UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
For the Quarter Ended March 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
Commission file number: 000-22007
Southwest Bancorporation of Texas, Inc.
|
Texas (State or Other Jurisdiction of Incorporation or Organization) |
76-0519693 (I.R.S. Employer Identification No.) |
4400 Post Oak Parkway
(713) 235-8800
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) Yes þ No o
There were 34,315,852 shares of the Registrant’s Common Stock outstanding as of the close of business on April 26, 2004.
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
1
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
We have reviewed the accompanying condensed consolidated balance sheet of Southwest Bancorporation of Texas, Inc. and Subsidiaries (“the Company”) as of March 31, 2004, the related condensed consolidated statement of income for the three-month periods ended March 31, 2004 and 2003, the condensed consolidated statement of changes in shareholders’ equity for the three-month period ended March 31, 2004, and the condensed consolidated statement of cash flows for the three-month periods ended March 31, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2003, and the related consolidated statements of income, of changes in shareholders’ equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 25, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
2
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
| March 31, | December 31, | ||||||||||
| 2004 | 2003 | ||||||||||
| (Dollars in thousands, except | |||||||||||
| per share amounts) | |||||||||||
| ASSETS | |||||||||||
|
Cash and due from banks
|
$ | 290,796 | $ | 390,890 | |||||||
|
Federal funds sold and other cash equivalents
|
52,678 | 94,908 | |||||||||
|
Total cash and cash equivalents
|
343,474 | 485,798 | |||||||||
|
Securities — available for sale
|
1,576,977 | 1,549,398 | |||||||||
|
Loans held for sale
|
101,944 | 96,899 | |||||||||
|
Loans held for investment
|
3,720,950 | 3,491,673 | |||||||||
|
Allowance for loan losses
|
(48,071 | ) | (43,008 | ) | |||||||
|
Premises and equipment, net
|
131,347 | 117,951 | |||||||||
|
Accrued interest receivable
|
21,380 | 21,630 | |||||||||
|
Goodwill
|
55,094 | 25,647 | |||||||||
|
Core deposit intangibles
|
11,661 | 6,185 | |||||||||
|
Other assets
|
199,462 | 193,563 | |||||||||
|
Total assets
|
$ | 6,114,218 | $ | 5,945,736 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
|
Deposits:
|
|||||||||||
|
Demand — noninterest-bearing
|
$ | 1,625,647 | $ | 1,513,038 | |||||||
|
Demand — interest-bearing
|
72,009 | 43,452 | |||||||||
|
Money market accounts
|
1,843,409 | 1,709,755 | |||||||||
|
Savings
|
142,213 | 131,059 | |||||||||
|
Time, $100 and over
|
658,675 | 642,590 | |||||||||
|
Other time
|
360,991 | 363,345 | |||||||||
|
Total deposits
|
4,702,944 | 4,403,239 | |||||||||
|
Securities sold under repurchase agreements
|
305,750 | 285,571 | |||||||||
|
Other borrowings
|
496,708 | 679,812 | |||||||||
|
Junior subordinated deferrable interest debentures
|
51,547 | 51,547 | |||||||||
|
Accrued interest payable
|
1,505 | 1,822 | |||||||||
|
Other liabilities
|
32,533 | 24,424 | |||||||||
|
Total liabilities
|
5,590,987 | 5,446,415 | |||||||||
|
Commitments and contingencies
|
|||||||||||
|
Shareholders’ equity:
|
|||||||||||
|
Common stock — $1 par value,
150,000,000 shares authorized; 34,346,435 issued and 34,306,321
outstanding at March 31, 2004; 34,229,143 issued and
34,213,899 outstanding at December 31, 2003
|
34,346 | 34,229 | |||||||||
|
Additional paid-in capital
|
97,721 | 95,394 | |||||||||
|
Retained earnings
|
381,298 | 368,069 | |||||||||
|
Accumulated other comprehensive income
|
11,209 | 2,050 | |||||||||
|
Treasury stock, at cost — 40,114 shares
and 15,244 shares, respectively
|
(1,343 | ) | (421 | ) | |||||||
|
Total shareholders’ equity
|
523,231 | 499,321 | |||||||||
|
Total liabilities and shareholders’ equity
|
$ | 6,114,218 | $ | 5,945,736 | |||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2004 | 2003 | ||||||||||
| (Dollars in thousands, | |||||||||||
| except per share amounts) | |||||||||||
|
Interest income:
|
|||||||||||
|
Loans
|
$ | 49,632 | $ | 45,156 | |||||||
|
Securities:
|
|||||||||||
|
Taxable
|
12,815 | 10,734 | |||||||||
|
Tax-exempt
|
1,734 | 1,217 | |||||||||
|
Federal funds sold and other
|
189 | 206 | |||||||||
|
Total interest income
|
64,370 | 57,313 | |||||||||
|
Interest expense:
|
|||||||||||
|
Deposits
|
8,070 | 10,106 | |||||||||
|
Borrowings
|
