10-K 1 oksb-20161231x10k.htm 10-K OKSB-201610K



Washington, D.C. 20549





For the Fiscal Year Ended December 31, 2016 

Commission File Number 001-34110 



(Exact name of registrant as specified in its charter)







(State or other jurisdiction of

incorporation or organization)


(I.R.S. Employer

Identification No.)




608 South Main Street,

Stillwater, Oklahoma



(Address of principal executive office)


(Zip Code)

Registrant’s telephone number, including area code: (405) 742-1800

Securities registered pursuant to Section 12(b) of the Act: 



Title of Each Class


Name of Each Exchange on which Registered

Common Stock, par value $1.00 per share


The NASDAQ Stock Market 

Securities registered pursuant to Section 12(g) of the Act:


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  [  ] YES  [X] NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  [  ] YES  [X] NO

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.   [X] YES   [  ] NO    

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [X] YES   [  ] 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.   [  ]

Indicate by a check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated filer [  ]        Accelerated filer [X]    Non-accelerated filer [  ]Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [  ] YES   [X] NO

The registrant's Common Stock is traded on the NASDAQ Global Select Market under the symbol OKSB. The aggregate market value of approximately 17,544,194 shares of Common Stock of the registrant issued and outstanding held by nonaffiliates on June 30, 2016, the last day of the registrant’s most recently completed second fiscal quarter, was approximately $297.0 million based on the closing sales price of $16.93 per share of the registrant's Common Stock on that date. Solely for purposes of this calculation, it is assumed that directors, officers, and 5% stockholders of the registrant (other than institutional investors) are affiliates.

As of the close of business on March 9, 2017,  18,689,022 shares of  the registrant's Common Stock were outstanding.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement relating to registrant’s Annual Meeting of Shareholders, to be held on April 25, 2017, are incorporated by reference into Part III of this Form 10-K to the extent described therein.





Annual Report on Form 10-K

Table of Contents








Item 1.


Item 1A.

Risk Factors


Item 1B.

Unresolved Staff Comments


Item 2.



Item 3.

Legal Proceedings


Item 4.

Mine Safety Disclosures







Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


Item 6.

Selected Financial Data


Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations


Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


Item 8.

Financial Statements and Supplementary Data


Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures


Item 9A.

Controls and Procedures


Item 9B.

Other Information







Item 10.

Directors, Executive Officers and Corporate Governance


Item 11.

Executive Compensation


Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


Item 13.

Certain Relationships and Related Transactions, and Director Independence


Item 14.

Principal Accounting Fees and Services







Item 15.

Exhibits, Financial Statement Schedules










Caution  about Forward-Looking Statements

Southwest Bancorp, Inc. (“we”, “our”, “us”, or “Southwest”) makes forward-looking statements in this Annual Report on Form 10-K that are subject to risks and uncertainties. We intend these statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include:


Statements of our goals, intentions, and expectations;


Estimates of risks and of future costs and benefits;


Expectations regarding our future financial performance and the financial performance of our operating segments;


Expectations regarding regulatory actions;


Expectations regarding our ability to utilize tax loss benefits;


Expectations regarding our stock repurchase program;


Expectations regarding dividends;


Expectations regarding our planned merger with Simmons First National Corporation;


Assessments of loan quality, probable loan losses or negative provisions, and the amount and timing of loan payoffs;


Estimates of the value of assets held for sale or available for sale; and


Statements of our ability to achieve financial and other goals. 

These forward-looking statements are subject to significant uncertainties because they are based upon: our operating strategy; the amount and timing of future changes in interest rates, market behavior, and other economic conditions; future laws, regulations, and accounting principles; changes in regulatory standards and examination policies; and a variety of other matters. These other matters include, among other things, the direct and indirect effects of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past growth and performance do not necessarily indicate our future results. For other factors, risks, and uncertainties that could cause actual results to differ materially from estimates and projections contained in forward-looking statements, please read the “Risk Factors” contained in this report and our future reports to the Securities and Exchange Commission (“SEC”).

These forward-looking statements speak only as of the date on which the statements were made. We do not intend, and undertake no obligation, to update or revise any forward-looking statements contained in this release, whether as a result of differences in actual results, changes in assumptions, or changes in other factors affecting such statements, except as required by law. 

We are required under generally accepted accounting principles to evaluate subsequent events and their impact, if any, on our financial statements as of December 31, 2016 through the date our financial statements are filed with the SEC. The December 31, 2016 financial statements included in this release will be adjusted if necessary to properly reflect the impact of subsequent events on estimates used to prepare those statements.





We are a financial holding company headquartered in Stillwater, Oklahoma for our banking subsidiary, Bank SNB, a state-chartered member bank.  We were organized in 1981 as the holding company for Bank SNB, which was chartered in 1894. We are registered as a financial holding company pursuant to the Bank Holding Company Act of 1956, as amended by the Financial Services Modernization Act or Gramm-Leach-Bliley Act (the "Holding Company Act"). As a financial holding company, we are subject to supervision and regulation by the Federal Reserve. Bank SNB’s deposit accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the maximum extent permitted by law.





On December 14, 2016, we entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Simmons First National Corporation (“Simmons”), an Arkansas corporation, pursuant to which, and subject to its terms and conditions, Simmons will acquire all of our outstanding capital stock for $95.0 million in cash and 7,250,000 shares of Simmons’s common stock (the “Merger”), representing an aggregate Merger consideration of approximately $564.4 million (based on Simmons’ common stock closing price as of December 13, 2016), subject to potential adjustments.

Simmons conducts banking operations through 150 financial centers located in communities throughout Arkansas, Kansas, Missouri and Tennessee. As of December 31, 2016, Simmons had $8.4 billion in total assets, $5.6 billion in loans and $6.7 billion in deposits. The completion of the Merger is subject to, among other things, regulatory and shareholder approval and other customary closing conditions.

Products and Services

We focus on providing customers with exceptional service and meeting all of their banking needs by offering a wide variety of commercial and retail financial services including commercial and consumer lending, deposit products and services, specialized cash management, and other financial products and services.  Our areas of expertise focus on the special financial needs of healthcare and health professionals, commercial real estate borrowers, businesses and their managers and owners, commercial lending, and energy banking. The healthcare and real estate industries make up the majority of our loan portfolio.

Our commercial lending services include (i) commercial real estate loans, (ii) working capital loans, (iii) construction loans, (iv) loans to small businesses, (v) loans for equipment and general business expansion, (vi) loans to energy companies based on proved producing reserves and (vii) loans to a broad variety of healthcare providers, business, and related concerns. Consumer lending services include (i) residential real estate loans and mortgage banking services, (ii) personal lines of credit, (iii) loans for the purchase of automobiles, and (iv) other installment loans. We also offer deposit and personal banking services, including (i) commercial deposit services, commercial checking, money market, and other deposit accounts, and (ii) retail deposit services such as certificates of deposit, money market accounts, checking accounts, negotiable order of withdrawal accounts, savings accounts, and automated teller machine access. Bank SNB offers personal brokerage services through a relationship with an independent institution.

We have developed internet banking services, called Bank SNB DirectBanker®, for consumer and commercial customers, a highly automated lockbox, document imaging, and information service for commercial customers called “Bank SNB Digital Lockbox,” and deposit products that automatically sweep excess funds from commercial demand deposit accounts and invest them in interest bearing funds. 

Strategic Focus

Our bank has and will continue to position itself for future growth. We seek to produce consistent and sustainable revenue growth by enhancing, clarifying, and expanding our geographic markets and increasing and diversifying our revenue base. This consists of, but is not limited to: building out existing markets with robust and profitable growth potential; expanding our professional team; and identifying, targeting, and acquiring earning assets under appropriate risk guidelines. We are focused on consummating the Merger with Simmons and will be conducting our operations with the intent to satisfy all of the covenants and conditions to closing contained in the Merger Agreement.

