bank
Joseph P. Root........................... 36 President, Central Oklahoma division of the Bank
Connie Saldivar.......................... 28 Senior Vice President, Retail Sales of the Bank
Kimberly G. Sinclair..................... 45 Executive Vice President and Chief Administrative
Officer of the Bank
Charles H. Westerheide................... 52 Executive Vice President and Treasurer of the Bank
The principal occupations and business experience of each executive
officer of Southwest are shown below.
8
Kerby E. Crowell has served as Executive Vice President, Treasurer and
Chief Financial Officer of Southwest and the Bank since 1986. Mr. Crowell joined
the Bank in 1969. He is a Past President and Board member of the Oklahoma City
Chapter of the Financial Executives Institute, and a member of the Bank
Operations Committee of the Independent Community Bankers of America and the
Federal Reserve's Industry Advisory Group on Electronic Check Presentment. He is
past President and Director of the Oklahoma 4-H Foundation, Inc., Director and
past President of the Payne County Affiliate of the American Diabetes
Association, past President of the Stillwater Breakfast Kiwanis Club, the Bank
Administration Institute's Northern Oklahoma Chapter, and the North Central
Chapter of Certified Public Accountants, and past Vice Chairman of the
Independent Community Bankers of America's Bank Services Committee. Mr. Crowell
is also a graduate of the Leadership Stillwater Class XI.
Jerry L. Lanier was appointed Executive Vice President, Credit
Administration in December 1999, supervising this area Company-wide. From
January 1998 to December 1999, Mr. Lanier served as Senior Vice President in
Credit Administration. From 1992 until joining the Bank in 1998, Mr. Lanier was
a consultant specializing in loan review. During this same period he also served
as court-appointed receiver for a number of Oklahoma-based insurance companies.
From 1982-1992, Mr. Lanier served as President of American National Bank and
Trust Co. of Shawnee, Oklahoma including service as Chief Executive Officer from
1987-92. From 1970-1981, he was a National Bank Examiner for the OCC in Oklahoma
City, Oklahoma and Dallas, Texas, and, while an examiner, served as Regional
Director of Special Surveillance from 1979 to 1981, and conducted bank
examinations in Europe. Mr. Lanier has served as United Way Drive Chairman and
President; Chairman of the Shawnee Advisory Board of Oklahoma Baptist
University; Director of the Shawnee Chamber of Commerce; Director and Chairman
of the Youth and Family Resource Center; and President and Trustee of the
Shawnee Educational Foundation.
Mark A. Poole was appointed President of the Tulsa division of the Bank
in December 1998. Prior to joining the Bank in 1998, Mr. Poole was Senior Vice
President/Sales Manager of Bank One, Oklahoma in Tulsa from 1996 to 1998; and
served as commercial lending officer for BankIV in Oklahoma City from 1994 to
1996; Bank of Oklahoma in Oklahoma City from 1991 to 1994; and Security Pacific
Bank of Arizona from 1987 to 1991. In 1981, Mr. Poole was drafted by the Toronto
Blue Jays and played professional baseball in the A, AA and AAA leagues until
1986. Mr. Poole is a board member of the Tulsa Area United Way Allocations
Committee and Downtown Tulsa Unlimited. He is a former board member of Citizens
Caring for Children, was chairman of the 1996 OBA Basic Banking School, and a
member of the Advisory Board for the 1994 OBA Commercial Lending School.
Joseph P. Root was appointed President of the Central Oklahoma division
of the Bank in November 1997. Previously, Mr. Root was Senior Vice President in
the Central Oklahoma division. Prior to joining the Bank in 1992, Mr. Root
served as Credit Analyst from November 1987 to April 1989 and Private Banking
Officer from May 1989 to July 1992 with Comerica Bank in Dallas, Texas. He is a
member of the Oklahoma City Chamber of Commerce and the State Chamber of
Commerce of Oklahoma, and of Robert Morris Associates. In addition, he is a
member of the Oklahoma City Men's Dinner Club.
