##### 









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|  |  |                                                                                                                                         
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
    For the Fiscal Year Ended December 31, 2004
|  |  | or                                                                                                                                      
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934                                            




Commission file number: 000-22007





Southwest Bancorporation of Texas, Inc.


(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|Texas(State or Other Jurisdiction of
    Incorporation or Organization) |  | 76-0519693(I.R.S. Employer
    Identification No.)

4400 Post Oak Parkway


Houston, Texas 77027


(Address of Principal Executive Offices, including zip
code)


(713) 235-8800


(Registrants telephone number, including area code)





Securities Registered Pursuant to Section 12(b) of the
Act:


None


Securities Registered Pursuant to Section 12(g) of the
Act:


Common Stock, $1.00 par value


(Title of Class)





þ o





þ





þ o






DOCUMENTS INCORPORATED BY REFERENCE












---



##### 



PART I




|        |         
|------- | --------
|Item 1. | Business



The Company


General.


www.amegybank.com






Business Strategy.








1



---



##### 













|                               |  |                  |                   |                 |                  |   |                |                  |  |                   |                  |  |  |   |               | 
|------------------------------ |  | ---------------- | ----------------- | --------------- | ---------------- | - | -------------- | ---------------- |  | ----------------- | ---------------- |  |  | - | ------------- | 
|                               |  |                  |                   | Total Assets at |                  |   | Total Loans at |                  |  | Total Deposits at |                 
|Acquired Entity                |  | Acquisition Date |                   |                 | Acquisition Date |   |                | Acquisition Date |  |                   | Acquisition Date | 
|                               |  |                  |                   |                 |                  |   |                |                  |  |                   |                  | 
|Pinemont
    Bank(1)           |  |                  | August 1, 1997    |                 |                  | $ | 235.3 million  |                  |  | $                 | 137.0 million    |  |  | $ | 219.0 million | 
|Fort Bend Holding
    Corp.(1) |  |                  | April 1, 1999     |                 |                  | $ | 315.8 million  |                  |  | $                 | 192.0 million    |  |  | $ | 268.8 million | 
|Citizens Bankers,
    Inc.(1)  |  |                  | December 29, 2000 |                 |                  | $ | 436.2 million  |                  |  | $                 | 133.1 million    |  |  | $ | 381.0 million | 
|Maxim Financial Holdings, Inc. |  |                  | July 1, 2003      |                 |                  | $ | 348.8 million  |                  |  | $                 | 105.0 million    |  |  | $ | 241.5 million | 
|Reunion Bancshares, Inc.       |  |                  | January 31, 2004  |                 |                  | $ | 261.5 million  |                  |  | $                 | 162.8 million    |  |  | $ | 207.1 million | 
|Klein Bancshares, Inc.         |  |                  | October 1, 2004   |                 |                  | $ | 713.1 million  |                  |  | $                 | 168.7 million    |  |  | $ | 535.0 million | 






|    |                                                     
|--- | ----------------------------------------------------
|(1) | Accounted for using the pooling-of-interests method.



Name Change




2



---



##### 





Operating Segments






| |         
| | --------
| | The Bank









3



---



##### 





| |                     
| | --------------------
| | The Mortgage Company





Competition




Employees




Economic Conditions






4



---



##### 







Supervision and Regulation






| |         
| | --------
| | The Bank



Restrictions on Transactions with Affiliates and
Insiders.






5



---



##### 





Examinations.


Prompt Corrective Action.






6



---



##### 









Dividends.




| |                           
| | --------------------------
| | FDIC Insurance Assessments







Conservator and Receivership Powers.


7



---



##### 





Brokered Deposit Restrictions.


Consumer Laws and Regulations.




| |            
| | -----------
| | The Company





Safe and Sound Banking Practices.


Stock Repurchases.


8



---



##### 





Annual Reporting; Examinations.


Capital Adequacy Requirements.








| |                       
| | ----------------------
| | Gramm Leach-Bliley Act





| |                                                   
| | --------------------------------------------------
| | Enforcement Powers of the Federal Banking Agencies



9



---



##### 





Imposition of Liability for Undercapitalized
Subsidiaries.


Acquisitions by Bank Holding Companies.




| |                        
| | -----------------------
| | USA Patriot Act of 2001



10



---



##### 





| |                           
| | --------------------------
| | Sarbanes-Oxley Act of 2002





| |                               
| | ------------------------------
| | Effect of Economic Environment







|        |           
|------- | ----------
|Item 2. | Properties



|                                                 |       |       |    |    |        |  |    |       |  |  |    |    | 
|------------------------------------------------ | ----- | ----- | -- | -- | ------ |  | -- | ----- |  |  | -- | -- | 
|                                                 |       | Owned |    |    | Leased |  |    | Total | 
|                                                 |       |       |    |    |        |  |    |       | 
|Banking offices in the Houston metropolitan area |       |       | 41 |    |        |  | 31 |       |  |  | 72 |   
|Banking offices in the Dallas metropolitan area  |       |       | 1  |    |        |  | 4  |       |  |  | 5  |   
|Central department offices                       |       |       |   |    |        |  | 2  |       |  |  | 2  |   
|                                                 |       |       |    |    |        |  |    |       | 
|                                                 | Total |       |    | 42 |        |  |    | 37    |  |  |    | 79 | 
|                                                 |       |       |    |    |        |  |    |       | 





|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings





|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



11



---



##### 



PART II




|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters, and Issuer Purchases of Equity
    Securities







|                                |      |         |      |       |         |   |      |         |  |   |         |       |  |         |      |       |         |   |      |         |  |   |         |       |  |   |   |       |  |   |   |       | 
|------------------------------- | ---- | ------- | ---- | ----- | ------- | - | ---- | ------- |  | - | ------- | ----- |  | ------- | ---- | ----- | ------- | - | ---- | ------- |  | - | ------- | ----- |  | - | - | ----- |  | - | - | ----- | 
|                                |      | 2004    |      |       | 2003    |  
|                                |      |         |      |       |         |  
|                                |      | Fourth  |      |       | Third   |   |      | Second  |  |   | First   |       |  | Fourth  |      |       | Third   |   |      | Second  |  |   | First   |      
|                                |      | Quarter |      |       | Quarter |   |      | Quarter |  |   | Quarter |       |  | Quarter |      |       | Quarter |   |      | Quarter |  |   | Quarter |      
|                                |      |         |      |       |         |   |      |         |  |   |         |       |  |         |      |       |         |   |      |         |  |   |         |      
|Common stock sale price:        |      |         |      |       |         |   |      |         |  |   |         |       |  |         |      |       |         |   |      |         |  |   |         |       |  |   |   |       |  |   |   |      
|                                | High |         | $    | 25.01 |         |   | $    | 22.06   |  |   | $       | 22.09 |  |         | $    | 19.96 |         |   | $    | 19.65   |  |   | $       | 19.23 |  |   | $ | 17.98 |  |   | $ | 16.53 | 
|                                | Low  |         | $    | 20.05 |         |   | $    | 19.50   |  |   | $       | 18.61 |  |         | $    | 18.43 |         |   | $    | 17.60   |  |   | $       | 16.03 |  |   | $ | 14.83 |  |   | $ | 13.80 | 
|Cash dividends per common share |      | $       | 0.03 |       |         | $ | 0.03 |         |  | $ | 0.03    |       |  | $       | 0.03 |       |         | $ | 0.03 |         |  | $ | 0.02    |       |  | $ |  |       |  | $ |  |      