We also seek to provide customers with exceptional service while, at the same time, improving operating efficiency. Over many years, we have refined our approach to customer service by listening to our customers’ needs and desires. We actively seek to make the customer experience consistent over time and across all of our locations. We improve operating efficiency by focusing on internal policy, process and procedure, along with technology, with the goal of continuous improvement while providing an exceptional experience to our clients. We build close relationships with businesses and their principals, business professionals and individuals by providing personalized financial solutions that give them more control over their financial futures. We also apply a philosophy of continuous improvement to internal and external information reporting to improve our decision making processes and product delivery.  






Our business operations are conducted through four operating segments that include Oklahoma Banking, Texas Banking, Kansas Banking, and an Other Operations segment that includes funds management (investment portfolio and funding) and corporate investments. Our organizational structure is designed to facilitate high-level customer service, prompt response, efficiency, and appropriate, uniform credit standards and other controls.    

Banking Segments – Our banking segments include Oklahoma Banking, which includes the Stillwater division, the Central Oklahoma division based in Oklahoma City, the Tulsa division, and the Colorado division based in Denver; Texas Banking, which includes the Dallas, Austin, and San Antonio divisions; and Kansas Banking, which includes the Wichita and Hutchinson divisions. All of the regional divisions focus on providing commercial and consumer financial services, including deposit products and services, to local businesses and their senior employees and to other managers and professionals living and working in our market areas. The Stillwater,  Hutchinson, and Denver divisions serve their respective markets as full-service community banks, emphasizing commercial and consumer lending. The other six  divisions pursue a more focused marketing strategy, targeting managers, professionals, and businesses for lending, and offering more specialized services. We originate and produce mortgages in our Stillwater, Oklahoma City, Tulsa, Austin, Wichita, and Denver divisions. Mortgage operations are managed through our home office located in Stillwater, Oklahoma. We originate conventional, jumbo, Federal Housing Administration ("FHA"), Veterans' Administration ("VA"), and other types of first mortgage loans for sale to the Federal National Mortgage Association (“FNMA”) or private investors. Servicing on these loans may be released or retained in connection with the sale.

Support and Control Functions – Support and control functions are centralized, although each segment has support and control personnel. Costs of centrally managed support and control functions other than funds management (which is included in the Other Operations segment) are allocated to the Banking segments. Our philosophy of customer service extends to our support and control functions. We manage and offer products that are technology based, or that otherwise are more efficiently offered centrally through our home office. These include products that are marketed through the regional offices, such as our internet banking product for commercial and retail customers (Bank SNB DirectBanker®), commercial information, and item processing services (Bank SNB Digital Lockbox). Our technology products are marketed to existing customers and to help develop new customer relationships. Use of these products by customers enables us to serve our customers more effectively, use our resources more efficiently, and increase our fee income.

For additional information regarding our operating segments, please see “Note 20:  Operating Segments” in the Notes to the Consolidated Financial Statements. 

Banking Centers and Geographic Markets

The majority of our banking centers are located along the heavily populated areas on the I-35 corridor through Texas, Oklahoma, and Kansas. As of December 31, 2016, Bank SNB had thirty banking centers:    six located in Stillwater, Oklahoma (which includes our operations center that facilitates electronic banking), nine located in the Oklahoma City, Oklahoma metropolitan area, three located in Denver, Colorado, two each located in Tulsa, Oklahoma, San Antonio, Texas, Hutchinson, Kansas and Wichita, Kansas and, one each in Chickasha, Oklahoma, Austin, Texas, Dallas, Texas, and Tilden, Texas. In addition, we have a fully dedicated loan production office in Denver, Colorado.

We focus our efforts on markets with characteristics that will allow us to capitalize on our strengths and to continue establishing new offices in those markets. We extend loans beyond Oklahoma, Texas, Kansas, and Colorado to our borrowers who conduct business in other states.


Another major component of our strategy is to be an employer of choice in our markets. We aim to employ talented and devoted people who embrace our vision and feel invested in our success. As of December 31, 2016, we employed 387  persons on a full-time equivalent basis, including executive officers, loan and other banking officers, branch personnel, and others. None of our employees or any of our consolidated subsidiary employees are represented by a union or covered under a collective bargaining agreement. Our management considers our employee relations to be excellent.






We encounter competition in seeking deposits and in obtaining loan, cash management, investment, and other customers. The level of competition for deposits is high. Our principal competitors for deposits are other financial institutions, including national banks, state banks, federal savings banks, and credit unions. 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 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 national banks, federal savings banks, and state banks, which are fully subject to federal income taxes. Credit unions may use this advantage to offer rates that are more competitive than those offered by national banks, federal savings banks, and state banks.

We also compete in our lending activities with other financial institutions such as securities firms, insurance companies, small loan companies, finance companies, mortgage companies, real estate investment trusts, and other sources of funds. The level of competition for loans is high. Many of our nonbank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally-insured banks. As a result, such nonbank competitors have advantages over us in providing certain services. A number of the financial institutions with which we compete in lending, deposit, investment, cash management, and other activities are larger than us or have significantly larger market share in the markets we serve. Our Texas, Kansas, and Colorado divisions compete for loans, deposits, and other services against local and nationally based financial institutions, many of which have much larger market shares and widespread office networks. In recent years, competition has increased in our Oklahoma market areas as new entrants and existing competitors have sought to more aggressively expand their loan and deposit market shares.

The business of mortgage banking is highly competitive. We compete for loan originations with other financial institutions, such as mortgage bankers, state and national banks, federal savings banks, credit unions, and insurance companies. Many of our competitors have financial resources that are substantially greater than those available to us. We compete principally by providing competitive pricing, by motivating our sales force through the payment of commissions on loans originated and by providing high quality service to builders, borrowers, and realtors.

Supervision and Regulation 

We are a financial holding company under the Holding Company Act and are regulated by the Federal Reserve. Our banking subsidiary, Bank SNB, is an Oklahoma banking corporation and is subject to regulation, supervision, and examination by the Oklahoma State Banking Department and the Federal Reserve. This regulation is intended primarily for the protection of depositors, the deposit insurance fund, and the banking system as a whole, and not for the protection of our shareholders.

The following summarizes certain provisions of existing laws and regulations that affect our operations and those of Bank SNB. Any discussion of laws and regulations applicable to a bank holding company also apply to us as a financial holding company. This summary does not address all aspects of these laws and regulations or include all laws and regulations that affect us now or may affect us in the future.

General  – As a financial holding company, we are regulated under the Holding Company Act and are subject to supervision and regular examination by the Federal Reserve. Under the Holding Company Act, we are required to furnish to the Federal Reserve quarterly and annual reports of our operations and additional information and reports. 

A financial holding company may engage in certain financial activities, including, without limitation, securities underwriting and dealing, insurance agency and underwriting activities and merchant banking activities. To engage in any such new financial activity, each insured depository institution of the financial holding company must have received a rating of at least “satisfactory in its most recent examination under the Community Reinvestment Act, and the financial holding company must notify the Federal Reserve within 30 days of engaging in such new activity. We are currently eligible to engage in new financial activities but have no immediate plan to do so.    





Under the Holding Company Act, a bank holding company must obtain the prior approval of the Federal Reserve before (1) 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.

Also under the Holding Company Act, any company must obtain approval of the Federal Reserve prior to acquiring control of us or Bank SNB. For purposes of the Holding Company Act, "control" is defined as ownership of more than 25% of any class of voting securities, the ability to control the election of a majority of the directors, or the exercise of a controlling influence over management or policies.

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 us or Bank SNB. 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. Our activities are subject to these legal and regulatory limitations under the Holding Company Act and Federal Reserve regulations. Non-bank and financially related activities of bank holding companies also may be subject to regulation and oversight by regulators other than the Federal Reserve.

The Federal Reserve has the power to order a bank 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 banking subsidiary of that bank 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” on page 9 of this report.

The Federal Reserve has the power to prohibit dividends by bank holding companies if their actions constitute unsafe or unsound 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.

Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) – The Dodd-Frank Act, enacted in July 2010, made significant changes in laws regarding the structure of banking regulation, the powers of the Federal Reserve and other federal and state banking regulators, deposit insurance assessments, the handling of troubled institutions, regulatory capital calculations, reporting and governance obligations of public companies, and many other provisions affecting supervision of banks, bank holding companies, and other financial services organizations. Among other things, the Dodd-Frank Act:


Created the Consumer Financial Protection Bureau (“CFPB”), whose regulations may adversely affect the business operations of financial institutions offering consumer financial products or services, including us. Although the CFPB has jurisdiction over banks with $10 billion or greater in assets, the rules, regulations and policies issued by the CFPB may also apply to Bank SNB through the adoption of similar policies by the Federal Reserve, FDIC, and state banking regulators.


Made permanent the $250,000 deposit insurance limit for insured deposits.






Revised the assessment base for calculating an insured depository institution’s deposit insurance premiums paid to the Deposit Insurance Fund to be based on average consolidated total assets minus average tangible equity rather than on deposits, and makes changes to the minimum designated reserve ratio of the Deposit Insurance Fund.


Eliminated the prohibition against payment of interest on demand deposits, which allows businesses to have interest bearing demand accounts formerly prohibited by law and Federal Reserve regulations.


Changed the requirements for certain transactions with affiliates and insiders.


Required banking regulators to establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company that provides an insider or other employee with excessive compensation or compensation that gives rise to excessive risk or could lead to a material financial loss to the institution.


Limited the use of new trust preferred securities issued after May 19, 2010 as regulatory capital.


Permitted banks to engage in de novo branching outside of their home states, provided that the laws of the target state permit banks chartered in that state to branch within that state.

Significant elements of the Dodd-Frank Act have been implemented, but implementation of other elements of the Act requires additional regulations, many of which have not yet been established.

Source of Strength Doctrine – Federal Reserve policy requires a bank holding company to serve as a source of financial and managerial strength to its subsidiary banks and does not permit a bank holding company to conduct its operations in an unsafe or unsound manner. Under this "source of strength doctrine", a bank holding company is expected to stand ready to use its available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity, and to maintain resources and the capacity to raise capital that it can commit to its subsidiary banks. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment of deposits and to certain other indebtedness of such subsidiary banks. The Holding Company Act provides that, in the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment. Furthermore, the Federal Reserve has the right to order a bank holding company to terminate any activity that the Federal Reserve believes is a serious risk to the financial safety, soundness or stability of any subsidiary bank. The Dodd-Frank Act codified the "source of strength doctrine".

State Member Bank Regulation – As an Oklahoma state-chartered bank that is a member of the Federal Reserve System, Bank SNB is subject to the primary supervision of the Oklahoma State Banking Department and the Federal Reserve. Prior regulatory approval is required for Bank SNB to establish or relocate a branch office or to engage in any merger, consolidation, or significant purchase or sale of assets.

The Oklahoma State Banking Department and the Federal Reserve regularly examine the operations and condition of Bank SNB, including, but not limited to, its capital adequacy, loans, allowance for loan losses, investments, liquidity, interest rate risk, and management practices. In addition, Bank SNB is required to furnish quarterly and annual reports to the Federal Reserve. Oklahoma State Banking Department and the Federal Reserve enforcement authority includes the power to remove officers and directors and the authority to issue cease-and-desist orders to prevent a state member bank from engaging in unsafe or unsound practices or violating laws or regulations governing its business.

Dividend Restrictions – Dividends from Bank SNB constitute the principal source of our cash revenues. The payment of dividends by Bank SNB is subject to regulatory restrictions.  Bank SNB is subject to legal and regulatory limitations on the amount of dividends that it may pay without prior approval of the Oklahoma State Banking Department and the Federal Reserve. Under these regulations, the total amount of dividends that may be paid in any calendar year by Bank SNB to us without regulatory approval is limited to the current year’s net profits, combined with the retained net profits of the preceding two years. In addition, Bank SNB is prohibited by federal statute from paying dividends or making any other capital distribution that would cause Bank SNB to fail to meet its regulatory capital requirements or when the payment of dividends would be an unsafe and unsound banking practice.

Limits on Loans to One Borrower – As an Oklahoma state-chartered bank, Bank SNB is subject to limits on the amount of loans it can make to one borrower. With certain limited exceptions, loans and extensions of credit from Oklahoma state-chartered banks outstanding to any borrower (including certain related entities of the borrower) at any one time may not exceed





30% of the capital of the bank. An Oklahoma state-chartered bank may lend an additional amount if the loan is fully secured by certain types of collateral, like bonds or notes of the United States. Certain types of loans are exempted from the lending limits, including loans secured by segregated in-bank deposits. We have established an internal limit of $20.0 million to any one borrower.

Transactions with Affiliates – Bank SNB is subject to restrictions imposed by federal law on extensions of credit to, and certain other transactions with, us and other affiliates and on investments in our and their stock or other securities. These restrictions prevent us and our nonbanking subsidiaries from borrowing from Bank SNB unless the loans are secured by specified collateral. Additionally, the restrictions require our transactions with Bank SNB to have terms comparable to terms of arms-length transactions with unaffiliated third persons. In addition, secured loans and investments by Bank SNB are generally limited to 10% of Bank SNB’s capital and surplus with respect to us and Bank SNB’s other affiliates on an individual basis, and to 20% of Bank SNB’s capital and surplus with respect to us and all other Bank SNB affiliates in the aggregate. Certain exemptions to these limitations apply to extensions of credit by, and other transactions between, Bank SNB and our other subsidiaries. These regulations and restrictions may limit our ability to obtain funds from Bank SNB for our cash needs, including funds for acquisitions and for payment of dividends, interest, and operating expenses. 

Real Estate Lending Guidelines – Under federal and state banking regulations, 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 that 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 Interagency Guidelines for Real Estate Lending Policies (the "Guidelines") adopted by the federal banking 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.

Federal Deposit Insurance – Bank SNB pays deposit insurance premiums to the FDIC. For additional information, see “Management’s Discussion and Analysis – FDIC and other insurance” on page 37 of this report.

Regulatory Capital Requirements – The Federal Reserve, the Oklahoma State Banking Department, and the FDIC have established guidelines for maintenance of appropriate levels of capital by bank holding companies and banks. 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 average assets, and risk-based capital rules, which require the maintenance of specified minimum ratios of capital to "risk-weighted" assets.

Federal regulations require bank holding companies and banks 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 banking 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 Tier 1 capital to total assets in making an overall assessment of capital. 

The risk-based capital rules require bank holding companies and 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 and, subject to certain limitations, qualifying perpetual preferred stock, trust preferred securities, minority interests in the equity accounts of consolidated subsidiaries, and deferred tax assets, 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, and the amount of perpetual preferred stock and trust preferred securities 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.





The Dodd-Frank Act includes certain provisions concerning the components of regulatory capital. Certain of these provisions are intended to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital. Under these provisions, trust preferred securities issued before May 19, 2010 by a company, such as us, with total consolidated assets of less than $15 billion, are eligible to be treated as regulatory capital, but any such securities issued after May 19, 2010 are not eligible to be treated as regulatory capital.

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 and state banking regulatory agencies have established a joint policy regarding the evaluation of banks' capital adequacy for interest rate risk. Under the policy, the assessment of a bank's capital adequacy includes an assessment of exposure to adverse changes in interest rates. Management believes our interest rate risk management systems and our capital relative to our interest rate risk are adequate.

Federal and state banking regulations also require banks with significant trading assets or liabilities to maintain supplemental risk-based capital based upon their levels of market risk. Bank SNB did not have any trading assets or liabilities during 2016, 2015, or 2014 and was not required to maintain such supplemental capital. 

The federal and state banking regulators have established regulations that classify banks by capital levels and provide for 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 8% 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 6%, and a leverage ratio of either (i) 4% or (ii) 3% if the bank 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 bank that falls within any of these three undercapitalized categories is subject to severe regulatory sanctions. As of December 31, 2016, Bank SNB was well-capitalized as defined in applicable banking regulations. For information regarding Bank SNB’s compliance with its regulatory capital requirements, see “Management's Discussion and AnalysisCapital Resources” on page 45 of this report and in the Notes to the Consolidated Financial Statements in this report, “Note 16 Capital Requirements and Regulatory Matters”.