Connie Saldivar was appointed Senior Vice President, Retail Sales, upon
joining the Bank in September 2000. Prior to joining the Bank, Ms. Saldivar
served as National Performance and Quality Manager, Vice President, for the
Midwest Region of Bank of America (previously NationsBank) during 2000, and as
Oklahoma West Sales Manager, Vice President, of Bank of America (formerly
NationsBank) from 1997 to 2000. Ms. Saldivar served in various capacities for
previously Boatmen's Bank, which was acquired by Nations Bank.
Kimberly G. Sinclair was appointed Chief Administrative Officer in 1995
and has been Executive Vice President of the Bank since 1991. Prior to 1991, she
had been Senior Vice President and Chief Operations Officer of the Bank since
1985. Ms. Sinclair joined the Bank in 1975. She is a member of the Stillwater
Junior Service League, Treasurer of the Board of Trustees of the Stillwater
Public Education Foundation, and a graduate of the Leadership Stillwater Class
IX. She has been an Ambassador with the Stillwater Chamber of Commerce and
active with the Pioneer Booster Club and Stillwater PTA.
Charles H. Westerheide was appointed Executive Vice President and
Treasurer of the Bank in 2000. Prior to that he served as Senior Vice President
and Treasury Manager. He joined the Bank in 1997 coming from Bank of America
(previously NationsBank), Wichita, Kansas (previously BankIV), where he served
as Treasury/Funding Manager. Prior to joining BankIV, Mr. Westerheide served as
Executive Vice President and Chief Financial Officer of Security Bank and Trust
Co., Ponca City, Oklahoma. Mr. Westerheide has held a number of community
leadership positions including Chairman of the Ponca City Chamber of Commerce,
President of the Ponca City Foundation for Progress, Inc., and a director and
officer of numerous community foundations and clubs. Mr. Westerheide is a
graduate of
9
Leadership Oklahoma, Class II.
Tabular Financial Information
The following tabular financial information should be read in
conjunction with the Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Consolidated Financial Statements and Notes
thereto included in the Annual Report and incorporated by reference in Items 7
and 8 of this Form 10-K.
Rate/Volume Analysis
The following table analyzes changes in interest income and interest
expense of Southwest for the periods indicated. For each category of
interest-earning asset and interest-bearing liability, information is provided
on changes attributable to: (i) changes in volume (changes in volume multiplied
by the prior period's rate); and (ii) changes in rates (changes in rate
multiplied by the prior period's volume). Changes in rate-volume (changes in
rate multiplied by the changes in volume) are allocated between changes in rate
and changes in volume in proportion to the relative contribution of each.
Year ended Year ended
December 31, 2000 December 31, 1999
Compared to Compared to
December 31, 1999 December 31, 1998
----------------------------------- -----------------------------------
Increase (decrease) attributable to change in:
Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change
----------------------------------- -----------------------------------
(dollars in thousands)
Interest earned on:
Loans receivable (1) $8,195 $5,912 $14,107 $2,726 $(2,373) $353
Investment securities 1,775 711 2,486 251 (220) 31
Federal funds sold 75 11 86 (35) (6) (41)
----------------------------------- -----------------------------------
Total interest income 10,045 6,634 16,679 2,942 (2,599) 343
Interest paid on:
NOW accounts 44 343 387 40 (171) (131)
Money market accounts 31 1,048 1,079 246 9 255
Savings accounts 20 -- 20 12 (14) (2)
Time deposits 4,884 4,809 9,693 (957) (2,145) (3,102)
Short-term borrowings 2,036 1,445 3,481 3,272 (71) 3,201
Long-term debt -- -- -- -- -- --
----------------------------------- -----------------------------------
Total interest expense 7,015 7,645 14,660 2,613 (2,392) 221
----------------------------------- -----------------------------------
Net interest income $3,030 $(1,011) $2,019 $329 $(207) $122
=================================== ===================================
<FN>
(1) Average balances include nonaccrual loans. Fees included in interest
income on loans receivable are not considered material. Interest on
tax-exempt loans and securities is not shown on a tax-equivalent basis
because it is not considered material.