Recent Sales of Unregistered Securities




Stock Repurchase Plan




12



---



##### 





|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data





|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |           |         | 
|---------------------------- | --------------------------------------------------------- | --------------------------------------------------- | - | --------- | ------- |  | - | --------- | ------- |  | ---- | --------- | ------- | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|                             |                                                           | Year Ended December 31,                             |  
|                             |                                                           |                                                     |  
|                             |                                                           | 2004                                                |   |           | 2003    |  |   | 2002      |         |  | 2001 |           |         | 2000 |  
|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |  
|                             |                                                           | (Dollars in thousands, except per share data)       |  
|Income Statement Data:       |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |          
|                             | Interest income                                           |                                                     | $ | 283,229   |         |  | $ | 236,244   |         |  | $    | 235,594   |         |      | $ | 258,416   |         |  | $ | 269,657   |        
|                             | Interest expense                                          |                                                     |   | 56,677    |         |  |   | 45,725    |         |  |      | 59,779    |         |      |   | 101,158   |         |  |   | 121,662   |        
|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |  
|                             |                                                           | Net interest income                                 |   |           | 226,552 |  |   |           | 190,519 |  |      |           | 175,815 |      |   |           | 157,258 |  |   |           | 147,995 | 
|                             | Provision for loan losses                                 |                                                     |   | 10,212    |         |  |   | 11,850    |         |  |      | 11,037    |         |      |   | 7,451     |         |  |   | 6,960     |        
|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |  
|                             |                                                           | Net interest income after provision for loan losses |   |           | 216,340 |  |   |           | 178,669 |  |      |           | 164,778 |      |   |           | 149,807 |  |   |           | 141,035 | 
|                             | Noninterest income                                        |                                                     |   | 96,505    |         |  |   | 83,209    |         |  |      | 67,136    |         |      |   | 55,412    |         |  |   | 40,942    |        
|                             | Noninterest expenses                                      |                                                     |   | 216,611   |         |  |   | 173,742   |         |  |      | 145,715   |         |      |   | 127,757   |         |  |   | 115,909   |        
|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |  
|                             |                                                           | Income before income taxes                          |   |           | 96,234  |  |   |           | 88,136  |  |      |           | 86,199  |      |   |           | 77,462  |  |   |           | 66,068  | 
|                             | Provision for income taxes                                |                                                     |   | 27,691    |         |  |   | 27,407    |         |  |      | 26,993    |         |      |   | 24,745    |         |  |   | 22,607    |        
|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |  
|                             | Net income                                                |                                                     | $ | 68,543    |         |  | $ | 60,729    |         |  | $    | 59,206    |         |      | $ | 52,717    |         |  | $ | 43,461    |        
|                             |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |  
|Per Share Data:              |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |          
|                             | Basic earnings per common
    share(1)                    |                                                     | $ | 0.99      |         |  | $ | 0.89      |         |  | $    | 0.88      |         |      | $ | 0.80      |         |  | $ | 0.67      |        
|                             | Diluted earnings per common
    share(1)                  |                                                     | $ | 0.97      |         |  | $ | 0.87      |         |  | $    | 0.86      |         |      | $ | 0.77      |         |  | $ | 0.65      |        
|                             | Cash dividends per common share                           |                                                     | $ | 0.12      |         |  | $ | 0.05      |         |  | $    |          |         |      | $ |          |         |  | $ | 0.04      |        
|                             | Book value per common share                               |                                                     | $ | 8.28      |         |  | $ | 7.30      |         |  | $    | 6.58      |         |      | $ | 5.50      |         |  | $ | 4.56      |        
|                             | Average common shares outstanding
    (in thousands)      |                                                     |   | 69,104    |         |  |   | 68,088    |         |  |      | 66,952    |         |      |   | 65,710    |         |  |   | 64,794    |        
|                             | Average common share equivalents
    (in thousands)       |                                                     |   | 1,771     |         |  |   | 1,628     |         |  |      | 1,940     |         |      |   | 2,442     |         |  |   | 2,464     |        
|Performance Ratios:          |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |          
|                             | Return on average assets                                  |                                                     |   | 1.05      | %       |  |   | 1.14      | %       |  |      | 1.30      | %       |      |   | 1.32      | %       |  |   | 1.23      | %      
|                             | Return on average common shareholders equity             |                                                     |   | 12.86     | %       |  |   | 12.86     | %       |  |      | 14.55     | %       |      |   | 15.82     | %       |  |   | 17.00     | %      
|                             | Dividend payout ratio                                     |                                                     |   | 12.11     | %       |  |   | 5.63      | %       |  |      |          |         |      |   |          |         |  |   | 5.39      | %      
|                             | Taxable-equivalent net interest margin                    |                                                     |   | 3.99      | %       |  |   | 4.04      | %       |  |      | 4.35      | %       |      |   | 4.41      | %       |  |   | 4.57      | %      
|                             | Efficiency
    ratio(3)                                   |                                                     |   | 65.52     | %       |  |   | 63.26     | %       |  |      | 60.41     | %       |      |   | 60.08     | %       |  |   | 61.20     | %      
|Balance Sheet
    Data(2):   |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |          
|                             | Total assets                                              |                                                     | $ | 7,505,603 |         |  | $ | 5,947,133 |         |  | $    | 5,173,204 |         |      | $ | 4,401,690 |         |  | $ | 3,940,827 |        
|                             | Securities                                                |                                                     |   | 1,985,237 |         |  |   | 1,549,398 |         |  |      | 1,201,200 |         |      |   | 1,068,315 |         |  |   | 848,164   |        
|                             | Loans                                                     |                                                     |   | 4,646,982 |         |  |   | 3,588,572 |         |  |      | 3,219,340 |         |      |   | 2,759,482 |         |  |   | 2,511,437 |        
|                             | Allowance for loan losses                                 |                                                     |   | 49,408    |         |  |   | 41,611    |         |  |      | 35,449    |         |      |   | 30,856    |         |  |   | 27,665    |        
|                             | Total deposits                                            |                                                     |   | 5,620,043 |         |  |   | 4,403,239 |         |  |      | 3,912,049 |         |      |   | 3,428,633 |         |  |   | 3,093,870 |        
|                             | Short-term borrowings                                     |                                                     |   | 759,624   |         |  |   | 473,154   |         |  |      | 408,381   |         |      |   | 222,168   |         |  |   | 298,218   |        
|                             | Long-term borrowings                                      |                                                     |   | 10,410    |         |  |   | 206,658   |         |  |      | 107,049   |         |      |   | 7,410     |         |  |   | 7,743     |        
|                             | Senior subordinated debenture                             |                                                     |   | 75,000    |         |  |   |          |         |  |      |          |         |      |   |          |         |  |   |          |        
|                             | Junior subordinated deferrable interest debentures        |                                                     |   | 149,486   |         |  |   | 51,547    |         |  |      |          |         |      |   |          |         |  |   |          |        
|                             | Total shareholders equity                                |                                                     |   | 580,414   |         |  |   | 499,321   |         |  |      | 445,523   |         |      |   | 361,734   |         |  |   | 298,125   |        
|Capital Ratio:               |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |          
|                             | Average equity to average assets                          |                                                     |   | 8.20      | %       |  |   | 8.82      | %       |  |      | 8.95      | %       |      |   | 8.34      | %       |  |   | 7.23      | %      
|Asset Quality
    Ratios(2): |                                                           |                                                     |   |           |         |  |   |           |         |  |      |           |         |      |   |           |         |  |   |          
|                             | Nonperforming
    assets(4)to loans and other real estate |                                                     |   | 0.55      | %       |  |   | 0.49      | %       |  |      | 0.50      | %       |      |   | 0.53      | %       |  |   | 0.41      | %      
|                             | Net charge-offs to average loans                          |                                                     |   | 0.15      | %       |  |   | 0.22      | %       |  |      | 0.22      | %       |      |   | 0.17      | %       |  |   | 0.06      | %      
|                             | Allowance for credit losses to total loans                |                                                     |   | 1.11      | %       |  |   | 1.23      | %       |  |      | 1.18      | %       |      |   | 1.17      | %       |  |   | 1.16      | %      
|                             | Allowance for loan losses to nonperforming loans
    (5)  |                                                     |   | 304.50    | %       |  |   | 326.57    | %       |  |      | 236.50    | %       |      |   | 233.78    | %       |  |   | 292.69    | %      






|    |                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Basic earnings per common share is computed by dividing net
    income available to common shareholders by the weighted average
    number of common shares outstanding for the period. Diluted
    earnings per

13



---



##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | common share is computed by dividing net income available to
    common shareholders, adjusted for any changes in income that
    would result from the assumed conversion of all potential
    dilutive common shares, by the sum of the weighted average
    number of common shares outstanding and the effect of all
    dilutive potential common shares outstanding for the period.
|   
|(2) | At period end, except net charge-offs to average loans.                                                                                                                                                                                                                                                                                                                                  
|   
|(3) | Calculated by dividing total noninterest expenses, excluding
    amortization of intangibles, by net interest income plus
    noninterest income, excluding net security gains (losses).                                                                                                                                                                                                 
|   
|(4) | Nonperforming assets consist of nonperforming loans and other
    real estate owned.                                                                                                                                                                                                                                                                                                     
|   
|(5) | Nonperforming loans consist of nonaccrual loans, troubled debt
    restructurings and loans contractually past due 90 days or
    more.                                                                                                                                                                                                                                                  



|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS








For the Years Ended December 31, 2004, 2003 and 2002


Overview




14



---



##### 

















15



---



##### 









Results of Operations


|                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                              |  | Year Ended December 31, |        
|                                              |  |                         |        
|                                              |  | 2004                    |         |   | 2003 |   |         | 2002 | 
|                                              |  |                         |         |   |      |   |         |      | 
|                                              |  | (Dollars in thousands)  |        
|Taxable  equivalent net interest income      |  | $                       | 232,104 |   |      | $ | 194,189 |      |  | $ | 178,494 |  
|Taxable  equivalent adjustment               |  |                         | (5,552  | ) |      |   | (3,670  | )    |  |   | (2,679  | )
|                                              |  |                         |         |   |      |   |         |      | 
|Net interest income, as reported              |  |                         | 226,552 |   |      |   | 190,519 |      |  |   | 175,815 |  
|Provision for loan losses                     |  |                         | 10,212  |   |      |   | 11,850  |      |  |   | 11,037  |  
|Noninterest income                            |  |                         | 96,505  |   |      |   | 83,209  |      |  |   | 67,136  |  
|Noninterest expenses                          |  |                         | 216,611 |   |      |   | 173,742 |      |  |   | 145,715 |  
|                                              |  |                         |         |   |      |   |         |      | 
|Income before income taxes                    |  |                         | 96,234  |   |      |   | 88,136  |      |  |   | 86,199  |  
|Provision for income taxes                    |  |                         | 27,691  |   |      |   | 27,407  |      |  |   | 26,993  |  
|                                              |  |                         |         |   |      |   |         |      | 
|Net income                                    |  | $                       | 68,543  |   |      | $ | 60,729  |      |  | $ | 59,206  |  
|                                              |  |                         |         |   |      |   |         |      | 
|Basic earnings per common share               |  | $                       | 0.99    |   |      | $ | 0.89    |      |  | $ | 0.88    |  
|Diluted earnings per common share             |  | $                       | 0.97    |   |      | $ | 0.87    |      |  | $ | 0.86    |  
|Return on average assets                      |  |                         | 1.05    | % |      |   | 1.14    | %    |  |   | 1.30    | %
|Return on average common shareholders equity |  |                         | 12.86   | % |      |   | 12.86   | %    |  |   | 14.55   | %



| |                    
| | -------------------
| | Net Interest Income



16



---



##### 



2004 versus 2003.




