Operating Segments

9 Months Ended

Sep. 30, 2014

Operating Segments [Abstract]

Operating Segments

NOTE 10: 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 loans available for sale in the secondary market.  During the fourth quarter of 2013, 1-4 family mortgages were combined with the available for sale loans for inclusion in the Mortgage Banking segment. This adjustment would have had an immaterial impact on interest income for the first nine months 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 September 30, 2014
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations		Company
Net interest income (loss)	$	9,902	$	5,141	$	1,543	$	204	$	(953)	$	15,837
Provision for loan losses		(1,142)		(867)		(897)		8		1		(2,897)
Noninterest income		1,717		409		341		506		111		3,084
Noninterest expenses		7,169		3,423		1,424		579		763		13,358
Income (loss) before taxes		5,592		2,994		1,357		123		(1,606)		8,460
Taxes on income		2,097		1,123		509		45		(602)		3,172
Net income (loss)	$	3,495	$	1,871	$	848	$	78	$	(1,004)	$	5,288

For the three months ended September 30, 2013
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations		Company
Net interest income (loss)	$	9,008	$	4,489	$	2,736	$	166	$	(1,126)	$	15,273
Provision for loan losses		1,012		(1,387)		39		7		-		(329)
Noninterest income		1,731		310		470		662		374		3,547
Noninterest expenses		6,570		2,524		2,579		575		771		13,019
Income (loss) before taxes		3,157		3,662		588		246		(1,523)		6,130
Taxes on income		1,200		1,395		222		94		(581)		2,330
Net income (loss)	$	1,957	$	2,267	$	366	$	152	$	(942)	$	3,800

For the nine months ended September 30, 2014
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations*		Company
Net interest income (loss)	$	28,026	$	14,230	$	6,998	$	552	$	(1,394)	$	48,412
Provision for loan losses		(626)		(3,350)		(238)		(25)		1		(4,238)
Noninterest income		5,139		948		1,242		1,533		5,493		14,355
Noninterest expenses		21,530		9,883		6,710		1,670		3,004		42,797
Income before taxes		12,261		8,645		1,768		440		1,094		24,208
Taxes on income		4,598		3,242		663		164		410		9,077
Net income	$	7,663	$	5,403	$	1,105	$	276	$	684	$	15,131
* Includes externally generated revenue of $6.0 million, primarily from investing services, and an internally generated loss of $1.9 million from the funds management unit
Total loans at period end		777,033		424,640		142,547		23,164		4		1,367,388
Total assets at period end		784,343		422,209		144,786		26,517		523,093		1,900,948
Total deposits at period end		1,069,278		206,268		114,432		7,907		97,061		1,494,946

For the nine months ended September 30, 2013
	Oklahoma		Texas		Kansas		Mortgage		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Banking		Operations*		Company
Net interest income (loss)	$	25,699	$	14,097	$	7,782	$	467	$	(2,032)	$	46,013
Provision for loan losses		1,168		(2,950)		69		(6)		1,012		(707)
Noninterest income		5,285		1,004		1,420		2,223		643		10,575
Noninterest expenses		20,817		6,211		8,653		1,749		2,816		40,246
Income (loss) before taxes		8,999		11,840		480		947		(5,217)		17,049
Taxes on income		3,403		4,477		182		358		(1,974)		6,446
Net income (loss)	$	5,596	$	7,363	$	298	$	589	$	(3,243)	$	10,603
* Includes externally generated loss of $1.4 million, primarily from investing services, and an internally generated loss of $36,000 from the funds management unit
Total loans at period end		681,745		414,433		206,802		3,641		4		1,306,625
Total assets at period end		684,529		407,532		211,237		6,591		662,478		1,972,367
Total deposits at period end		1,128,753		188,391		250,597		5,666		10,384		1,583,791