Basel IIIUnited States banking regulators are members of the Basel Committee on Banking Supervision. This committee issues accords, which include capital guidelines for use by regulators in individual countries, generally referred to as Basel I (1988), Basel II (2004), and Basel III (2011). U.S. banking agencies have published the final proposed rules to implement Basel III in the United States (the “Basel III Capital Rules”), which were effective for us January 1, 2015 (subject to a phase-in period for certain provisions). The Basel III Capital Rules introduced a comprehensive new regulatory framework for U.S. banking organizations, which is consistent with international standards. The implementation of Basel III is intended to help ensure that banks of all sizes maintain strong capital positions to keep them viable during times of financial stress and severe economic downturns.

The Basel III Capital Rules, among other things, introduce a new capital measure called “Common Equity Tier 1” (“CET1”), specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and expand the scope of the deductions/adjustments as compared to existing regulations.





Under the Basel III Capital Rules, the initial minimum capital ratios that became effective on January 1, 2015 are as follows:


4.5% CET1 to risk weighted assets


6.0% Tier 1 capital to risk weighted assets


8.0% Total capital to risk weighted assets


4.0% Tier 1 capital to average quarterly assets

When fully phased in on January 1, 2019, the Basel III Capital Rules will require us to maintain (i) a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a “capital conservation buffer” equal to 2.5% of total risk-weighted assets (the “Capital Buffer”), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the Capital Buffer, (iii) a minimum ratio of Total capital to risk-weighted assets of at least 8.0%, plus the Capital Buffer and (iv) a minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average quarterly assets. The Capital Buffer will be tested on a quarterly basis. Our ability to pay dividends, discretionary bonuses, or repurchase stock will be restricted unless we maintain the Capital Buffer. As of December 31, 2016, we were well-capitalized even if we apply the Capital Buffer, which does not go into effect until future years.

The Basel III Capital Rules also prescribe a standardized approach for risk weightings that expand the risk-weighting categories from the four Basel I-derived categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and resulting in higher risk weights for a variety of asset categories. Specific changes to the rules impacting our determination of risk-weighted assets include a 150% risk weight instead of a 100% risk weight for certain high volatility commercial real estate acquisition, development and construction loans, and a 150% risk weight to exposures that are 90 days past due.

Banks with under $250 billion in assets were given a one-time, opt-out election under the Basel III Capital Rules to filter from regulatory capital certain accumulated other comprehensive income (“AOCI”) components. Without this election, a bank must reflect unrealized gains and losses on “available for sale” securities in regulatory capital. This AOCI opt-out election had to be made on a bank’s first regulatory report filed after January 1, 2015. 

We timely made the AOCI opt-out election. Accordingly, amounts reported as accumulated other comprehensive income/loss related to securities available for sale and effective cash flow hedges do not increase or reduce regulatory capital and are not included in the calculation of risk-based capital and leverage ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed to measure capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items.


Brokered Deposits – Well-capitalized institutions are not subject to limitations on brokered deposits, while an adequately capitalized institution is able to accept, renew, or rollover brokered deposits only with a waiver from the FDIC and subject to certain restrictions on the yield paid on such deposits. Undercapitalized institutions are not permitted to accept brokered deposits. Bank SNB is well-capitalized and therefore is eligible to accept brokered deposits without limitation.    

Supervision and Regulation of Mortgage Banking Operations – Bank SNB’s mortgage banking business is subject to the rules and regulations of the U.S. Department of Housing and Urban Development, FHA, 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 Bank SNB are required to submit financial statements to FNMA, FHA, and VA annually. Each regulatory entity has its own financial requirements. Lenders’ 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, Home Mortgage Disclosure 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. Bank SNB mortgage banking operations are also affected by various state and local laws and regulations and the requirements of various private mortgage investors. 





Community Reinvestment – Under the Community Reinvestment Act (“CRA”), a financial institution has a continuing and affirmative obligation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions or limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. However, institutions are rated on their performance in meeting the needs of their communities. Performance is tested in three areas: (a) lending, to evaluate the institution’s record of making loans in its assessment areas; (b) investment, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low- or moderate-income individuals and businesses; and (c) service, to evaluate the institution’s delivery of services through its branches, ATMs and other offices. The CRA requires each federal banking agency, in connection with its examination of a financial institution, to assess and assign one of four ratings to the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the institution, including applications for charters, branches, and other deposit facilities, relocations, mergers, consolidations, acquisitions of assets or assumptions of liabilities, bank and bank holding company acquisitions, and savings and loan holding company acquisitions. The CRA also requires that all institutions make public disclosure of their CRA ratings. Bank SNB was assigned a “satisfactory” rating as a result of its last CRA examination.    


Bank Secrecy Act; Patriot Act – Under the Bank Secrecy Act (“BSA”), a financial institution is required to have systems in place to detect certain transactions based on the size and nature of the transaction. Financial institutions are generally required to report cash transactions involving more than $10,000 to the U.S. Treasury. In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects, or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA, or has no lawful purpose. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, commonly referred to as the “USA PATRIOT Act” or the “Patriot Act,” enacted in response to the September 11, 2001 terrorist attacks, contains prohibitions against specified financial transactions and account relationships, as well as enhanced due diligence standards intended to prevent the use of the United States financial system for money laundering and terrorist financing activities. The Patriot Act requires banks and other depository institutions, brokers, dealers and certain other businesses involved in the transfer of money to establish anti-money laundering programs, including employee training and independent audit requirements meeting minimum standards specified by the act, to follow standards for customer identification and maintenance of customer identification records, and to compare customer lists against lists of suspected terrorists, terrorist organizations, and money launderers. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve a proposed bank acquisition.

Other Laws and Regulations – Some of the aspects of the lending and deposit business of Bank SNB are subject to regulation by the Federal Reserve and the FDIC, including reserve requirements and disclosure requirements in connection with personal and mortgage loans and deposit accounts. In addition, Bank SNB 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.

Enforcement Actions – Federal statutes and regulations provide financial institution regulatory agencies with great flexibility to undertake an enforcement action against an institution that fails to comply with regulatory requirements. Possible enforcement actions range from the imposition of a capital plan and capital directive to civil money penalties, cease-and-desist orders, receivership, conservatorship, or the termination of deposit insurance.

Available Information

We provide internet access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports through our Investor Relations section at www.oksb.com (This site is also accessible through Bank SNB’s website at www.banksnb.com.) The SEC maintains a website (www.sec.gov) where these filings also are available through the SEC’s EDGAR system. There is no charge for access to these filings through either our site or the SEC’s site, although users should understand that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, that they may bear. The public also may read and copy materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.






The following are some important risk factors that could affect our future financial performance or could cause our future earnings to be lower or our financial condition to be less favorable than we expect. In addition, other risks of which we are not aware, or which we do not believe are material, may also impair or adversely affect our business, financial condition or results of operation.


Risks Relating to our Business 


Difficult and unsettled market conditions may affect our profits and loan quality and may continue to do so for an unknown period. 


Unsettled market conditions may increase the likelihood and the severity of adverse effects discussed in the following risk factors, in particular: 



There may be less demand for our products and services; 


Competition in our industry could intensify as a result of increased consolidation of the banking industry; 


It may become more difficult to estimate losses inherent in our loan portfolio; 


Loan delinquencies and problem assets may increase; 


Collateral for loans may decline in value, increasing loan to value ratios and reducing our customers’ borrowing power and the security for our loans; 


Deposits and borrowings may become even more expensive relative to yields on loans and securities, reducing our net interest margin, and making it more difficult to maintain adequate sources of liquidity; 


Asset based liquidity, which depends upon the marketability of assets such as mortgages, may be reduced; and 


Compliance with banking regulations enacted in connection with stimulus legislation and other legislation may increase our costs, limit our ability to pursue business opportunities, and impair our ability to hire and retain talented managers. 


Changes in interest rates and other factors beyond our control may adversely affect our earnings and financial condition. 


Our net income depends to a great extent upon the level of our net interest income. Changes in interest rates can increase or decrease net interest income and net income. Net interest income is the difference between the interest income we earn on loans, investments, and other interest-earning assets, and the interest we pay on interest-bearing liabilities, such as deposits and borrowings. Net interest income is affected by changes in market interest rates, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income. 