2003 versus 2002.


17



---



##### 





|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |           |           |         |           |         |         |  |         |      |      |   |      |  
|-------------------------------------- | ---------------------------------------------- | ----------------------------------- | ------------------------------------------ | --------- | --------- | --------- | ------- | ------- |  | ------- | ----------- | ---- | - | -------- | --------- | --------- | --------- | --------- | ------- | ----------- |  | ------- | -------- | ---- | - | ------- | --------- | --------- | ------- | --------- | ------- | ------- |  | ------- | ---- | ---- | - | ---- | -
|                                       |                                                | Year Ended December 31,             |                                           
|                                       |                                                |                                     |                                           
|                                       |                                                | 2004                                |                                            |           | 2003      |           |         | 2002    | 
|                                       |                                                |                                     |                                            |           |           |           |         |         | 
|                                       |                                                | Average                             |                                            |           | Interest  |           |         | Average |  |         | Average     |      |   | Interest |           |           | Average   |           |         | Average     |  |         | Interest |      |   | Average |          
|                                       |                                                | Outstanding                         |                                            |           | Earned/   |           |         | Yield/  |  |         | Outstanding |      |   | Earned/  |           |           | Yield/    |           |         | Outstanding |  |         | Earned/  |      |   | Yield/  |          
|                                       |                                                | Balance                             |                                            |           | Paid(1)   |           |         | Rate    |  |         | Balance     |      |   | Paid(1)  |           |           | Rate      |           |         | Balance     |  |         | Paid(1)  |      |   | Rate    |          
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                | (Dollars in thousands)              |                                           
|Interest-earning assets:               |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |           |           |         |           |         |         |  |         |      |     
|                                       | Loans                                          |                                     | $                                          | 4,052,344 |           |           | $       | 217,876 |  |         |             | 5.38 | % |          | $         | 3,362,177 |           |           | $       | 186,408     |  |         |          | 5.54 | % |         | $         | 2,916,959 |         |           | $       | 178,264 |  |         |      | 6.11 | %
|                                       | Securities                                     |                                     |                                            | 1,715,176 |           |           |         | 70,179  |  |         |             | 4.09 |   |          |           | 1,355,900 |           |           |         | 52,538      |  |         |          | 3.87 |   |         |           | 1,139,017 |         |           |         | 59,211  |  |         |      | 5.20 |  
|                                       | Federal funds sold and
    other               |                                     |                                            | 53,610    |           |           |         | 726     |  |         |             | 1.35 |   |          |           | 89,579    |           |           |         | 968         |  |         |          | 1.08 |   |         |           | 50,409    |         |           |         | 798     |  |         |      | 1.58 |  
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                |                                     | Total interest-earning assets              |           |           | 5,821,130 |         |         |  | 288,781 |             |      |   | 4.96     | %         |           |           | 4,807,656 |         |             |  | 239,914 |          |      |   | 4.99    | %         |           |         | 4,106,385 |         |         |  | 238,273 |      |      |   | 5.80 | %
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|Less allowance for loan losses         |                                                |                                     | (49,139                                    | )         |           |           |         |         |  |         |             |      |   |          | (40,546   | )         |           |           |         |             |  |         |          |      |   |         | (34,067   | )         |         |           |         |         |  |         |      |     
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                |                                     | 5,771,991                                  |           |           |           |         |         |  |         |             |      |   |          | 4,767,110 |           |           |           |         |             |  |         |          |      |   |         | 4,072,318 |           |         |           |         |         |  |         |      |     
|Noninterest-earning assets             |                                                |                                     | 730,865                                    |           |           |           |         |         |  |         |             |      |   |          | 583,177   |           |           |           |         |             |  |         |          |      |   |         | 473,976   |           |         |           |         |         |  |         |      |     
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                |                                     | Total assets                               |           | $         | 6,502,856 |         |         |  |         |             |      |   |          |           |           | $         | 5,350,287 |         |             |  |         |          |      |   |         |           |           | $       | 4,546,294 |         |         |  |         |      |      |   |      |  
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|Interest-bearing liabilities:          |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |           |           |         |           |         |         |  |         |      |     
|                                       | Money market and savings deposits              |                                     | $                                          | 2,127,079 |           |           |         | 17,022  |  |         |             | 0.80 | % |          | $         | 1,835,565 |           |           |         | 15,244      |  |         |          | 0.83 | % |         | $         | 1,553,178 |         |           |         | 20,463  |  |         |      | 1.32 | %
|                                       | Time deposits                                  |                                     |                                            | 1,105,856 |           |           |         | 22,808  |  |         |             | 2.06 |   |          |           | 1,004,928 |           |           |         | 21,727      |  |         |          | 2.16 |   |         |           | 926,001   |         |           |         | 28,499  |  |         |      | 3.08 |  
|                                       | Repurchase agreements and other borrowed funds |                                     |                                            | 1,096,049 |           |           |         | 16,847  |  |         |             | 1.54 |   |          |           | 722,038   |           |           |         | 8,754       |  |         |          | 1.21 |   |         |           | 640,141   |         |           |         | 10,817  |  |         |      | 1.69 |  
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                |                                     | Total interest-bearing liabilities         |           |           | 4,328,984 |         |         |  | 56,677  |             |      |   | 1.31     | %         |           |           | 3,562,531 |         |             |  | 45,725  |          |      |   | 1.28    | %         |           |         | 3,119,320 |         |         |  | 59,779  |      |      |   | 1.92 | %
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|Noninterest-bearing liabilities:       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |           |           |         |           |         |         |  |         |      |     
|                                       |                                                | Noninterest-bearing demand deposits |                                            |           | 1,611,636 |           |         |         |  |         |             |      |   |          |           |           | 1,281,546 |           |         |             |  |         |          |      |   |         |           |           | 994,113 |           |         |         |  |         |      |      |   |     
|                                       |                                                | Other liabilities                   |                                            |           | 29,047    |           |         |         |  |         |             |      |   |          |           |           | 34,024    |           |         |             |  |         |          |      |   |         |           |           | 25,872  |           |         |         |  |         |      |      |   |     
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                |                                     | Total liabilities                          |           |           | 5,969,667 |         |         |  |         |             |      |   |          |           |           |           | 4,878,101 |         |             |  |         |          |      |   |         |           |           |         | 4,139,305 |         |         |  |         |      |      |   |      |  
|Shareholders equity                   |                                                |                                     | 533,189                                    |           |           |           |         |         |  |         |             |      |   |          | 472,186   |           |           |           |         |             |  |         |          |      |   |         | 406,989   |           |         |           |         |         |  |         |      |     
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|                                       |                                                |                                     | Total liabilities and shareholders equity |           | $         | 6,502,856 |         |         |  |         |             |      |   |          |           |           | $         | 5,350,287 |         |             |  |         |          |      |   |         |           |           | $       | 4,546,294 |         |         |  |         |      |      |   |      |  
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|Taxable-equivalent net interest income |                                                |                                     |                                            |           |           | $         | 232,104 |         |  |         |             |      |   |          |           |           |           | $         | 194,189 |             |  |         |          |      |   |         |           |           |         | $         | 178,494 |         |  |         |      |     
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|Taxable-equivalent net interest spread |                                                |                                     |                                            |           |           |           |         |         |  |         | 3.65        | %    |   |          |           |           |           |           |         |             |  |         | 3.71     | %    |   |         |           |           |         |           |         |         |  |         | 3.89 | %   
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          
|Taxable-equivalent net interest margin |                                                |                                     |                                            |           |           |           |         |         |  |         | 3.99        | %    |   |          |           |           |           |           |         |             |  |         | 4.04     | %    |   |         |           |           |         |           |         |         |  |         | 4.35 | %   
|                                       |                                                |                                     |                                            |           |           |           |         |         |  |         |             |      |   |          |           |           |           |           |         |             |  |         |          |      |   |         |          






|    |                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For analytical purposes, income from tax-exempt assets,
    primarily securities issued by state and local governments or
    authorities, is adjusted by an increment that equates tax-exempt
    income to income from taxable assets assuming a 35% federal
    income tax rate. The following is a reconciliation of
    taxable-equivalent net interest income to net interest income,
    as reported.

|                                         |  |                         |         |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | Year Ended December 31, |        
|                                         |  |                         |        
|                                         |  | 2004                    |         |   | 2003 |   |         | 2002 | 
|                                         |  |                         |         |   |      |   |         |      | 
|                                         |  | (Dollars in thousands)  |        
|Taxable  equivalent net interest income |  | $                       | 232,104 |   |      | $ | 194,189 |      |  | $ | 178,494 |  
|Taxable  equivalent adjustment          |  |                         | (5,552  | ) |      |   | (3,670  | )    |  |   | (2,679  | )
|                                         |  |                         |         |   |      |   |         |      | 
|Net interest income, as reported         |  | $                       | 226,552 |   |      | $ | 190,519 |      |  | $ | 175,815 |  
|                                         |  |                         |         |   |      |   |         |      | 

