Operating Segments

12 Months Ended

Dec. 31, 2012

Operating Segments [Abstract]

Operating Segments

Note 19:  Operating Segments

We operatesix principal segments:  Oklahoma Banking, Texas Banking, Kansas Banking, Out of Market, Secondary Market, and Other Operations.  The Oklahoma Banking segment, the Texas Banking segment, and the Kansas Banking segment provide deposit and lending services to customers in the states of Oklahoma, Texas, and Kansas.  The Out of Market segment provides lending services to customers outside Oklahoma, Texas, and Kansas.  The Secondary Market segment consists of three operating units: one that provides student lending services to post-secondary students in Oklahoma and several other states, one that provides residential mortgage lending services to customers in Oklahoma, Texas, and Kansas, and one that provides United States Department of Agriculture (“USDA”) government guaranteed commercial real estate lending services to rural healthcare providers.  Other Operations includes our funds management unit, SNB Wealth Management, and corporate investments.    

The primary purpose of the funds management unit is to manage our overall internal liquidity needs and interest rate risk.  Each segment borrows funds from or provides funds to the funds management unit as needed to support its operations.  The value of funds provided to and the cost of funds borrowed from the funds management unit by each segment are internally priced at rates that approximate market rates for funds with similar duration.  The yield used in the funds transfer pricing curve is a blend of rates based on the volume usage of retail and brokered certificates of deposit and Federal Home Loan Bank advances. 

We identify reportable segments by type of service provided and geographic location.  Operating results are adjusted for borrowings, allocated service costs, and management fees.  Portfolio loans are allocated based upon the state of the borrower or the location of the real estate in the case of real estate loans.  Loans included in the Out of Market segment are portfolio loans attributable to twenty-six states other than Oklahoma, Texas, or Kansas and primarily consist of healthcare and commercial real estate credits.  These out of state loans are administered by offices in Oklahoma, Texas, or Kansas.

The accounting policies of each reportable segment are the same as those of Southwest.  Expenses for consolidated back-office operations are allocated to operating segments based on estimated uses of those services.  General overhead expenses such as executive administration, accounting, and audit are allocated based on the direct expense and/or deposit and loan volumes of the operating segment.  Income tax expense for the operating segments is calculated at statutory rates.  The Other Operations segment records the tax expense or benefit necessary to reconcile to the consolidated financial statements. 

Capital is assigned to each of the segments using a risk-based capital pricing methodology that assigns capital ratios by asset, deposit, or revenue category based on credit risk, interest rate risk, market risk, operational risk, and liquidity risk factors.   

The following table summarizes financial results by operating segment: 

For the year ended December 31,2012
	Oklahoma		Texas		Kansas		Out of		Secondary		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Market		Market		Operations*		Company
Net interest income	$	36,846	$	28,947	$	11,929	$	5,363	$	1,383	$	(7,905)	$	76,563
Provision for loan losses		(2,699)		375		(3,123)		8,554		-		-		3,107
Noninterest income		7,623		1,818		2,332		218		2,771		1,174		15,936
Noninterest expenses		27,861		12,668		13,683		1,808		2,430		4,872		63,322
Income (loss) before taxes		19,307		17,722		3,701		(4,781)		1,724		(11,603)		26,070
Taxes on income		7,319		6,719		1,403		(1,813)		654		(4,399)		9,883
Net income (loss)	$	11,988	$	11,003	$	2,298	$	(2,968)	$	1,070	$	(7,204)	$	16,187
*  Includes externally generated revenue of $1.7 million, primarily from investing services, and an internally generated loss of $8.5 million from the funds management unit
Fixed asset expenditures	$	178	$	$ 71	$	$ 8	$	-	$	-	$	$ 1,362	$	1,619
Total loans at period end		536,855		491,442		184,330		134,426		31,682		-		1,378,735
Total assets at period end		558,332		491,024		188,576		127,478		34,304		722,541		2,122,255
Total deposits at period end		1,254,347		166,919		270,369		-		2,420		15,523		1,709,578

For the year ended December 31,2011 (As Restated)
	Oklahoma		Texas		Kansas		Out of		Secondary		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Market		Market		Operations*		Company
Net interest income	$	44,494	$	36,619	$	13,814	$	6,565	$	1,456	$	(6,616)	$	96,332
Provision for loan losses		16,226		75,027		9,494		31,293		61		-		132,101
Noninterest income		7,709		1,816		1,956		221		1,297		1,019		14,018
Noninterest expenses		30,821		27,723		17,820		7,896		2,121		3,820		90,201
Income (loss) before taxes		5,156		(64,315)		(11,544)		(32,403)		571		(9,417)		(111,952)
Taxes on income		2,010		(25,079)		(4,501)		(12,636)		223		(3,674)		(43,657)
Net income (loss)	$	3,146	$	(39,236)	$	(7,043)	$	(19,767)	$	348	$	(5,743)	$	(68,295)
*  Includes externally generated revenue of $3.9 million, primarily from investing services, and an internally generated loss of $9.5 million from the funds management unit
Fixed asset expenditures	$	366	$	3	$	193	$	-	$	5	$	1,119	$	1,686
Total loans at period end		688,592		665,010		238,468		132,723		38,695		-		1,763,488
Total assets at period end		720,815		665,846		245,005		136,579		40,876		568,155		2,377,276
Total deposits at period end		1,406,360		156,102		276,757		-		1,430		80,733		1,921,382

For the year ended December 31,2010 (As Restated)
	Oklahoma		Texas		Kansas		Out of		Secondary		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Market		Market		Operations*		Company
Net interest income	$	43,278	$	42,311	$	14,387	$	8,445	$	1,500	$	(2,590)	$	107,331
Provision for loan losses		66		22,992		3,605		8,897		-		-		35,560
Noninterest income		8,178		1,726		2,437		368		2,359		3,496		18,564
Noninterest expenses		28,020		13,740		17,864		2,919		2,269		4,418		69,230
Income (loss) before taxes		23,370		7,305		(4,645)		(3,003)		1,590		(3,512)		21,105
Taxes on income		8,522		2,664		347		(1,095)		580		(1,280)		9,738
Net income (loss)	$	14,848	$	4,641	$	(4,992)	$	(1,908)	$	1,010	$	(2,232)	$	11,367
*  Includes externally generated revenue of $7.9 million, primarily from investing services, and an internally generated loss of $7.0 million from the funds management unit
Fixed asset expenditures	$	161	$	$ 40	$	$ 152	$	-	$	52	$	$ 632	$	1,037
Total loans at period end		871,393		982,845		289,642		241,041		35,194		-		2,420,115
Total assets at period end		899,269		976,383		304,203		231,591		37,483		366,015		2,814,944
Total deposits at period end		1,565,124		160,181		268,867		-		1,389		257,167		2,252,728