Market interest rates are affected by many factors beyond our control, including inflation, unemployment, money supply, international events, and events in world financial markets.  We attempt to manage our risk from changes in market interest rates by adjusting the rates, maturity, repricing, and balances of the different types of interest-earning assets and interest-bearing liabilities, but interest rate risk management techniques are not exact. As a result, a rapid increase or decrease in interest rates could have an adverse effect on our net interest margin and results of operations. Changes in the market interest rates for types of products and services in our various markets also may vary significantly from location to location and over time based upon competition and local or regional economic factors. The results of our interest rate sensitivity simulation model depend upon a number of assumptions which may not prove to be accurate. There can be no assurance that we will be able to successfully manage our interest rate risk. 


Changes in local economic conditions could adversely affect our business. 


Our commercial and commercial real estate lending operations are concentrated in the metropolitan areas of Oklahoma City, Stillwater, Edmond, and Tulsa, Oklahoma; Dallas, Austin, and San Antonio, Texas; Hutchinson and Wichita Kansas;  





and Denver, Colorado. Our success depends in part upon economic conditions in these markets. Adverse changes in economic conditions in these markets could reduce our growth in loans and deposits, impair our ability to collect our loans, increase our problem loans and charge-offs and otherwise negatively affect our performance and financial condition. 


Adverse changes in healthcare-related businesses could lead to slower loan growth and higher levels of problem loans and charge-offs. 


We have approximately $423.8 million in loans to individuals and businesses involved in the healthcare industry, including business and personal loans to physicians, dentists, and other healthcare professionals, and loans to for-profit hospitals, nursing homes, suppliers and other healthcare-related businesses, representing approximately 23% of total loans outstanding as of December 31, 2016. Our strategy calls for continued commitment to healthcare lending. This concentration exposes us to the risk that adverse developments in the healthcare industry could hurt our profitability and financial condition as a result of increased levels of nonperforming loans and charge-offs and reduced loan demand and deposit growth.  


The Patient Protection and Affordable Care Act, as amended by the Health Care and Educations Reconciliations Act of 2010, has impacted the provision of healthcare in the United States. We have assessed its potential outcome on the market for healthcare and our services for the healthcare industry, and believe it is too early to conclude the entire impact on them. However, some trends are emerging. We are beginning to see an evolution that favors larger healthcare providers, which is driving many strategic mergers and acquisitions. Also, reimbursement and service provider margins continue to be pressed. The law is complex and implementation requires the adoption of significant regulations. As a result, the new laws could have adverse effects on the growth and profitability of our healthcare business. There is additional uncertainty as to the future of the Affordable Care Act following the election of President Trump. President Trump and Congress have indicated a desire and a willingness to repeal the Affordable Care Act, possibly without a replacement, although replacement options are being considered. Until the future of the Affordable Care Act and any replacement statute is decided, the healthcare industry will continue to experience increased uncertainty as to the environment in which healthcare providers will operate. 

We have credit exposure to the oil and gas industry.

Our direct exposure to the oil and gas industry is approximately 3% of our portfolio loans. However, many of our customers provide transportation and other services and products that support oil and gas exploration and production activities. As of December 31, 2016, we had  $84.7 million in loan commitments, of which $48.6 million was funded debt, to borrowers in the oil and gas industry. As of December 31, 2016, the price per barrel of crude oil was approximately $54 compared to approximately $37 as of December 31, 2015. If oil prices return to lower levels for an extended period, we could experience weaker energy loan demand and increased losses within our energy portfolio. Furthermore, a prolonged period of low or stagnant oil prices could have a negative impact on the economies of energy-dominant states such as Oklahoma and Texas. As a result, low oil prices could have an adverse effect on our business, financial condition and results of operation. We have the ability to adjust the borrowing base on outstanding commitments based on market price and condition.


Our allowance for loan losses may not be adequate to cover our actual loan losses, which could adversely affect our earnings. 


We maintain an allowance for loan losses in an amount that we believe is appropriate to provide for losses inherent in the portfolio. While we strive to carefully monitor credit quality and to identify loans that may become nonperforming, at any time there are loans included in the portfolio that will result in losses but that have not been identified as nonperforming or potential problem loans. We cannot be sure that we will be able to identify deteriorating loans before they become nonperforming assets or that we will be able to limit losses on those loans that are identified. As a result, future additions to the allowance may be necessary. Additionally, future additions may be required based on changes in the loans comprising the portfolio and changes in the financial condition of borrowers, such as may result from changes in economic conditions or as a result of incorrect assumptions by management in determining the allowance. Federal banking regulators, as an integral part of their supervisory function, periodically review our allowance for loan losses. These regulatory agencies may require us to increase our provision for loan losses or to recognize further loan charge-offs based





upon their judgments, which may be different from ours. Any increase in the allowance for loan losses could have a negative effect on our financial condition and results of operations. 


Commercial and commercial real estate loans comprise a significant portion of our total loan portfolio. These types of loans typically are larger than residential real estate loans and other consumer loans. Because our loan portfolio contains a significant number of commercial and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in nonperforming assets. An increase in nonperforming loans could result in a loss of earnings from these loans, an increase in the allowance for loan losses, or an increase in loan charge-offs, which could have an adverse impact on our results of operations and financial condition. 


The results of our most recent internal credit stress test may not accurately predict the impact on our financial condition if the economy’s performance is worse than we expect.  


We perform internal assessments of our capital and asset quality as part of our planning process. Our process includes stress tests using alternative credit quality assumptions in order to estimate their effects on loan loss provisions, net income, and regulatory capital ratios. The alternative assumptions include mild and severe credit quality stress scenarios.   


The results of these stress tests involve assumptions about the economy, future loan losses and default rates, which may not accurately reflect the impact on our earnings or financial condition or actual future conditions. Actual future economic conditions may result in significantly higher credit losses than we assume in our stress tests, with a corresponding more negative impact on our earnings, financial condition, and capital than those predicted by our internal stress test. 


We may not realize our deferred tax assets.  


We may experience negative or unforeseen tax consequences. We review the probability of the realization of our deferred tax assets based on forecasts of taxable income quarterly. This review uses historical results, projected future operating results based on approved business plans, eligible carryforward and carryback periods, tax-planning opportunities and other relevant considerations. Adverse changes in the profitability and financial outlook in the U.S. and our industry may require the creation of a valuation allowance to reduce our deferred tax assets. Such changes could result in material non-cash expenses in the period in which the changes are made and could have a material adverse impact on our results of operations and financial condition. 

Additionally, we conduct quarterly assessments of our deferred tax assets. The carrying value of these assets is dependent upon earnings forecasts and prior period changes, among other things. A significant change in our assumptions could affect the carrying value of our deferred tax assets on our balance sheet. 


Our earnings and financial condition may be adversely affected by changes in accounting principles and in tax laws, or the interpretation of them. 


Changes in U.S. generally accepted accounting principles could have negative effects on our reported earnings and financial condition. 


Changes in tax laws, rules, and regulations, including changes in the interpretation or implementation of tax laws, rules, and regulations by the Internal Revenue Service or other governmental bodies, could affect us in significant and unpredictable ways. Such changes could subject us to additional costs, among other things. Failure to comply with tax laws, rules, and regulations could result in sanctions by regulatory agencies, civil money penalties, and reputation damage. 

Our information systems may experience an interruption or breach in security.

We rely heavily on third-party services for communications, information systems, and the internet for nearly every spectrum of our business operations. Any failure, interruption, or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. We have taken steps designed to improve the security and redundancy of our networks and computer systems and our physical space. Despite these defensive measures designed to prevent or limit the effect of the failure, interruption, or security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. The potential consequences of a material cybersecurity incident





include interruption of our business operations, damage to our reputation, loss of customer business, and additional regulatory scrutiny or civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations. In some situations, we may not become aware of a cyber incident for some time after it occurs, which could increase our exposure.

In the event of a failure in our computer systems, we would rely on our disaster recovery system to keep our business operational. Any unanticipated problems with our disaster recovery systems could have a material adverse impact on our ability to conduct our business efficiently and without significant additional expenses and may have a material adverse effect on our financial condition and results of operations.