18



---



##### 





|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        |  |   |         |         |   |   |        |         |  
|------------------------------------------------------------- | --------------------------------------------------------------- | -------------------------- | ------ | ------ | -------------------------- | - | ------ | ------ | - | - | ----- | --- |  | ------ | ------ | ------ | ---- | - | ------ | ------ |  | - | ------- | ------- | - | - | ------ | ------- | -
|                                                              |                                                                 | Year Ended December 31,    |       
|                                                              |                                                                 |                            |       
|                                                              |                                                                 | 2004 vs. 2003              |        |        | 2003 vs. 2002              |  
|                                                              |                                                                 |                            |        |        |                            |  
|                                                              |                                                                 | Increase (Decrease) Due to |        |        | Increase (Decrease) Due to |  
|                                                              |                                                                 |                            |        |        |                            |  
|                                                              |                                                                 | Volume                     |        |        | Rate                       |   |        | Days   |   |   | Total |     |  | Volume |        |        | Rate |   |        | Total  | 
|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        | 
|                                                              |                                                                 | (Dollars in thousands)     |       
|Interest-earning assets:                                      |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        |  |   |         |         |   |   |        |        
|Loans                                                         |                                                                 | $                          | 37,831 |        |                            | $ | (6,874 | )      |   | $ | 511   |     |  | $      | 31,468 |        |      | $ | 27,209 |        |  | $ | (19,065 | )       |   | $ | 8,144  |        
|Securities                                                    |                                                                 |                            | 13,807 |        |                            |   | 3,690  |        |   |   | 144   |     |  |        | 17,641 |        |      |   | 11,274 |        |  |   | (17,947 | )       |   |   | (6,673 | )      
|Federal funds sold and other                                  |                                                                 |                            | (391   | )      |                            |   | 146    |        |   |   | 3     |     |  |        | (242   | )      |      |   | 620    |        |  |   | (450    | )       |   |   | 170    |        
|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        | 
|                                                              | Total increase (decrease) in taxable-equivalent interest income |                            |        | 51,247 |                            |   |        | (3,038 | ) |   |       | 658 |  |        |        | 48,867 |      |   |        | 39,103 |  |   |         | (37,462 | ) |   |        | 1,641   |  
|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        | 
|Interest-bearing liabilities:                                 |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        |  |   |         |         |   |   |        |        
|Money market and savings deposits                             |                                                                 |                            | 2,388  |        |                            |   | (652   | )      |   |   | 42    |     |  |        | 1,778  |        |      |   | 3,720  |        |  |   | (8,939  | )       |   |   | (5,219 | )      
|Time deposits                                                 |                                                                 |                            | 2,142  |        |                            |   | (1,121 | )      |   |   | 60    |     |  |        | 1,081  |        |      |   | 2,429  |        |  |   | (9,201  | )       |   |   | (6,772 | )      
|Repurchase agreements and other borrowed funds                |                                                                 |                            | 4,522  |        |                            |   | 3,547  |        |   |   | 24    |     |  |        | 8,093  |        |      |   | 1,384  |        |  |   | (3,447  | )       |   |   | (2,063 | )      
|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        | 
|                                                              | Total increase (decrease) in interest expense                   |                            |        | 9,052  |                            |   |        | 1,774  |   |   |       | 126 |  |        |        | 10,952 |      |   |        | 7,533  |  |   |         | (21,587 | ) |   |        | (14,054 | )
|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        | 
|Increase (decrease) in taxable-equivalent net interest income |                                                                 | $                          | 42,195 |        |                            | $ | (4,812 | )      |   | $ | 532   |     |  | $      | 37,915 |        |      | $ | 31,570 |        |  | $ | (15,875 | )       |   | $ | 15,695 |        
|                                                              |                                                                 |                            |        |        |                            |   |        |        |   |   |       |     |  |        |        |        |      |   |        |        | 





| |                          
| | -------------------------
| | Provision for Loan Losses





| |                   
| | ------------------
| | Noninterest Income



19



---



##### 





|                                                            |                          |                         |        |        |          |   |       |          |  |   |        |        |  |          |        |        |          |   |       |       |  |   |          |        |  |          |        |        |  |   |        |     |  |   |        |        | 
|----------------------------------------------------------- | ------------------------ | ----------------------- | ------ | ------ | -------- | - | ----- | -------- |  | - | ------ | ------ |  | -------- | ------ | ------ | -------- | - | ----- | ----- |  | - | -------- | ------ |  | -------- | ------ | ------ |  | - | ------ | --- |  | - | ------ | ------ | 
|                                                            |                          | Year Ended December 31, |       
|                                                            |                          |                         |       
|                                                            |                          | 2004                    |        |        | 2003     |   |       | 2002     | 
|                                                            |                          |                         |        |        |          |   |       |          | 
|                                                            |                          | Bank                    |        |        | Mortgage |   |       | Combined |  |   | Bank   |        |  | Mortgage |        |        | Combined |   |       | Bank  |  |   | Mortgage |        |  | Combined |       
|                                                            |                          |                         |        |        |          |   |       |          |  |   |        |        |  |          |        |        |          |   |       |       |  |   |          |        |  |          |       
|                                                            |                          | (Dollars in thousands)  |       
|Service charges on deposit accounts                         |                          | $                       | 46,345 |        |          | $ |      |          |  | $ | 46,345 |        |  | $        | 40,065 |        |          | $ |      |       |  | $ | 40,065   |        |  | $        | 33,936 |        |  | $ |       |     |  | $ | 33,936 |       
|Investment services                                         |                          |                         | 12,682 |        |          |   |      |          |  |   | 12,682 |        |  |          | 9,712  |        |          |   |      |       |  |   | 9,712    |        |  |          | 9,302  |        |  |   |       |     |  |   | 9,302  |       
|Factoring fee income                                        |                          |                         | 3,712  |        |          |   |      |          |  |   | 3,712  |        |  |          | 3,806  |        |          |   |      |       |  |   | 3,806    |        |  |          | 4,692  |        |  |   |       |     |  |   | 4,692  |       
|Loan fee income                                             |                          |                         | 4,202  |        |          |   | 2,067 |          |  |   | 6,269  |        |  |          | 2,593  |        |          |   | 2,978 |       |  |   | 5,571    |        |  |          | 1,693  |        |  |   | 1,633  |     |  |   | 3,326  |       
|Bank-owned life insurance income                            |                          |                         | 7,047  |        |          |   |      |          |  |   | 7,047  |        |  |          | 6,009  |        |          |   |      |       |  |   | 6,009    |        |  |          | 4,860  |        |  |   |       |     |  |   | 4,860  |       
|Letters of credit fee income                                |                          |                         | 4,201  |        |          |   |      |          |  |   | 4,201  |        |  |          | 2,522  |        |          |   |      |       |  |   | 2,522    |        |  |          | 1,608  |        |  |   |       |     |  |   | 1,608  |       
|Mortgage servicing fees, net of amortization and impairment |                          |                         |       |        |          |   | 867   |          |  |   | 867    |        |  |          |       |        |          |   | 659   |       |  |   | 659      |        |  |          |       |        |  |   | (2,907 | )   |  |   | (2,907 | )     
|Gain on sale of loans, net                                  |                          |                         | 64     |        |          |   | 914   |          |  |   | 978    |        |  |          |       |        |          |   | 1,522 |       |  |   | 1,522    |        |  |          | 472    |        |  |   | 1,396  |     |  |   | 1,868  |       
|Gain (loss) on sale of securities, net                      |                          |                         | (12    | )      |          |   |      |          |  |   | (12    | )      |  |          | 1,224  |        |          |   |      |       |  |   | 1,224    |        |  |          | 1,737  |        |  |   |       |     |  |   | 1,737  |       
|Other income                                                |                          |                         | 13,697 |        |          |   | 719   |          |  |   | 14,416 |        |  |          | 11,024 |        |          |   | 1,095 |       |  |   | 12,119   |        |  |          | 7,909  |        |  |   | 805    |     |  |   | 8,714  |       
|                                                            |                          |                         |        |        |          |   |       |          |  |   |        |        |  |          |        |        |          |   |       |       |  |   |          |        |  |          |       
|                                                            | Total noninterest income |                         | $      | 91,938 |          |   | $     | 4,567    |  |   | $      | 96,505 |  |          | $      | 76,955 |          |   | $     | 6,254 |  |   | $        | 83,209 |  |          | $      | 66,209 |  |   | $      | 927 |  |   | $      | 67,136 | 
|                                                            |                          |                         |        |        |          |   |       |          |  |   |        |        |  |          |        |        |          |   |       |       |  |   |          |        |  |          |       

Banking Segment.






Mortgage Segment.




