Operating Segments

6 Months Ended

Jun. 30, 2014

Operating Segments [Abstract]

Operating Segments

NOTE 9: OPERATING SEGMENTS  

We operate five principal segments:  Oklahoma Banking, Texas Banking, Kansas Banking, Mortgage Banking, and Other Operations.  The Oklahoma Banking segment, the Texas Banking segment, and the Kansas Banking segment provide deposit and lending services.  The Mortgage Banking segment consists of residential mortgage lending services to customers.  Prior to the fourth quarter of 2013, the Mortgage Banking segment only included all loans available for sale in the secondary market.  During the fourth quarter of 2013, 1-4 family mortgages were added to the available for sale loans in the Mortgage Banking segment. This adjustment would have had an immaterial impact on interest income for the first half of 2013.  Other Operations includes our funds management unit 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 FHLB advances.    

The accounting policies of each reportable segment are the same as Southwest’s.  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.  The following table summarizes financial results by operating segment:

For the three months ended June 30, 2014
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations		Company
Net interest income (loss)	$	9,295	$	4,457	$	3,075	$	201	$	(454)	$	16,574
Provision for loan losses		(1,460)		1,449		(340)		(4)		-		(355)
Noninterest income		1,722		243		420		610		5,251		8,246
Noninterest expenses		7,302		3,232		2,658		568		1,572		15,332
Income before taxes		5,175		19		1,177		247		3,225		9,843
Taxes on income		1,941		7		441		93		1,209		3,691
Net income	$	3,234	$	12	$	736	$	154	$	2,016	$	6,152

For the three months ended June 30, 2013
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations		Company
Net interest income (loss)	$	8,434	$	4,593	$	2,560	$	165	$	(618)	$	15,134
Provision for loan losses		(714)		(1,269)		107		(12)		1,012		(876)
Noninterest income		1,787		307		485		847		65		3,491
Noninterest expenses		6,876		1,080		3,179		612		1,092		12,839
Income (loss) before taxes		4,059		5,089		(241)		412		(2,657)		6,662
Taxes on income		1,420		1,727		(99)		137		(937)		2,248
Net income (loss)	$	2,639	$	3,362	$	(142)	$	275	$	(1,720)	$	4,414

For the six months ended June 30, 2014
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations*		Company
Net interest income (loss)	$	18,124	$	9,089	$	5,455	$	348	$	(441)	$	32,575
Provision for loan losses		516		(2,483)		659		(33)		-		(1,341)
Noninterest income		3,422		539		901		1,027		5,382		11,271
Noninterest expenses		14,361		6,460		5,286		1,091		2,241		29,439
Income before taxes		6,669		5,651		411		317		2,700		15,748
Taxes on income		2,501		2,119		154		119		1,012		5,905
Net income	$	4,168	$	3,532	$	257	$	198	$	1,688	$	9,843
* Includes externally generated revenue of $5.6 million, primarily from investing services, and an internally generated loss of $0.7 million from the funds management unit
Total loans at period end		773,663		408,385		145,247		24,402		3		1,351,700
Total assets at period end		779,315		405,524		147,644		27,687		524,988		1,885,158
Total deposits at period end		1,079,566		206,031		111,615		7,093		59,550		1,463,855

For the six months ended June 30, 2013
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations*		Company
Net interest income (loss)	$	16,693	$	9,608	$	5,046	$	301	$	(908)	$	30,740
Provision for loan losses		156		(1,563)		30		(13)		1,012		(378)
Noninterest income		3,554		694		950		1,561		269		7,028
Noninterest expenses		14,247		3,687		6,074		1,174		2,045		27,227
Income (loss) before taxes		5,844		8,178		(108)		701		(3,696)		10,919
Taxes on income		2,203		3,082		(40)		264		(1,393)		4,116
Net income (loss)	$	3,641	$	5,096	$	(68)	$	437	$	(2,303)	$	6,803
* Includes externally generated loss of $1.1 million, primarily from investing services, and an internally generated revenue of $0.4 million from the funds management unit
Total loans at period end		656,352		444,327		210,189		7,217		4		1,318,089
Total assets at period end		661,036		436,460		215,489		10,035		708,942		2,031,962
Total deposits at period end		1,171,876		173,735		248,805		4,807		16,738		1,615,961