Government regulation significantly affects our business. 


The banking industry is heavily regulated. Banking regulations are primarily intended to protect the federal deposit insurance funds, depositors and the banking system as a whole, not shareholders. Bank SNB is subject to regulation and supervision by the Oklahoma State Banking Department and the Federal Reserve. We are subject to regulation and supervision by the Board of Governors of the Federal Reserve System. The burden imposed by federal and state regulations puts banks at a competitive disadvantage compared to less regulated competitors such as finance companies, mortgage banking companies, and leasing companies.   


Changes in the laws, regulations, and regulatory practices affecting the banking industry may limit our ability to increase or assess fees for services provided, increase our costs of doing business or otherwise adversely affect us and create competitive advantages for others. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of these changes, which could have a material adverse effect on our profitability and financial condition. Federal economic and monetary policy may also affect our ability to attract deposits and other funding sources, make loans and investments, and achieve satisfactory interest spreads.   


The FDIC insures deposits at insured financial institutions up to certain limits. The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund. Economic conditions in the past have contributed to bank failures. The FDIC may increase our deposit insurance costs by increasing regular assessment rates and levying special assessments, which may in the future significantly and adversely affect our net income. 


The Dodd-Frank Act will likely continue to increase our regulatory compliance burden and costs, may place restrictions on certain products and services, and limit our future capital raising alternatives.  

The Dodd-Frank Act made significant, wide-ranging changes in the regulation of the financial services industry that affect all financial institutions, including us.  The Dodd-Frank Act may continue to increase our regulatory compliance burden, increase the costs associated with regulatory examinations and compliance measures, and increase other operating costs.  


Among other things, the Dodd-Frank Act eliminated the prohibition of paying interest on commercial demand deposits, which may increase our funding costs, and limits the use of new trust preferred securities as regulatory capital. In addition, the Dodd-Frank Act created the Consumer Financial Protection Bureau, whose regulations may adversely affect our business operations. Although the Consumer Financial Protection Bureau has jurisdiction over banks with $10 billion or greater in assets, rules, regulations and policies issued by the Bureau may also apply to us through the adoption of similar policies by the Federal Reserve.  


Significant elements of the Dodd-Frank Act have been implemented, but implementation of other elements of the Dodd-Frank Act requires additional regulations, some of which have not yet been established. There is additional uncertainty as to the future of the Dodd-Frank Act following the election of President Trump. President Trump and Congress have indicated a desire and a willingness to repeal certain provisions of the Dodd-Frank Act. Certain provisions of the Dodd-Frank Act that have yet to be implemented may never be implemented and additional repeal or amendments to various sections of the Dodd-Frank Act are likely. This additional uncertainty may increase our risks and costs until such time as any changes are finally implemented. 





Examination reports may include significant findings and assessments about our condition and operations that are not publicly disclosed. Assessments by bank examiners may cause us to increase our publicly reported problem assets and potential problem loans, charge-offs, or provisions for loan losses. 


Examinations by federal regulatory agencies include assessments of risk, financial health, capital adequacy, loan risk, and other factors that federal banking laws do not allow to be publicly disclosed. The assignment of loans to credit risk categories involves judgment and the application of credit policies. In their examinations, federal banking examiners may assign different risk categories to loans than those assigned by management. In that case, we must amend our risk categorizations to match those assigned by the bank examiners, which may result in increases in publicly reported problem and potential problem loans, charge-offs, or provisions for loan losses. 


We rely on our management and other key personnel, and the loss of any of them may adversely affect our operations.  


We are and will continue to be dependent upon the services of our executive management team. In addition, we will continue to depend on our ability to retain and recruit key commercial bankers. The unexpected loss of services of any key management personnel or the inability to recruit and retain qualified personnel in the future could have an adverse effect on our business and financial condition. 

Competition may decrease our growth or profits. 


We compete for loans, deposits, and investment dollars with other banks and other financial institutions and enterprises, such as securities firms, insurance companies, savings associations, credit unions, mortgage brokers, and private lenders, many of which have substantially greater resources than ours. Credit unions have federal tax exemptions, which they may take advantage of to offer lower rates on loans and higher rates on deposits than taxpaying financial institutions such as commercial banks. In addition, non-depository institution competitors are generally not subject to the extensive regulation applicable to institutions that offer federally insured deposits. Other institutions may have other competitive advantages in particular markets or may be willing to accept lower profit margins on certain products. These differences in resources, regulation, competitive advantages, and business strategy may decrease our net interest margin, may increase our operating costs, and may make it harder for us to compete profitably.  


Risks Related to the Acquisition of Southwest by Simmons 


Business uncertainties while the Merger is pending may negatively impact our ability to attract and retain personnel and impact our customer relationships.

Uncertainty about the effect of the Merger on our employees and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others that deal with us to seek to change their existing business relationships with us.  Retention of certain employees by Southwest may be challenging while the Merger is pending, as certain employees may experience uncertainty about their future roles with the combined company. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined entity, our business could be harmed.

Regulatory approvals for the Merger may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Merger.

In determining whether to grant regulatory approvals for the Merger, the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under ‘‘Supervision and Regulation’’. An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain approval for the Merger or delay receipt of such approvals. The regulators may impose conditions on the completion of the Merger or require changes to the terms of the Merger. Such conditions or changes could have the effect of delaying or preventing completion of the Merger or imposing additional costs on or limiting the revenues of the combined company following the Merger, any of which might have an adverse effect on the combined company following the Merger. 





If the Merger is not completed, we will have incurred substantial expenses without realizing the expected benefits of the Merger.

We have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not completed, we would have to recognize the expenses we have incurred without realizing the expected benefits of the Merger, which could materially impact our earnings and results of operations.

The Merger Agreement limits our ability to pursue acquisition proposals and requires us to pay a termination fee under limited circumstances.

The Merger Agreement prohibits us from initiating, soliciting, knowingly encouraging or knowingly facilitating certain third party acquisition proposals. The Merger Agreement also provides that we must pay a termination fee in the amount of $20 million in the event the Merger Agreement is terminated under certain circumstances, including involving our failure to abide by certain obligations not to solicit acquisition proposals and our board of directors withdrawing or materially and adversely changing its recommendation that our shareholders approve the Merger proposal. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us from considering or proposing such an acquisition.

Termination of the Merger Agreement could negatively impact us.

If the Merger Agreement is terminated, there may be various negative consequences to us. For example, our businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. The closing price of our common stock on March 8, 2017 was $26.85 per share, which is 10% higher than the $24.30 closing price of our common stock on December 13, 2016, the day immediately prior to the announcement of the Merger. If the Merger Agreement is terminated, it is likely that the market price of our common stock will decline to the extent that the current market price reflects a market assumption that the Merger will be completed. 

Risks Related to Ownership of Our Common Stock 


The market price for our common stock may be highly volatile, which may make it difficult for investors to resell shares of common stock at times they desire or at prices they find attractive. 


The overall market and the price of our common stock fluctuates as a result of a variety of factors, many of which are beyond our control. These factors include, in addition to those described in the Risk Factors:  



Market assumptions with respect to the likelihood of consummation of the Merger with Simmons;


Actual or anticipated quarterly fluctuations in our operating results and financial condition; 


Changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions; 


Speculation in the press or investment community generally or relating to our reputation or the financial services industry; 


The size of the public float of our common stock; 


Repurchases by us under our stock repurchase program;


Strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions, or financings; 


Fluctuations in the stock price and operating results of our competitors; 


Future sales of our equity or equity-related securities; 


Proposed or adopted regulatory changes or developments; 


Unknown, anticipated or pending investigations, proceedings, or litigation that involve or affect us; 


Domestic and international economic factors unrelated to our performance; and 


General market conditions and, in particular, developments related to market conditions for the financial services industry. 






In addition, in recent years, the stock market in general has experienced extreme price and volume fluctuations as a result of general economic instability and recession. This volatility has had a significant effect on the market price of securities issued by many companies, including volatility resulting from reasons unrelated to their performance. These broad market fluctuations may adversely affect our stock price, notwithstanding our future operating results. We expect that the market price of our common stock will continue to fluctuate, and there can be no assurance about the levels of the market prices for our common stock. 