20



---



##### 









| |                     
| | --------------------
| | Noninterest Expenses



|                                             |                            |                         |         |         |      |   |        |         |  |   |        |         | 
|-------------------------------------------- | -------------------------- | ----------------------- | ------- | ------- | ---- | - | ------ | ------- |  | - | ------ | ------- | 
|                                             |                            | Year Ended December 31, |        
|                                             |                            |                         |        
|                                             |                            | 2004                    |         |         | 2003 |   |        | 2002    | 
|                                             |                            |                         |         |         |      |   |        |         | 
|                                             |                            | (Dollars in thousands)  |        
|Salaries and employee benefits               |                            | $                       | 117,869 |         |      | $ | 97,176 |         |  | $ | 81,486 |        
|Occupancy                                    |                            |                         | 37,657  |         |      |   | 29,690 |         |  |   | 24,066 |        
|Professional services                        |                            |                         | 12,514  |         |      |   | 9,640  |         |  |   | 8,626  |        
|Core deposit intangible amortization expense |                            |                         | 4,947   |         |      |   | 1,368  |         |  |   |       |        
|Other operating expenses                     |                            |                         | 43,624  |         |      |   | 35,868 |         |  |   | 31,537 |        
|                                             |                            |                         |         |         |      |   |        |         | 
|                                             | Total noninterest expenses |                         | $       | 216,611 |      |   | $      | 173,742 |  |   | $      | 145,715 | 
|                                             |                            |                         |         |         |      |   |        |         | 







21



---



##### 







|                                             |                               |                         |       |        |      |   |       |       |  |  |   |   | 
|-------------------------------------------- | ----------------------------- | ----------------------- | ----- | ------ | ---- | - | ----- | ----- |  |  | - | - | 
|                                             |                               | Year Ended December 31,
|                                             |                               |                        
|                                             |                               | 2004                    |       |        | 2003 |   |       | 2002 
|                                             |                               |                         |       |        |      |   |       |      
|                                             |                               | (Dollars in thousands) 
|Merger salaries and employee benefits        |                               | $                       | 8,908 |        |      | $ | 1,651 |       |  |  |  |  
|Core deposit intangible amortization expense |                               |                         | 4,947 |        |      |   | 1,368 |       |  |  |  |  
|Merger operating expenses                    |                               |                         | 9,382 |        |      |   | 4,715 |       |  |  |  |  
|                                             |                               |                         |       |        |      |   |       |       | 
|                                             | Total merger-related expenses |                         | $     | 23,237 |      |   | $     | 7,734 |  |  | $ |  | 
|                                             |                               |                         |       |        |      |   |       |       | 





| |             
| | ------------
| | Income Taxes





| |                    
| | -------------------
| | Impact of Inflation



22



---



##### 



Financial Condition




| |                          
| | -------------------------
| | Loans Held for Investment











23



---



##### 





|                          |                                   |                                 |           |         |           |  |       |        |        |   |           |         |           |        |       |       |         |   |           |         |           |  |         |       |        |        |           |         |           |  |       |       |        |   |         |         |           |  |       |       |        |  
|------------------------- | --------------------------------- | ------------------------------- | --------- | ------- | --------- |  | ----- | ------ | ------ | - | --------- | ------- | --------- | ------ | ----- | ----- | ------- | - | --------- | ------- | --------- |  | ------- | ----- | ------ | ------ | --------- | ------- | --------- |  | ----- | ----- | ------ | - | ------- | ------- | --------- |  | ----- | ----- | ------ | -
|                          |                                   | December 31,                    |          
|                          |                                   |                                 |          
|                          |                                   | 2004                            |           |         | 2003      |  |       | 2002   |        |   | 2001      |         |           | 2000   |      
|                          |                                   |                                 |           |         |           |  |       |        |        |   |           |         |           |        |      
|                          |                                   | Amount                          |           |         | Percent   |  |       | Amount |        |   | Percent   |         |           | Amount |       |       | Percent |   |           | Amount  |           |  | Percent |       |        | Amount |           |         | Percent   | 
|                          |                                   |                                 |           |         |           |  |       |        |        |   |           |         |           |        |       |       |         |   |           |         |           |  |         |       |        |        |           |         |           | 
|                          |                                   | (Dollars in thousands)          |          
|Commercial and industrial |                                   | $                               | 2,048,460 |         |           |  | 45.12 | %      |        | $ | 1,500,304 |         |           |        | 42.96 | %     |         | $ | 1,296,849 |         |           |  | 41.59   | %     |        | $      | 1,084,114 |         |           |  | 40.56 | %     |        | $ | 954,912 |         |           |  | 39.37 | %    
|Real estate:              |                                   |                                 |           |         |           |  |       |        |        |   |           |         |           |        |       |       |         |   |           |         |           |  |         |       |        |        |           |         |           |  |       |       |        |   |         |         |           |  |       |      
|                          | Construction and land development |                                 |           | 796,541 |           |  |       | 17.55  |        |   |           | 706,546 |           |        |       | 20.24 |         |   |           | 748,272 |           |  |         | 24.00 |        |        |           | 698,423 |           |  |       | 26.13 |        |   |         | 641,128 |           |  |       | 26.43 |       
|                          | 1-4 family residential            |                                 |           | 729,173 |           |  |       | 16.06  |        |   |           | 567,009 |           |        |       | 16.24 |         |   |           | 447,534 |           |  |         | 14.35 |        |        |           | 344,133 |           |  |       | 12.88 |        |   |         | 335,934 |           |  |       | 13.85 |       
|                          | Commercial                        |                                 |           | 755,929 |           |  |       | 16.65  |        |   |           | 521,254 |           |        |       | 14.93 |         |   |           | 458,033 |           |  |         | 14.69 |        |        |           | 320,336 |           |  |       | 11.99 |        |   |         | 265,534 |           |  |       | 10.95 |       
|                          | Farmland                          |                                 |           | 13,414  |           |  |       | 0.30   |        |   |           | 11,140  |           |        |       | 0.32  |         |   |           | 7,679   |           |  |         | 0.25  |        |        |           | 4,854   |           |  |       | 0.18  |        |   |         | 5,753   |           |  |       | 0.24  |       
|                          | Other                             |                                 |           | 62,889  |           |  |       | 1.39   |        |   |           | 41,854  |           |        |       | 1.20  |         |   |           | 21,693  |           |  |         | 0.70  |        |        |           | 25,884  |           |  |       | 0.97  |        |   |         | 31,861  |           |  |       | 1.31  |       
|Consumer                  |                                   |                                 | 133,172   |         |           |  | 2.93  |        |        |   | 143,566   |         |           |        | 4.11  |       |         |   | 137,891   |         |           |  | 4.42    |       |        |        | 194,714   |         |           |  | 7.29  |       |        |   | 190,376 |         |           |  | 7.85  |      
|                          |                                   |                                 |           |         |           |  |       |        |        |   |           |         |           |        |       |       |         |   |           |         |           |  |         |       |        |        |           |         |           | 
|                          |                                   | Total loans held for investment |           | $       | 4,539,578 |  |       |        | 100.00 | % |           | $       | 3,491,673 |        |       |       | 100.00  | % |           | $       | 3,117,951 |  |         |       | 100.00 | %      |           | $       | 2,672,458 |  |       |       | 100.00 | % |         | $       | 2,425,498 |  |       |       | 100.00 | %
|                          |                                   |                                 |           |         |           |  |       |        |        |   |           |         |           |        |       |       |         |   |           |         |           |  |         |       |        |        |           |         |           | 













24



---



##### 







|                                              |       |                        |           |           |            |   |         |            |  |   |         |         |  |   |           |           | 
|--------------------------------------------- | ----- | ---------------------- | --------- | --------- | ---------- | - | ------- | ---------- |  | - | ------- | ------- |  | - | --------- | --------- | 
|                                              |       | December 31, 2004      |          
|                                              |       |                        |          
|                                              |       |                        |           | After One |            |   |        
|                                              |       | One Year               |           |           | Through    |   |         | After      |  |   |        
|                                              |       | or Less                |           |           | Five Years |   |         | Five Years |  |   | Total   |        
|                                              |       |                        |           |           |            |   |         |            |  |   |         |        
|                                              |       | (Dollars in thousands) |          
|Commercial and industrial                     |       | $                      | 997,035   |           |            | $ | 867,539 |            |  | $ | 183,886 |         |  | $ | 2,048,460 |          
|Real estate construction and land development |       |                        | 438,487   |           |            |   | 337,394 |            |  |   | 20,660  |         |  |   | 796,541   |          
|                                              |       |                        |           |           |            |   |         |            |  |   |         |        
|                                              | Total |                        | $         | 1,435,522 |            |   | $       | 1,204,933  |  |   | $       | 204,546 |  |   | $         | 2,845,001 | 
|                                              |       |                        |           |           |            |   |         |            |  |   |         |        
|Loans with a fixed interest rate              |       | $                      | 255,587   |           |            | $ | 328,800 |            |  | $ | 53,570  |         |  | $ | 637,957   |          
|Loans with a floating interest rate           |       |                        | 1,179,935 |           |            |   | 876,133 |            |  |   | 150,976 |         |  |   | 2,207,044 |          
|                                              |       |                        |           |           |            |   |         |            |  |   |         |        
|                                              | Total |                        | $         | 1,435,522 |            |   | $       | 1,204,933  |  |   | $       | 204,546 |  |   | $         | 2,845,001 | 
|                                              |       |                        |           |           |            |   |         |            |  |   |         |        



| |                    
| | -------------------
| | Loans Held for Sale





| |                  
| | -----------------
| | Credit Management





25



---



##### 







| |                            
| | ---------------------------
| | Allowance for Credit Losses







Accounting by Creditors for
Impairment of a Loan (SFAS No. 114).














