Southwest Bancorp Sells $300 Million of Nonperforming Loans

Southwest Bancorp, the holding company for Stillwater National Bank and Trust Co. and Bank of Kansas, sold $300 million of nonperforming assets that will affect the bank's net sales in the fourth quarter.

According to a news release, the Stillwater, Okla.-based asset manager will take a net, pretax loss of $101.2 million in the fourth quarter due to the sale of these problem loans to SW Loan Portfolio Holdings and its affiliates.

Southwest did not retain any interest in the loans or real estate sold from these transactions.

Approximately $170 million of the loans are considered to be nonperforming, while $132 million is said to be potential problem loans. Potential problem loans are performing loans which are not included in the past due, nonaccrual or restructured categories, but for which known information about possible credit problems cause management to be uncertain as to the ability of the borrowers to comply with the present loan repayment status.

With these transactions, Southwest expects that its capital levels and those of its banking subsidiaries will continue to substantially exceed regulatory standards for well-capitalized institutions and individual minimum capital ratios.

“These sales immediately and substantially reduce our nonperforming assets and potential problem loans,” said Rick Green, president and CEO of Southwest Bancorp. “This action is a major step toward achieving our goals of reducing problem assets, returning to sustained profitability, resuming dividends and producing reliable and attractive returns for our shareholders.”

There was about $152 million in commercial loans sold in this transaction, while $66 million was dedicated towards real estate construction loans.

Southwest's board of directors decided to sell these loans after considering the potential costs and benefits to Southwest and its shareholders of continuing the workout process for these assets over time.

With roughly 10% of its loans no longer performing, Southwest lost more than $13 million through the first three quarters of 2011, compared to a profit of $9.5 million in the same period in 2010. The bulk sale reduced its level of nonperforming loans by roughly 83%, based on Sept. 30 data, and slashed its level of potential problem loans by nearly half.

As of Sept. 30, Southwest had $2.6 billion in total assets.

Additional information regarding the effects of the loan and asset sales will be provided in the bank's annual earnings report next month.