</FN>
10
Investment Portfolio Composition
At December 31,
-----------------------------------------
2000 1999 1998
------------ ------------ ------------
(Dollars in thousands)
U.S. Government and agency obligations $106,210 $105,763 $121,656
Obligations of states and political subdivisions 41,026 31,170 15,372
Mortgage-backed securities 70,567 64,202 31,020
Other securities 11,989 10,547 6,623
------------ ------------ ------------
Total investment securities $229,792 $211,682 $174,671
============ ============ ============
Available for sale (fair value) $156,947 $131,379 $92,960
Held to maturity (amortized cost) 64,406 71,814 77,575
Federal Reserve Bank and Federal Home
Loan Bank Stock 8,439 8,489 4,136
------------ ------------ ------------
Total investment securities $229,792 $211,682 $174,671
============ ============ ============
Southwest does not have any material amounts of investment securities
or other interest-earning assets, other than loans, that would have been
classified as nonperforming if such assets were loans, or which were recognized
by management as potential problem assets based upon known information about
possible credit problems of the borrower or issuer.
11
Investment Portfolio Maturity
The following table shows the maturities, carrying value (amortized
cost for investment securities being held to maturity or estimated fair value
for investment securities available for sale), estimated fair market values and
average yields for Southwest's investment portfolio at December 31, 2000. Yields
are not presented on a tax-equivalent basis. Maturities of mortgage-backed
securities are based on expected maturities. Expected maturities will differ
from contractual maturities due to scheduled repayments and because borrowers on
the underlying mortgages may have the right to call or prepay obligations with
or without prepayment penalties. The securities of no single issuer (other than
the United States or its agencies), or in the case of securities issued by state
and political subdivisions, no source or group of sources of repayment,
accounted for more than 10% of shareholders' equity of Southwest at December 31,
2000.
Two through Five through More than
One Year or Less Five Years Ten Years Ten Years Total Investment Securities
------------------ ------------------ ------------------ ------------------ ---------------------------
Amortized Average Amortized Average Amortized Average Amortized Average Amortized Market Average
Cost Yield Cost Yield Cost Yield Cost Yield Cost Value Yield
--------- -------- --------- ------- --------- ------- --------- ------- --------- ------ -------
(Dollars in thousands)
Held to Maturity:
U.S. government and
agency obligations $ 9,505 6.30% $ 18,693 6.23% $ -- --% $ -- --% $ 28,198 $ 28,433 6.25%
Obligations of states
and political
subdivisions 3,977 5.93 32,231 6.44 -- -- -- -- 36,208 36,182 6.35
-------- -------- ------- ------- -------- --------
Total 13,482 6.19 50,924 6.36 -- -- -- -- 64,406 64,615 6.33
-------- -------- ------- ------- -------- --------
Available for Sale:
U.S. government and
agency obligations 15,409 4.24 58,026 6.56 3,969 6.78 -- -- 77,404 78,012 6.11
Obligations of states
and political
subdivisions 220 5.99 2,867 6.47 1,700 6.74 -- -- 4,787 4,818 6.54
Mortgage-backed
securities 3,154 5.83 48,168 6.70 8,535 7.21 10,676 7.92 70,533 70,567 6.91
Other securities -- -- 10,030 6.40 -- -- 2,000 8.60 12,030 11,989 6.77
-------- -------- ------- ------- -------- --------
Total 18,783 6.02 119,091 6.60 14,204 7.03 12,676 8.03 164,754 165,386 6.51
-------- -------- ------- ------- -------- --------
Total investment
securities $ 32,265 $170,015 $14,204 $12,676 $229,160 $230,001
======== ======== ======= ======= ======== ========
12
Loan Portfolio
The following table presents the composition of Southwest's loan
portfolio, net of unearned interest:
At December 31,
-----------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------------- --------------- ---------------- ---------------- ----------------
Amount % Amount % Amount % Amount % Amount %
------- ----- ------- ----- -------- ----- -------- ----- -------- -----
(Dollars in thousands)
Real estate mortgage -
One to four family
residential 107,360 11.76% 102,973 12.07% $ 83,657 10.55% $ 79,843 11.10% $ 61,175 9.49%
Commercial 276,525 30.30 263,216 30.86 275,729 34.75 223,672 31.10 196,163 30.43
Real estate construction 103,951 11.39 85,511 10.03 76,544 9.65 72,454 10.08 54,369 8.43
Commercial 311,953 34.19 296,415 34.77 252,341 31.81 241,007 33.52 218,515 33.90