26



---



##### 









|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |        |        |      |  
|----------------------------------------------------------- | ------------------------- | ---------------------------------------- | --------------------------------- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | ---- | -
|                                                            |                           | Year Ended December 31,                  |                                  
|                                                            |                           |                                          |                                  
|                                                            |                           | 2004                                     |                                   |        | 2003   |        |        | 2002   |        |        | 2001   |        |        | 2000 |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|                                                            |                           | (Dollars in thousands)                   |                                  
|Allowance for loan losses, beginning balance                |                           | $                                        | 41,611                            |        |        | $      | 35,449 |        |        | $      | 30,856 |        |        | $    | 27,665 |        |        | $    | 22,044 |       
|Provision for loan losses                                   |                           |                                          | 10,212                            |        |        |        | 11,850 |        |        |        | 11,037 |        |        |      | 7,451  |        |        |      | 6,960  |       
|Charge-offs:                                                |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |       
|                                                            | Commercial and industrial |                                          |                                   | (3,995 | )      |        |        | (2,986 | )      |        |        | (5,784 | )      |      |        | (3,663 | )      |      |        | (714   | )     
|                                                            | Real estate:              |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |        |       
|                                                            |                           |                                          | Construction and land development |        |        | (54    | )      |        |        | (34    | )      |        |        | (107 | )      |        |        | (65  | )      |        |        | (208 | )
|                                                            |                           |                                          | 1-4 family residential            |        |        | (1,070 | )      |        |        | (252   | )      |        |        | (126 | )      |        |        | (171 | )      |        |        |     |  
|                                                            |                           |                                          | Commercial                        |        |        |       |        |        |        | (911   | )      |        |        | (38  | )      |        |        |     |        |        |        |     |  
|                                                            |                           |                                          | Farmland                          |        |        |       |        |        |        |       |        |        |        |     |        |        |        |     |        |        |        |     |  
|                                                            |                           |                                          | Other                             |        |        | (2,017 | )      |        |        | (2,742 | )      |        |        | (64  | )      |        |        | (94  | )      |        |        | (100 | )
|                                                            | Consumer                  |                                          |                                   | (1,896 | )      |        |        | (1,340 | )      |        |        | (973   | )      |      |        | (1,037 | )      |      |        | (1,071 | )     
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Total charge-offs                                           |                           |                                          | (9,032                            | )      |        |        | (8,265 | )      |        |        | (7,092 | )      |        |      | (5,030 | )      |        |      | (2,093 | )     
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Recoveries:                                                 |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |       
|                                                            | Commercial and industrial |                                          |                                   | 635    |        |        |        | 203    |        |        |        | 235    |        |      |        | 265    |        |      |        | 485    |       
|                                                            | Real estate:              |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |        |       
|                                                            |                           |                                          | Construction and land development |        |        | 1      |        |        |        |       |        |        |        |     |        |        |        |     |        |        |        | 7    |  
|                                                            |                           |                                          | 1-4 family residential            |        |        | 106    |        |        |        |       |        |        |        | 14   |        |        |        | 59   |        |        |        |     |  
|                                                            |                           |                                          | Commercial                        |        |        |       |        |        |        |       |        |        |        |     |        |        |        |     |        |        |        |     |  
|                                                            |                           |                                          | Farmland                          |        |        |       |        |        |        |       |        |        |        |     |        |        |        |     |        |        |        |     |  
|                                                            |                           |                                          | Other                             |        |        | 1,700  |        |        |        | 378    |        |        |        | 136  |        |        |        | 51   |        |        |        |     |  
|                                                            | Consumer                  |                                          |                                   | 705    |        |        |        | 570    |        |        |        | 351    |        |      |        | 395    |        |      |        | 262    |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Total recoveries                                            |                           |                                          | 3,147                             |        |        |        | 1,151  |        |        |        | 736    |        |        |      | 770    |        |        |      | 754    |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Net charge-offs                                             |                           |                                          | (5,885                            | )      |        |        | (7,114 | )      |        |        | (6,356 | )      |        |      | (4,260 | )      |        |      | (1,339 | )     
|Allowance acquired through mergers and acquisitions         |                           |                                          | 3,470                             |        |        |        | 1,426  |        |        |        |       |        |        |      |       |        |        |      |       |       
|Adjustment for sale of subsidiary                           |                           |                                          |                                  |        |        |        |       |        |        |        | (88    | )      |        |      |       |        |        |      |       |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Allowance for loan losses, ending balance                   |                           |                                          | 49,408                            |        |        |        | 41,611 |        |        |        | 35,449 |        |        |      | 30,856 |        |        |      | 27,665 |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Reserve for unfunded lending commitments, beginning balance |                           |                                          | 1,397                             |        |        |        | 1,247  |        |        |        | 534    |        |        |      | 485    |        |        |      | 392    |       
|Provision for unfunded lending commitments                  |                           |                                          | 454                               |        |        |        | 150    |        |        |        | 713    |        |        |      | 49     |        |        |      | 93     |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Reserve for unfunded lending commitments, ending balance    |                           |                                          | 1,851                             |        |        |        | 1,397  |        |        |        | 1,247  |        |        |      | 534    |        |        |      | 485    |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Allowance for credit losses                                 |                           | $                                        | 51,259                            |        |        | $      | 43,008 |        |        | $      | 36,696 |        |        | $    | 31,390 |        |        | $    | 28,150 |       
|                                                            |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |       
|Allowance for loan losses:                                  |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |       
|                                                            |                           | as a % of period-end loans               |                                   |        | 1.07   | %      |        |        | 1.19   | %      |        |        | 1.14   | %    |        |        | 1.15   | %    |        |        | 1.14   | %   
|                                                            |                           | as a % of period-end nonperforming loans |                                   |        | 304.50 | %      |        |        | 326.57 | %      |        |        | 236.50 | %    |        |        | 233.78 | %    |        |        | 292.69 | %   
|Allowance for credit losses:                                |                           |                                          |                                   |        |        |        |        |        |        |        |        |        |        |      |        |        |        |      |        |       
|                                                            |                           | as a % of period-end loans               |                                   |        | 1.11   | %      |        |        | 1.23   | %      |        |        | 1.18   | %    |        |        | 1.17   | %    |        |        | 1.16   | %   
|Net charge-offs as a % of average loans                     |                           |                                          | 0.15                              | %      |        |        | 0.22   | %      |        |        | 0.22   | %      |        |      | 0.17   | %      |        |      | 0.06   | %     

27



---



##### 





|                                                    |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |       |       |             |   |            |        |        |  |             |            |        |        |        |       |             |  |       |       |        |   |        |       |        |  |       |       |        |  
|--------------------------------------------------- | --------------------------------- | ------------------------------- | ------ | ---------- | ----------- |  | ----- | ------ | ---------- | - | ----------- | ----- | ------ | ---------- | ----- | ----- | ----------- | - | ---------- | ------ | ------ |  | ----------- | ---------- | ------ | ------ | ------ | ----- | ----------- |  | ----- | ----- | ------ | - | ------ | ----- | ------ |  | ----- | ----- | ------ | -
|                                                    |                                   | December 31,                    |       
|                                                    |                                   |                                 |       
|                                                    |                                   | 2004                            |        |            | 2003        |  |       | 2002   |            |   | 2001        |       |        | 2000       |      
|                                                    |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |      
|                                                    |                                   |                                 |        | Percent of |             |  |       |        | Percent of |   |             |       |        | Percent of |       |       |             |   | Percent of |        |        |  |             | Percent of |       
|                                                    |                                   |                                 |        | Loans to   |             |  |       |        | Loans to   |   |             |       |        | Loans to   |       |       |             |   | Loans to   |        |        |  |             | Loans to   |       
|                                                    |                                   | Amount                          |        |            | Total Loans |  |       | Amount |            |   | Total Loans |       |        | Amount     |       |       | Total Loans |   |            | Amount |        |  | Total Loans |            |        | Amount |        |       | Total Loans | 
|                                                    |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |       |       |             |   |            |        |        |  |             |            |        |        |        |       |             | 
|                                                    |                                   | (Dollars in thousands)          |       
|Balance of allowance for loan losses applicable to: |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |       |       |             |   |            |        |        |  |             |            |        |        |        |       |             |  |       |       |        |   |        |       |        |  |       |      
|Commercial and industrial                           |                                   | $                               | 26,285 |            |             |  | 45.12 | %      |            | $ | 24,762      |       |        |            | 42.96 | %     |             | $ | 15,094     |        |        |  | 41.59       | %          |        | $      | 13,321 |       |             |  | 40.56 | %     |        | $ | 12,012 |       |        |  | 39.37 | %    
|Real estate:                                        |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |       |       |             |   |            |        |        |  |             |            |        |        |        |       |             |  |       |       |        |   |        |       |        |  |       |      
|                                                    | Construction and land development |                                 |        | 7,547      |             |  |       | 17.55  |            |   |             | 5,208 |        |            |       | 20.24 |             |   |            | 6,512  |        |  |             | 24.00      |        |        |        | 7,244 |             |  |       | 26.13 |        |   |        | 5,594 |        |  |       | 26.43 |       
|                                                    | 1-4 family residential            |                                 |        | 6,569      |             |  |       | 16.06  |            |   |             | 2,241 |        |            |       | 16.24 |             |   |            | 3,827  |        |  |             | 14.35      |        |        |        | 2,621 |             |  |       | 12.88 |        |   |        | 3,221 |        |  |       | 13.85 |       
|                                                    | Commercial                        |                                 |        | 5,778      |             |  |       | 16.65  |            |   |             | 4,962 |        |            |       | 14.93 |             |   |            | 5,676  |        |  |             | 14.69      |        |        |        | 3,328 |             |  |       | 11.99 |        |   |        | 2,618 |        |  |       | 10.95 |       
|                                                    | Farmland                          |                                 |        | 156        |             |  |       | 0.30   |            |   |             | 34    |        |            |       | 0.32  |             |   |            | 50     |        |  |             | 0.25       |        |        |        | 33    |             |  |       | 0.18  |        |   |        | 39    |        |  |       | 0.24  |       
|                                                    | Other                             |                                 |        | 868        |             |  |       | 1.39   |            |   |             | 2,448 |        |            |       | 1.20  |             |   |            | 1,028  |        |  |             | 0.70       |        |        |        | 1,104 |             |  |       | 0.97  |        |   |        | 1,246 |        |  |       | 1.31  |       
|Consumer                                            |                                   |                                 | 2,205  |            |             |  | 2.93  |        |            |   | 1,956       |       |        |            | 4.11  |       |             |   | 3,262      |        |        |  | 4.42        |            |        |        | 3,205  |       |             |  | 7.29  |       |        |   | 2,935  |       |        |  | 7.85  |      
|                                                    |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |       |       |             |   |            |        |        |  |             |            |        |        |        |       |             | 
|                                                    |                                   | Total allowance for loan losses |        | $          | 49,408      |  |       |        | 100.00     | % |             | $     | 41,611 |            |       |       | 100.00      | % |            | $      | 35,449 |  |             |            | 100.00 | %      |        | $     | 30,856      |  |       |       | 100.00 | % |        | $     | 27,665 |  |       |       | 100.00 | %
|                                                    |                                   |                                 |        |            |             |  |       |        |            |   |             |       |        |            |       |       |             |   |            |        |        |  |             |            |        |        |        |       |             | 