There is a limited trading market for our common shares, and you may not be able to resell your shares at or above the price you paid for them. 


Although our common shares are listed for trading on the NASDAQ Global Select Market, the trading in our common shares has less liquidity than many other companies quoted on the NASDAQ Global Select Market. A public trading market having the desired characteristics of depth, liquidity, and orderliness depends on the presence in the market of willing buyers and sellers for our common shares at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. We cannot assure you that the volume of trading in our common shares will increase in the future. Additionally, general market forces may have a negative effect on our stock price, independent of factors affecting our stock specifically. 


Future issuances or sales of our common stock or other securities may dilute the value of our common stock.   


In many situations, our board of directors has the authority, without any vote of our shareholders, to issue shares of our authorized but unissued stock, including shares authorized and unissued under our 2008 Stock Based Award Plan.  Though currently prohibited by the Merger Agreement, if the Merger is not completed in the future, we may issue additional securities, through public or private offerings, in order to raise additional capital. Any such issuance would dilute the percentage of ownership interest of existing shareholders and may dilute the per share book value of the common stock or reduce the market price for our common stock

The sale, or availability for sale, of a substantial number of shares of common stock in the public market could adversely affect the price of our common stock and could impair our ability to raise additional capital through the sale of equity securities.

Our ability to pay dividends is limited by law, contract, and banking agency discretion. 


In January 2014, our board of directors reinstated quarterly common stock dividends with their approval of a quarterly cash dividend of $0.04 per share. This was the first time dividends on our common stock had been declared since 2009. In January 2015, our board of directors increased our quarterly cash dividend from $0.04 per share to $0.06 per share, and in January 2016, our board of directors increased our quarterly cash dividend from $0.06 per share to $0.08 per share.


Our ability to pay dividends to our shareholders depends on our receipt of dividends from Bank SNB.  The amount of dividends Bank SNB may pay to us is limited by state and federal laws and regulations. We also may decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business. For information regarding our ability to pay dividends, see the Notes to the Consolidated Financial Statements in this report, “Note 16 Capital Requirements and Regulatory Matters”.

Our ability to increase or pay dividends to our shareholders is limited by covenants included in the Merger Agreement.

Our ability to pay dividends to our shareholders is further limited because the Federal Reserve has the power to prohibit payment of dividends by bank holding companies if their actions constitute unsafe or unsound practices. The Federal Reserve has issued a policy statement on the payment of cash dividends by financial holding companies, which expresses the Federal Reserve's view that a financial 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.





Restrictions on unfriendly acquisitions could prevent a takeover. 

Our certificate of incorporation and bylaws contain provisions that could discourage takeover attempts that are not approved by our board of directors. The Oklahoma General Corporation Act includes provisions that make our acquisition more difficult. These provisions may prevent a future takeover attempt in which our shareholders otherwise might receive a substantial premium for their shares over then-current market prices. These provisions include supermajority provisions for the approval of certain business combinations and certain provisions relating to meetings of shareholders. Our certificate of incorporation also authorizes the issuance of additional shares without shareholder approval on terms or in circumstances that could deter a future takeover attempt. 



ITEM 2.  Properties 


The locations of Southwest and its banking subsidiary are shown below:





Southwest Bancorp, Inc. Location

Corporate Headquarters



608 S. Main Street

P.O. Box 1988


Stillwater, Oklahoma 74076




Bank SNB Locations





Corporate Headquarters and Branch

608 S. Main Street

P.O. Box 1988


Stillwater, Oklahoma 74076








Drive-in Facility and Branch

308 S. Main Street

P.O. Box 1988

Stillwater, Oklahoma 74076




Operations Center

1624 Cimarron Plaza

P.O. Box 1988

Stillwater, Oklahoma 74076




19th & Sangre Branch

1908 S. Sangre

P.O. Box 1988

Stillwater, Oklahoma 74074


OSU Campus Branch

1102 W. Hall of Fame Avenue

P.O. Box 1988


OSU-Student Union Branch

Student Union, Room 056

P.O. Box 1988

Stillwater, Oklahoma 74076




Stillwater, Oklahoma 74076














Waterford Branch

6301 Waterford Boulevard

Suite 101 & 102

Oklahoma City, Oklahoma 73118




OKC – South Penn Branch

9921 S. Pennsylvania Ave.


OUHSC –  OKC Branch 

1106 N. Stonewall


OKC  Classen Branch

2523 N. Classen Blvd.


OKC  – Capitol Hill Branch

3131 S. Shields Blvd.


OKC  Memorial Branch

3805 W. Memorial Rd.


OKC  Rockwell Branch

7308 N.W. Expressway

Oklahoma City, Oklahoma 73159



Oklahoma City, Oklahoma 73117                      



Oklahoma City, Oklahoma 73106



Oklahoma City, Oklahoma 73129



Oklahoma City, Oklahoma 73134



Oklahoma City, Oklahoma 73132



















Edmond Spring Creek Branch

1440 S. Bryant Avenue

Edmond, Oklahoma 73034


Edmond Branch

1601 S. Kelly



Edmond, Oklahoma 73013



Chickasha Branch

500 W. Grand Avenue

Chickasha, Oklahoma 73018


Tulsa Utica Branch

1500 S. Utica Avenue

P.O. Box 521500


Tulsa, Oklahoma 74152





Tulsa 61st Branch

2431 E. 61st

Suite 170

P.O. Box 521500

Tulsa, Oklahoma 74152








Tilden Branch

205 Elm Street

P.O. Box 299

Tilden, Texas 78072




Preston Center Branch

5950 Berkshire Lane

Suite 150 and 350

Dallas, Texas 75225




Austin Branch

3001 Palm Way

Suite 108


Austin, Texas 78758












San Antonio Medical Hill Branch

9324 Huebner Road



San Antonio Pyramid Branch

601 N.W. Loop 410

Suite 230


San Antonio, Texas 78240




San Antonio, Texas 78216






Hutchinson Branch

100 East 30th Avenue

P.O. Box 1707


South Hutchinson Branch

524 N. Main Street

P.O. Box 1707


Wichita East Branch

8415 E. 21st Street North

Suite 150


Wichita West Branch

10111 W. 21st Street North


Denver Englewood Branch

3531 S. Logan Street

Suite A


Denver - Highlands Ranch Branch

9131 S. Broadway

Suite 500


Denver - Lone Tree Branch

10457 Park Meadows Drive

Suite 300


Denver - industry

3001 Brighton Blvd.

Suite 718

Hutchinson, Kansas 67502




South Hutchinson, Kansas 67505




Wichita, Kansas 67206




Wichita, Kansas 67205



Englewood, Colorado 80113




Highlands Ranch, Colorado 80129




Lone Tree, Colorado 80124




Denver, Colorado 80216































On March 18, 2011, an action entitled Ubaldi, et al. v SLM Corporation (“Sallie Mae”), et al., Case No. 3:11-cv-01320 EDL (the “Ubaldi Case”) was filed in the U.S. District Court for the Northern District of California as a putative class action with respect to certain loans that the plaintiffs claim were made by Sallie Mae. The loans in question were made by various banks, including Bank SNB, and sold to Sallie Mae. Plaintiffs claim that Sallie Mae entered into arrangements with chartered banks in order to evade California law and that Sallie Mae is the de facto lender on the loans in question and, as the lender on such loan, Sallie Mae charged interest and late fees that violates California usury law and the California Business and Professions Code. Sallie Mae has denied all claims asserted against it and has stated that it intends to vigorously defend the action. On March 26, 2014, the Court denied the plaintiffs’ request to certify the class; however, the Court permitted the plaintiffs to amend the filing to redefine the class. Plaintiffs filed a renewed motion on June 23, 2014. On December 19, 2014, the Court issued a decision on the renewed motion, certifying a class with respect to claims of improper late fees, but denying class certification with respect to plaintiffs’ usury claims. Plaintiffs thereafter filed a motion seeking leave to amend their complaint to add additional parties, which Sallie Mae opposed, and, on March 24, 2015, the Court denied the plaintiffs’ motion. On June 5, 2015, the law firm Cohen Milstein Sellers & Toll based in Washington, D.C. entered its appearance as co-counsel on behalf of plaintiffs.