Installment and consumer -
Government-guaranteed
student loans 77,846 8.53 69,873 8.19 65,242 8.22 64,390 8.95 61,959 9.61
Credit cards -- -- -- -- -- -- 73 0.01 20,839 4.11
Other 34,915 3.83 34,820 4.08 39,806 5.02 37,674 5.24 31,626 4.91
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
912,550 100.0% 852,808 100.00% 793,319 100% 719,113 100.00% 644,646 100.00%
====== ===== ====== ===== =====
Less: Allowance
for loan loss (12,125) (11,190) (10,401) (8,282) (7,139)
-------- -------- -------- -------- --------
Total 900,425 841,618 782,982 710,831 637,507
======== ======== ======== ======== ========
Potential Nonperforming Loans. Those performing loans considered
potential nonperforming loans, loans which are not included in the past due,
nonaccrual or restructured categories, but for which known information about
possible credit problems cause management to be uncertain as to the ability of
the borrowers to comply with the present loan repayment terms over the next six
months, amounted to approximately $53.1 million at December 31, 2000, compared
to $17.8 million at December 31, 1999. Loans may be monitored by management and
reported as potential nonperforming loans for an extended period of time during
which management continues to be uncertain as to the ability of certain
borrowers to comply with the present loan repayment terms. These loans are
subject to continuing management attention and are considered by management in
determining the level of the allowance for loan losses.
13
Allocation of the Allowance for Loan Losses
Southwest's methodology for assessing the appropriateness of the
allowance includes determination of a formula allowance, specific allowances and
an unallocated allowance. The formula allowance is calculated by applying loss
factors to corresponding categories of outstanding loans and leases. Loss
factors are based on Southwest's historical loss experience in the various
portfolio categories over the prior six quarters or four quarters, whichever is
greater. The use of these loss factors is intended to reduce the differences
between estimated losses inherent in the portfolio and observed losses. Specific
allowances are established in cases where management has identified significant
conditions or circumstances related to a credit that management believes
indicate the probability that a loss may be incurred in an amount different from
the amount determined by application of the formula allowance. The allowance for
loan losses related to loans that are identified for evaluation of impairment is
based on discounted cash flows using the loan's initial effective interest rate
or the fair value of the collateral for certain collateral dependent loans.
Allowances are established for credits 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. The unallocated allowance is based upon management's evaluation of
various conditions that are not directly measured in the determination of the
formula and specific allowances. Management reviews these conditions quarterly.
During 2000, there were no changes in estimation methods or assumptions that
affected the allowance methodology.
Management believes that the allowance for credit losses is adequate.
However, the determination of the allowance requires significant judgment, and
estimates of probable losses inherent in the loan portfolio can vary
significantly from the amounts actually observed. While management uses
available information to recognize probable losses, future additions to the
allowance may be necessary based on changes in the credits comprising the loan
and lease portfolio and changes in the financial condition of borrowers, such as
may result from changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, and independent
consultants engaged by Stillwater National, periodically review the Bank's loan
portfolio and allowance for credit losses. Such review may result in recognition
of additions to the allowance based on their judgments of information available
to them at the time of their examination.
14
The following table presents a five-year history for the allocation of
the allowance for credit losses, reflecting use of the methodology presented
above, along with the percentage of total loans and leases in each category
(dollars in thousands). The unallocated allowance increased from December 31,
1999, to December 31, 2000, due primarily to growth in loans. When measured
against the total allowance, unallocated reserves decreased to 24.96% at
December 31, 2000, from 26.74% a year earlier.