| |                                        
| | ---------------------------------------
| | Nonperforming Assets and Impaired Loans





|                                                    |                            |                        |        |        |      |   |        |        |  |   |        |        |  |      |        |        |  |   |       |       | 
|--------------------------------------------------- | -------------------------- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ |  | ---- | ------ | ------ |  | - | ----- | ----- | 
|                                                    |                            | December 31,           |       
|                                                    |                            |                        |       
|                                                    |                            | 2004                   |        |        | 2003 |   |        | 2002   |  |   | 2001   |        |  | 2000 |       
|                                                    |                            |                        |        |        |      |   |        |        |  |   |        |        |  |      |       
|                                                    |                            | (Dollars in thousands) |       
|Nonaccrual loans                                    |                            | $                      | 14,174 |        |      | $ | 11,443 |        |  | $ | 13,113 |        |  | $    | 11,020 |        |  | $ | 8,345 |      
|Accruing loans 90 or more days past due             |                            |                        | 2,052  |        |      |   | 1,299  |        |  |   | 1,876  |        |  |      | 2,179  |        |  |   | 1,107 |      
|Restructured loans                                  |                            |                        |       |        |      |   |       |        |  |   |       |        |  |      |       |        |  |   |      |      
|Other real estate and foreclosed property           |                            |                        | 8,887  |        |      |   | 4,248  |        |  |   | 760    |        |  |      | 1,037  |        |  |   | 454   |      
|                                                    |                            |                        |        |        |      |   |        |        |  |   |        |        |  |      |       
|                                                    | Total nonperforming assets |                        | $      | 25,113 |      |   | $      | 16,990 |  |   | $      | 15,749 |  |      | $      | 14,236 |  |   | $     | 9,906 | 
|                                                    |                            |                        |        |        |      |   |        |        |  |   |        |        |  |      |       
|Nonperforming assets to loans and other real estate |                            |                        | 0.55   | %      |      |   | 0.49   | %      |  |   | 0.50   | %      |  |      | 0.53   | %      |  |   | 0.41  | %    



28



---



##### 











|                                                      |                                             |                        |        |        |      |   |       |        | 
|----------------------------------------------------- | ------------------------------------------- | ---------------------- | ------ | ------ | ---- | - | ----- | ------ | 
|                                                      |                                             | December 31,           |       
|                                                      |                                             |                        |       
|                                                      |                                             | 2004                   |        |        | 2003 |  
|                                                      |                                             |                        |        |        |      |  
|                                                      |                                             | (Dollars in thousands) |       
|Impaired loans with no SFAS No. 114 valuation reserve |                                             | $                      | 4,342  |        |      | $ | 8,838 |       
|Impaired loans with a SFAS No. 114 valuation reserve  |                                             |                        | 20,944 |        |      |   | 7,970 |       
|                                                      |                                             |                        |        |        |      |  
|                                                      | Total recorded investment in impaired loans |                        | $      | 25,286 |      |   | $     | 16,808 | 
|                                                      |                                             |                        |        |        |      |  
|Valuation allowance related to impaired loans         |                                             | $                      | 5,848  |        |      | $ | 2,768 |       
|                                                      |                                             |                        |        |        |      |  





| |           
| | ----------
| | Securities



29



---



##### 





|                    |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |   |         |           |  |   |         |         | 
|------------------- | ------------------------------------- | ----------------------------------- | - | --------- | --------- |  | - | --------- | --------- |  | ---- | ------- | --------- | ---- | - | ------- | --------- |  | - | ------- | ------- | 
|                    |                                       | December 31,                        |  
|                    |                                       |                                     |  
|                    |                                       | 2004                                |   |           | 2003      |  |   | 2002      |           |  | 2001 |         |           | 2000 |  
|                    |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |  
|                    |                                       | (Dollars in thousands)              |  
|Available for sale: |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |   |         |           |  |   |        
|                    | U.S. Government and agency securities |                                     | $ | 388,061   |           |  | $ | 250,359   |           |  | $    | 142,032 |           |      | $ | 50,860  |           |  | $ | 169,069 |        
|                    | Mortgage-backed securities            |                                     |   | 1,237,420 |           |  |   | 1,101,988 |           |  |      | 869,872 |           |      |   | 872,974 |           |  |   | 618,523 |        
|                    | Municipal securities                  |                                     |   | 246,705   |           |  |   | 152,927   |           |  |      | 105,143 |           |      |   | 85,047  |           |  |   | 27,920  |        
|                    | Federal Reserve Bank stock            |                                     |   | 8,511     |           |  |   | 4,459     |           |  |      | 4,431   |           |      |   | 4,230   |           |  |   | 3,949   |        
|                    | Federal Home Loan Bank stock          |                                     |   | 32,772    |           |  |   | 25,469    |           |  |      | 27,188  |           |      |   | 7,939   |           |  |   | 17,972  |        
|                    | Other securities                      |                                     |   | 17,196    |           |  |   | 9,455     |           |  |      | 30,777  |           |      |   | 41,169  |           |  |   | 15,491  |        
|                    |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |  
|                    |                                       | Total securities available for sale |   | $         | 1,930,665 |  |   | $         | 1,544,657 |  |      | $       | 1,179,443 |      |   | $       | 1,062,219 |  |   | $       | 852,924 | 
|                    |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |  
|Held to maturity:   |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |   |         |           |  |   |        
|                    | Mortgage-backed securities            |                                     | $ | 58,033    |           |  | $ |          |           |  | $    |        |           |      | $ |        |           |  | $ |        |        
|                    |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |  
|                    |                                       | Total securities held to maturity   |   | $         | 58,033    |  |   | $         |          |  |      | $       |          |      |   | $       |          |  |   | $       |        | 
|                    |                                       |                                     |   |           |           |  |   |           |           |  |      |         |           |      |  



|                                      |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           |  |  |   |        |  |  |   |        |   |  |   |           | 
|------------------------------------- |  | ---------------------- | --------- | ---------------- | ----------------- | - | ------ | ----------------- |  | - | ---------------- | - |  | ---- | --------- |  | ---- | ---------------- | --------- | --------- |  | - | ------ |  |  | ---- | ------ | - | ---- | - | --------- | ---- |  | - | --------- |  |  | - | ------ |  |  | - | ------ | - |  | - | --------- | 
|                                      |  | December 31, 2004      |           |                  | December 31, 2003 |   |        | December 31, 2002 | 
|                                      |  |                        |           |                  |                   |   |        |                   | 
|                                      |  |                        |           | Gross Unrealized |                   |   |        |                   |  |   | Gross Unrealized |   |  |      |           |  |      | Gross Unrealized |           |           | 
|                                      |  | Amortized              |           |                  |                   |   |        | Fair              |  |   | Amortized        |   |  |      |           |  | Fair |                  |           | Amortized |  |   |        |  |  | Fair |       
|                                      |  | Cost                   |           |                  | Gain              |   |        | Loss              |  |   | Value            |   |  | Cost |           |  | Gain |                  |           | Loss      |  |   | Value  |  |  | Cost |        |   | Gain |   |           | Loss |  |   | Value     | 
|                                      |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           | 
|                                      |  | (Dollars in thousands) |          
|Available for sale:                   |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           |  |  |   |        |  |  |   |        |   |  |   |           | 
|U.S. Government and agency securities |  | $                      | 388,061   |                  |                   | $ | 246    |                   |  | $ | (2,623           | ) |  | $    | 385,684   |  |      | $                | 250,359   |           |  | $ | 841    |  |  | $    | (102   | ) |      | $ | 251,098   |      |  | $ | 142,032   |  |  | $ | 1,323  |  |  | $ |       |   |  | $ | 143,355   | 
|Mortgage-backed securities            |  |                        | 1,237,420 |                  |                   |   | 3,820  |                   |  |   | (11,076          | ) |  |      | 1,230,164 |  |      |                  | 1,101,988 |           |  |   | 7,078  |  |  |      | (8,320 | ) |      |   | 1,100,746 |      |  |   | 869,872   |  |  |   | 18,077 |  |  |   | (1,194 | ) |  |   | 886,755   | 
|Municipal securities                  |  |                        | 246,705   |                  |                   |   | 7,564  |                   |  |   | (1,392           | ) |  |      | 252,877   |  |      |                  | 152,927   |           |  |   | 5,905  |  |  |      | (754   | ) |      |   | 158,078   |      |  |   | 105,143   |  |  |   | 3,634  |  |  |   | (190   | ) |  |   | 108,587   | 
|Federal Reserve Bank stock            |  |                        | 8,511     |                  |                   |   |       |                   |  |   |                 |   |  |      | 8,511     |  |      |                  | 4,459     |           |  |   |       |  |  |      |       |   |      |   | 4,459     |      |  |   | 4,431     |  |  |   |       |  |  |   |       |   |  |   | 4,431     | 
|Federal Home Loan Bank stock          |  |                        | 32,772    |                  |                   |   |       |                   |  |   |                 |   |  |      | 32,772    |  |      |                  | 25,469    |           |  |   |       |  |  |      |       |   |      |   | 25,469    |      |  |   | 27,188    |  |  |   |       |  |  |   |       |   |  |   | 27,188    | 
|Other securities                      |  |                        | 17,196    |                  |                   |   |       |                   |  |   |                 |   |  |      | 17,196    |  |      |                  | 9,455     |           |  |   | 93     |  |  |      |       |   |      |   | 9,548     |      |  |   | 30,777    |  |  |   | 107    |  |  |   |       |   |  |   | 30,884    | 
|                                      |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           | 
|Total securities available for sale   |  | $                      | 1,930,665 |                  |                   | $ | 11,630 |                   |  | $ | (15,091          | ) |  | $    | 1,927,204 |  |      | $                | 1,544,657 |           |  | $ | 13,917 |  |  | $    | (9,176 | ) |      | $ | 1,549,398 |      |  | $ | 1,179,443 |  |  | $ | 23,141 |  |  | $ | (1,384 | ) |  | $ | 1,201,200 | 
|                                      |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           | 
|Held to maturity:                     |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           |  |  |   |        |  |  |   |        |   |  |   |           | 
|Mortgage-backed securities            |  | $                      | 58,033    |                  |                   | $ | 536    |                   |  | $ |                 |   |  | $    | 58,569    |  |      | $                |          |           |  | $ |       |  |  | $    |       |   |      | $ |          |      |  | $ |          |  |  | $ |       |  |  | $ |       |   |  | $ |          | 
|                                      |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           | 
|Total securities held to maturity     |  | $                      | 58,033    |                  |                   | $ | 536    |                   |  | $ |                 |   |  | $    | 58,569    |  |      | $                |          |           |  | $ |       |  |  | $    |       |   |      | $ |          |      |  | $ |          |  |  | $ |       |  |  | $ |       |   |  | $ |          | 
|                                      |  |                        |           |                  |                   |   |        |                   |  |   |                  |   |  |      |           |  |      |                  |           |           |  |   |        |  |  |      |        |   |      |   |           |      |  |   |           | 