2,932 | 2,126 | |||||||||
|
Total interest expense
|
11,002 | 12,232 | |||||||||
|
Net interest income
|
53,368 | 45,081 | |||||||||
|
Provision for loan losses
|
2,000 | 3,000 | |||||||||
|
Net interest income after provision for loan
losses
|
51,368 | 42,081 | |||||||||
|
Noninterest income:
|
|||||||||||
|
Service charges on deposit accounts
|
11,040 | 9,617 | |||||||||
|
Investment services
|
2,970 | 2,295 | |||||||||
|
Other fee income
|
4,953 | 3,648 | |||||||||
|
Bank-owned life insurance income
|
1,491 | 1,190 | |||||||||
|
Other operating income
|
1,397 | 1,369 | |||||||||
|
Gain on sale of loans, net
|
577 | 1,099 | |||||||||
|
Gain on sale of securities, net
|
26 | 35 | |||||||||
|
Total noninterest income
|
22,454 | 19,253 | |||||||||
|
Noninterest expenses:
|
|||||||||||
|
Salaries and employee benefits
|
29,243 | 23,826 | |||||||||
|
Occupancy expense
|
8,258 | 6,500 | |||||||||
|
Professional services
|
2,320 | 2,067 | |||||||||
|
Losses on deposit accounts
|
176 | 328 | |||||||||
|
Merger-related expenses
|
1,522 | — | |||||||||
|
Core deposit intangible amortization expense
|
903 | — | |||||||||
|
Other operating expenses
|
8,924 | 6,790 | |||||||||
|
Total noninterest expenses
|
51,346 | 39,511 | |||||||||
|
Income before income taxes
|
22,476 | 21,823 | |||||||||
|
Provision for income taxes
|
7,189 | 6,748 | |||||||||
|
Net income
|
$ | 15,287 | $ | 15,075 | |||||||
|
Earnings per common share:
|
|||||||||||
|
Basic
|
$ | 0.45 | $ | 0.45 | |||||||
|
Diluted
|
$ | 0.44 | $ | 0.44 | |||||||
|
Dividends per common share
|
$ | 0.06 | $ | — | |||||||
4
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
| Accumulated | ||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||
| Common Stock | Additional | Comprehensive | Total | |||||||||||||||||||||||||||
| Paid-in | Retained | Income | Treasury | Shareholders’ | ||||||||||||||||||||||||||
| Shares | Dollars | Capital | Earnings | (Loss) | Stock | Equity | ||||||||||||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||||
|
BALANCE, DECEMBER 31, 2003
|
34,229,143 | $ | 34,229 | $ | 95,394 | $ | 368,069 | $ | 2,050 | $ | (421 | ) | $ | 499,321 | ||||||||||||||||
|
Exercise of stock options
|
117,292 | 117 | 1,970 | 2,087 | ||||||||||||||||||||||||||
|
Purchase of treasury stock
|
(922 | ) | (922 | ) | ||||||||||||||||||||||||||
|
Deferred compensation amortization
|
357 | 357 | ||||||||||||||||||||||||||||
|
Cash dividends, $0.06 per common share
|
(2,058 | ) | (2,058 | ) | ||||||||||||||||||||||||||
|
Comprehensive income:
|
||||||||||||||||||||||||||||||
|
Net income for the three months ended
March 31, 2004
|
15,287 | 15,287 | ||||||||||||||||||||||||||||
|
Net change in unrealized appreciation on
securities available for sale, net of deferred taxes of ($4,665)
|
8,671 | 8,671 | ||||||||||||||||||||||||||||
|
Reclassification adjustment for losses included
in net income, net of deferred taxes of ($263)
|
488 | 488 | ||||||||||||||||||||||||||||
|
Total comprehensive income
|
24,446 | |||||||||||||||||||||||||||||
|
BALANCE, MARCH 31, 2004
|
34,346,435 | $ | 34,346 | $ | 97,721 | $ | 381,298 | $ | 11,209 | $ | (1,343 | ) | $ | 523,231 | ||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2004 | 2003 | |||||||||||
| (Dollars in thousands) | ||||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income
|
$ | 15,287 | $ | 15,075 | ||||||||
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
||||||||||||
|
Provision for loan losses
|
2,000 | 3,000 | ||||||||||
|
Depreciation
|
3,449 | 2,604 | ||||||||||
|
Realized gain on securities available for sale,
net
|
(26 | ) | (35 | ) | ||||||||
|
Amortization and accretion of securities’
premiums and discounts, net
|
1,457 | 2,459 | ||||||||||
|
Amortization of mortgage servicing rights
|
587 | 1,129 | ||||||||||
|
Amortization of computer software
|
1,479 | 1,098 | ||||||||||
|
Amortization of core deposit intangibles
|
903 | — | ||||||||||
|
Amortization of deferred compensation
|
357 | 301 | ||||||||||
|
Income tax benefit from exercise of stock options
|
422 | 222 | ||||||||||
|
Net change in:
|
||||||||||||
|
Loans held for sale
|
(5,045 | ) | 13,991 | |||||||||
|
Other assets and liabilities, net
|
(4,091 | ) | (8,926 | ) | ||||||||
|
Net cash provided by operating activities
|
16,779 | 30,918 | ||||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Proceeds from maturity and call of securities
available for sale
|
25,810 | 43,474 | ||||||||||
|
Proceeds from sale of securities available for
sale
|
340,849 | 49,151 | ||||||||||
|
| ||||||||||||