At December 31,
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997
----------------------- ----------------------- ----------------------- -----------------------
Percent of Percent of Percent of Percent of
Loans in Each Loans in Each Loans in Each Loans in Each
Category to Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
-------- ------------- -------- -------------- -------- ------------- -------- -------------
(Dollars in thousands)
Real estate mortgage -
One to four family
residential $ 546 11.76% $ 602 12.07% $ 321 10.55% $ 488 11.10%
Commercial 916 30.30 1,128 30.86 851 34.75 1,073 31.10
Real estate construction 3,003 11.39 1,893 10.03 912 9.65 732 10.08
Commercial 4,286 34.19 4,028 34.77 5,353 31.81 4,477 33.52
Installment and consumer -
Government-guaranteed
student loans -- 8.53 56 8.19 -- 8.22 -- 8.95
Credit cards -- -- -- -- -- -- 1 0.01
Other 347 3.83 491 4.08 510 5.02 573 5.24
Unallocated 3,027 2,992 2,454 938
-------- ------- -------- ------- -------- ------- -------- -------
Total $ 12,125 100.00% $ 11,190 100.00% $ 10,401 100.00% $ 8,282 100.00%
======== ======= ======== ======= ======== ======= ======== =======
At December 31,
-----------------------
1996
-----------------------
Percent of
Loans in Each
Category to
Amount Total Loans
-------- --------------
(Dollars in thousands)
Real estate mortgage -
One to four family
residential $ 294 9.49%
Commercial 584 30.43
Real estate construction 457 8.43
Commercial 4,597 33.90
Installment and consumer -
Government-guaranteed
student loans -- 9.61
Credit cards 670 3.23
Other 263 4.91
Unallocated 274
-------- -------
Total $ 7,139 100.00%
======== =======
15
Certificates of Deposit of $100,000 or More
The following table indicates the amount of Southwest's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
2000:
Maturity Period Amount
- --------------------------------------------------- ------------
(Dollars in thousands)
Three months or less (1) $ 95,304
Over three through six months (1) 112,228
Over six through 12 months (1) 68,723
Over 12 months 28,559
------------
Total $304,814
============
<FN>
(1) The amount of certificates of deposit that mature within 12 months is $276.3
million. The Company does not have any liquidity concerns as a result of the
volume of these maturities.
</FN>
Other Material
The Letter to Shareholder from the CEO on pages 2 and 3 of the Annual
Report, the information set forth on pages 5 through 17 of the Annual Report,
Note 1-"Summary of Significant Accounting and Reporting Policies" on pages 24
through 26 of the Annual Report, Note 3-"Loans Receivable" on pages 28 through
30 of the Annual Report, and Note 5-"Other Borrowed Funds" on pages 31 and 32 of
the Annual Report are incorporated herein by reference.
ITEM 2. PROPERTIES
Page 46 of the Annual Report (listing executive and other offices) is
hereby incorporated by reference. The Corporate Headquarters, Drive-in &
Mortgage Lending, Chickasha Branch, and Tulsa Utica Branch are owned. Other
facilities are held under lease or similar arrangement.
ITEM 3. LEGAL PROCEEDINGS
Note 15--"Commitments and Contingencies" on page 40 of the Annual
Report is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 2000, through solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
As of March 20, 2001, there were approximately 2000 holders of record
of Southwest's Common Stock. The section titled "Stock Information" on page 45
of the Annual Report is hereby incorporated by reference.
For information regarding regulatory restrictions on Stillwater
National's and, therefore, Southwest's payment of dividends, see Note 8 --
"Shareholders' Equity" on pages 34 and 35 of the Annual Report, which is hereby
incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
16
The table titled "Selected Consolidated Financial Data" on pages 4 and
5 of the Annual Report is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pages 7 through 17 of the Annual Report are hereby incorporated by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section titled "Asset/Liability Management and Quantitative and
Qualitative Disclosures about Market Risk" on pages 15 and 16 of the Annual
Report is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 19 through 42 of the Annual Report are hereby incorporated by
reference. The Independent Auditors' Report as of December 31, 1999 and for each
of the two years in the period ended December 31, 1999 is included as Exhibit 99
to the Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The section titled, "Change in Auditors" on page 17 of the Annual
Report is incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and nominees for directors of Southwest
and compliance with Section 16(a) of the Securities Exchange Act of 1934 is
included under the captions titled "Proposal I--Election of Directors" on pages
2 through 7 of the Proxy Statement, and Section 16(a) "Beneficial Ownership
Reporting Compliance" on page 15 of the Proxy Statement, and is hereby
incorporated by reference.
Information concerning the executive officers of Southwest is included
under the caption titled "Item 1. Business -- Executive Officers" of this report
and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding the compensation of Southwest's directors and
executive officers is included under the captions "Director Compensation," on
page 7 and "Executive Compensation and Other Benefits," and "Stock Performance
Comparisons" on pages 10 through 14 of the Proxy Statement, and is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial ownership of Southwest's common stock
by certain beneficial owners and directors and executive officers of Southwest
is included under the caption "Common Stock Owned by Directors and Executive
Officers" on page 8 of the Proxy Statement and is hereby incorporated by
reference.