Bank SNB is not specifically named in the action. However, in the first quarter of 2014, Sallie Mae provided Bank SNB with a notice of claims that have been asserted against Sallie Mae in the Ubaldi Case (the “Notice”). Sallie Mae asserts in the Notice that Bank SNB may have indemnification and/or repurchase obligations pursuant to the ExportSS Agreement dated July 1, 2002 between Sallie Mae and Bank SNB, pursuant to which the loans in question were made by Bank SNB. Bank SNB has substantial defenses with respect to any claim for indemnification or repurchase ultimately made by Sallie Mae, if any, and intends to vigorously defend against any such claims.

In the normal course of business, we are at all times subject to various pending and threatened legal actions. The relief or damages sought in some of these actions may be substantial. After reviewing pending and threatened actions with counsel, management currently does not expect that the outcome of such actions will have a material adverse effect on our financial position; however, we are not able to predict whether the outcome of such actions may or may not have a material adverse effect on results of operations in a particular future period as the timing and amount of any resolution of such actions and relationship to the future results of operations are not known.


Not applicable.





Part II


Stock Listing

Common shares of Southwest Bancorp, Inc. are traded on NASDAQ Global Select Market under the symbol OKSB.

Transfer Agents and Registrars


For Southwest Bancorp, Inc.:


Computershare Investor Services, LLC


2 North LaSalle St.


Chicago, IL 60602

Recent Stock Prices, Dividends, and Equity Compensation Plan Information

Our board of directors decides whether or not to pay dividends on common stock, and the amount of any such dividends, each quarter. In making its decisions on dividends, the board of directors considers operating results, financial condition, capital adequacy, regulatory requirements, shareholder returns, and other factors. Our ability to pay dividends depends upon regulatory approval and cash resources, which include dividend payments from Bank SNB. For information regarding the ability of Bank SNB to pay dividends to us and the restrictions on bank dividends under federal banking laws, see “Note 16:  Capital Requirements & Regulatory Matters” in the Notes to the Consolidated Financial Statements, “Dividend Restrictions”  on page 47 of this report, and “Risk Factors” on page 13 of this report. 

As shown on the table below, common shareholders received quarterly cash dividends of $0.08 per share in 2016 and $0.06 per share in 2015. In January 2017, our board of directors approved a quarterly cash dividend of $0.08 per share.

As of March  1, 2017, there were approximately 480 holders of record of our common stock. The following table sets forth the common stock dividends declared for each quarter during 2016 and 2015, and the range of high and low closing trade prices for the common stock for those periods.


















































For the Quarter Ending:



















March 31



















June 30



















September 30



















December 31



















Repurchases under the repurchase program authorized by our Board of Directors (the “Board”) are available at the discretion of management based upon market, business, legal, and other factors. We repurchased 867,310 shares under the 2014 program for a total of $14.3 million. As of December 31, 2015, we had repurchased 254,248 shares under the 2015 program for a total of $4.4 million. During 2016, we repurchased 1,398,026 shares for a total of $22.1 million, and since August 2014, we have repurchased a total of 2,519,584 shares for a total of $40.8 million. Our ability to repurchase our common stock is limited during the time that the Merger is pending. No repurchases were made in the fourth quarter of 2016. For information regarding our most recently authorized program by the Board, see “Management’s Discussion and AnalysisSignificant Developments” on page 30 of this report.
















Stock Performance

The following table compares the cumulative total return on a hypothetical investment of $100 in our common stock at the closing price on December 31, 2011 through December 31, 2016, with the hypothetical cumulative total return on the NASDAQ Stock Market Index (U.S. Companies) and the NASDAQ Bank Index for the comparable period. 

Picture 2







Period Ending








Southwest Bancorp, Inc.

100.00  187.92  267.11  294.03  300.29  507.57 

NASDAQ Bank Index

100.00  118.69  168.21  176.48  192.08  265.02 


100.00  117.45  164.57  188.84  201.98  219.89 


100.00  119.19  171.31  177.42  191.53  265.56 

Equity Compensation Plan Information

The following table presents disclosure regarding equity compensation plans in existence at December 31, 2016, consisting of our 2008 Stock Based Award Plan, which was approved by our shareholders.




Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights


Weighted average exercise price of outstanding options, warrants and rights



Number of securities available for future issuance under equity compensation plans excluding securities reflected in column (a)


Plan approved by shareholders












ITEM 6.  Selected Financial Data 

The following table presents our selected consolidated financial data for each of the five years in the period ended December 31, 2016. The selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements, including the accompanying Notes to the Consolidated Financial Statements, presented elsewhere in this report.




















For the Year Ended December 31,


(Dollars in thousands, except per share data)











Operations Data




















Interest income




















Interest expense




















Net interest income




















Provision (credit) for loan losses




















Gain on sales of mortgage loans and securities, net




















Gain on sale of bank branches, net




















Noninterest income




















Noninterest expense




















Income before taxes




















Taxes on income




















Net income







































Net income available




















to common shareholders



























































Preferred stock - declared (1)




















Common stock - declared




















Ratio of total dividends to net income




















Per Common Share Data




















Basic earnings




















Diluted earnings




















Cash dividends




















Book value (2)




















Weighted average common shares outstanding:




















Basic, net of unvested restricted stock




















Diluted, net of unvested restricted stock




















Financial Condition Data (2)




















Investment securities




















Portfolio loans (3)




















Loans held for sale (3)




















Total loans (3) (4)




















Interest-earning assets




















Total assets




















Interest-bearing deposits




















Total deposits




















Other borrowings




















Subordinated debentures




















Total shareholders' equity (5)




















Common shareholders' equity




















Financial Ratios




















Return on average assets




















Return on average total shareholders' equity




















Return on average common equity




















Net interest margin




















Efficiency ratio (6)




















Average assets per employee (7)
























Selected Financial Data (Continued)




















At December 31,


(Dollars in thousands, except per share data)











Asset Quality




















Net loan charge-offs (recoveries) (2)




















Net loan charge-offs (recoveries) to average portfolio loans




















Allowance for loan losses (2)




















Allowance for loan losses to portfolio loans




















Nonperforming loans (2) (8)




















Nonperforming loans to portfolio loans




















Allowance for loan losses to nonperforming loans




















Nonperforming assets (2) (9)




















Nonperforming assets to portfolio loans and




















other real estate




















Capital Ratios




















Average shareholders' equity to average assets




























































Tier I capital to risk-weighted assets (2)




















Total capital to risk-weighted assets (2)




















Leverage ratio




















(1Preferred stock - declared and paid includes a one-time non-cash equity charge of $1.2 million for 2012 to reflect the accelerated accretion of the remaining discount on the Series B Preferred securities repurchased in August of 2012. 

(2At period end. 

(3Net of unearned discounts but before deduction of allowance for loan losses.

(4Total loans include loans held for sale.

(5Reflects the repurchase of preferred securities in 2012. Please see “Capital Resources” on page 45 and Note 14:  Shareholders’ Equity” in the Notes to the Consolidated Financial Statements.

(6The efficiency ratio = noninterest expenses / (net interest income + total noninterest income) as shown on the Consolidated Statements of Operations. 

(7Ratio = average assets for year divided by the number of full-time equivalent employees at year-end.

(8Nonperforming loans consist of nonaccrual loans, loans contractually past due 90 days or more, and restructured loans not performing in accordance with restructured terms.

(9Nonperforming assets consist of nonperforming loans and other real estate.












For the Quarter Ended

(Dollars in thousands, except per share data)








Operations Data












Interest income












Interest expense












Net interest income












Provision (credit) for loan losses












Gain on sales of securities and mortgage loans












Noninterest income












Noninterest expenses












Income before taxes












Taxes on income












Net income












Per Share Data












Basic earnings per common share












Diluted earnings per common share












Cash dividends












Weighted Average Common Shares Outstanding