17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
with management is included under the caption "Certain Transactions" on page 14
of the Proxy Statement and is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report
(1) Financial Statements. The consolidated financial statements of
Southwest included in the Annual Report to Shareholders for the year
ended December 31, 2000, are incorporated herein by reference in Item 8
of this Report. The remaining information appearing in the Annual
Report to Shareholders is not deemed to be filed as part of this
Report, except as expressly provided herein.
The following financial statements are filed as a part of this report:
Independent Auditors' Report
Consolidated Statements of Financial Condition at December 31,
2000 and 1999
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Comprehensive Income for the Years
Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements for the Years Ended
December 31, 2000, 1999 and 1998
Independent Auditors' Report as of December 31, 1999 and for
each of the two years in the period ended December 31, 1999
(2) Financial Statement Schedules. All schedules for which provision is
made in the applicable accounting regulations of the SEC are omitted because of
the absence of conditions under which they are required or because the required
information is included in the consolidated financial statements and related
notes thereto.
(3) Exhibits. The following is a list of exhibits filed as part of this
Annual Report on Form 10-K.
No. Exhibit
--- -------
3.1 Amended and Restated Certificate of Incorporation of Southwest
Bancorp, Inc. (incorporated by reference to Exhibit 3.1 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996)
3.2 Bylaws of Southwest Bancorp, Inc. (incorporated by reference
to Exhibit 3.2 to Registration Statement on Form S-1 (File No.
33-71168))
4.1 Rights Agreement, dated as of April 22, 1999, between
Southwest Bancorp, Inc. and Harris Trust & Savings Bank, as
rights agent and Form of Certificate of Designations setting
forth terms of Class B, Series 1 Preferred Stock of Southwest
Bancorp, Inc. referred to in the rights agreement
(incorporated by reference to Exhibits 1 and 2 to Current
Report on Form 8-K dated April 22, 1999)
* 10.1 Southwest Bancorp, Inc. Employee Stock Purchase Plan
(incorporated by reference from Exhibit 4.1 to Registration
Statement on Form S-8 (File No. 33-97850))
* 10.2 Severance Compensation Plan (incorporated by reference as
Exhibit 10.2 to Registration Statement on Form S-1 (File No.
33-71168))
* 10.3 Southwest Bancorp, Inc. 1994 Stock Option Plan (incorporated
by reference from Exhibit 10.3 to Annual Report on
18
Form 10-K for the fiscal year ended December 31, 1993)
* 10.4 Southwest Bancorp, Inc. 1999 Stock Option Plan (incorporated
by reference from Exhibit 4 to Registration Statement on Form
S-8 (File No. 333-92143))
13 Annual Report to Shareholders for the Year Ended December 31,
2000
21 Subsidiaries of the Registrant
23.1 Independent Auditors' Consent
23.2 Independent Auditors' Consent
24 Power of Attorney
99 Independent Auditors' Report as of December 31, 1999 and for
each of the two years in the period ended December 31, 1999
- --------------
* Management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K.
Southwest filed an 8-K dated December 14, 2000, reporting, in Item 5 of
such form, the restructuring of a large problem credit.
(c) Exhibits. See (a)(3) above for all exhibits filed herewith and the
Exhibit Index.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 29, 2001 By: /s/ Rick Green
------------------------------
Rick Green
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Rick Green March 29, 2001
- ----------------------------------------
Rick Green
Director and Chief Executive Officer
(Principal Executive Officer)
/s/ Kerby E. Crowell March 29, 2001
- ----------------------------------------
Kerby E. Crowell
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
A majority of the directors of Southwest executed a power of attorney
appointing Rick Green as their attorney-in-fact, empowering him to sign this
report on their behalf. This power of attorney has been filed with the
Securities and Exchange Commission under Part IV, Exhibit 24 of this Form 10-K
for the year ended December 31, 2000. This report has been signed below by such
attorney-in-fact as of March 29, 2001.
By: /s/ Rick Green
---------------------------------------
Rick Green
Attorney-in-Fact for Majority of the
Directors of Southwest
20