30



---



##### 





|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |   |         |           |  |   |         |         |  
|------------------------------------- | ----- | ---------------------- | ------- | --------- | ---------------------- | - | ------ | ------- | - | - | ---------- | ------- |  | ----- | ------ | ------ | ---------- | - | ------- | --------- |  | - | ------- | ------- | -
|                                      |       | Less Than 12 Months    |         |           | Greater Than 12 Months |   |        | Total   |  
|                                      |       |                        |         |           |                        |   |        |         |  
|                                      |       | Fair                   |         |           | Unrealized             |   |        | Fair    |   |   | Unrealized |         |  | Fair  |        |        | Unrealized |  
|                                      |       | Value                  |         |           | Loss                   |   |        | Value   |   |   | Loss       |         |  | Value |        |        | Loss       |  
|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |  
|                                      |       | (Dollars in thousands) |         |           |                       
|U.S. Government and agency securities |       | $                      | 272,478 |           |                        | $ | (2,623 | )       |   | $ |           |         |  | $     |       |        |            | $ | 272,478 |           |  | $ | (2,623  | )      
|Mortgage-backed securities            |       |                        | 722,889 |           |                        |   | (7,035 | )       |   |   | 202,543    |         |  |       | (4,041 | )      |            |   | 925,432 |           |  |   | (11,076 | )      
|Municipal securities                  |       |                        | 56,349  |           |                        |   | (1,048 | )       |   |   | 12,668     |         |  |       | (344   | )      |            |   | 69,017  |           |  |   | (1,392  | )      
|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |  
|                                      | Total |                        | $       | 1,051,716 |                        |   | $      | (10,706 | ) |   | $          | 215,211 |  |       | $      | (4,385 | )          |   | $       | 1,266,927 |  |   | $       | (15,091 | )
|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |  











31



---



##### 





|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          |  |      |      |   |   |           |           |  |  |      |      |  
|------------------------------------- | ----------------------------------- | ---------------------- | ------- | ------------------ | ----------------- |  | -------------------- | ---------------- | - | - | --------------- | --------- |  | ---- | ---- | ---- | --------- | - | ------- | ------- |  |  | -------- | ---- | - | ----- | ------ | ------- | -------- |  | ---- | ---- | - | - | --------- | --------- |  |  | ---- | ---- | -
|                                      |                                     | December 31, 2004      |        
|                                      |                                     |                        |        
|                                      |                                     |                        |         | After One Year but |                   |  | After Five Years but |                  |   |   |                 |          
|                                      |                                     | Within One Year        |         |                    | within Five Years |  |                      | within Ten Years |   |   | After Ten Years |           |  |     
|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |     
|                                      |                                     | Amortized              |         |                    |                   |  | Amortized            |                  |   |   |                 | Amortized |  |      |      |      | Amortized |   |         |         |  | 
|                                      |                                     | Cost                   |         |                    | Yield(1)          |  |                      | Cost             |   |   | Yield(1)        |           |  | Cost |      |      | Yield(1)  |   |         | Cost    |  |  | Yield(1) |      |   | Total |        |         | Yield(1) | 
|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          | 
|                                      |                                     | (Dollars in thousands) |        
|Available for sale:                   |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          |  |      |      |   |   |           |           |  |  |      |     
|U.S. Government and agency securities |                                     | $                      | 109,651 |                    |                   |  | 3.82                 | %                |   | $ | 272,306         |           |  |      | 3.40 | %    |           | $ | 6,104   |         |  |  | 3.92     | %    |   | $     |       |         |          |  |     | %    |   | $ | 388,061   |           |  |  | 3.53 | %   
|Mortgage-backed securities            |                                     |                        | 46,467  |                    |                   |  | 2.74                 |                  |   |   | 746,974         |           |  |      | 4.48 |      |           |   | 404,576 |         |  |  | 4.14     | %    |   |       | 39,403 |         |          |  | 3.98 | %    |   |   | 1,237,420 |           |  |  | 4.28 |     
|Municipal securities                  |                                     |                        | 2,732   |                    |                   |  | 6.37                 |                  |   |   | 29,503          |           |  |      | 6.49 |      |           |   | 118,847 |         |  |  | 6.44     | %    |   |       | 95,623 |         |          |  | 6.82 | %    |   |   | 246,705   |           |  |  | 6.59 |     
|Federal Reserve Bank stock            |                                     |                        | 8,511   |                    |                   |  | 6.00                 |                  |   |   |                |           |  |      |     |      |           |   |        |         |  |  |         |      |   |       |       |         |          |  |     |      |   |   | 8,511     |           |  |  | 6.00 |     
|Federal Home Loan Bank stock          |                                     |                        | 32,772  |                    |                   |  | 1.92                 |                  |   |   |                |           |  |      |     |      |           |   |        |         |  |  |         |      |   |       |       |         |          |  |     |      |   |   | 32,772    |           |  |  | 1.92 |     
|Other securities                      |                                     |                        | 17,196  |                    |                   |  | 1.82                 |                  |   |   |                |           |  |      |     |      |           |   |        |         |  |  |         |      |   |       |       |         |          |  |     |      |   |   | 17,196    |           |  |  | 1.82 |     
|Federal funds sold                    |                                     |                        | 7,695   |                    |                   |  | 2.44                 |                  |   |   |                |           |  |      |     |      |           |   |        |         |  |  |         |      |   |       |       |         |          |  |     |      |   |   | 7,695     |           |  |  | 2.44 |     
|Interest-bearing
    deposits         |                                     |                        | 6,722   |                    |                   |  | 2.45                 |                  |   |   |                |           |  |      |     |      |           |   |        |         |  |  |         |      |   |       |       |         |          |  |     |      |   |   | 6,722     |           |  |  | 2.45 |     
|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          | 
|                                      | Total securities available for sale |                        | $       | 231,746            |                   |  |                      | 3.21             | % |   | $               | 1,048,783 |  |      |      | 4.30 | %         |   | $       | 529,527 |  |  |          | 4.65 | % |       | $      | 135,026 |          |  |      | 5.99 | % |   | $         | 1,945,082 |  |  |      | 4.38 | %
|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          | 
|Held to maturity:                     |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          |  |      |      |   |   |           |           |  |  |      |     
|Mortgage-backed securities            |                                     | $                      |        |                    |                   |  |                     | %                |   | $ | 58,033          |           |  |      | 5.13 | %    |           | $ |        |         |  |  |         | %    |   | $     |       |         |          |  |     | %    |   | $ | 58,033    |           |  |  | 5.13 | %   
|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          | 
|                                      | Total securities held to maturity   |                        | $       |                   |                   |  |                      |                 | % |   | $               | 58,033    |  |      |      | 5.13 | %         |   | $       |        |  |  |          |     | % |       | $      |        |          |  |      |     | % |   | $         | 58,033    |  |  |      | 5.13 | %
|                                      |                                     |                        |         |                    |                   |  |                      |                  |   |   |                 |           |  |      |      |      |           |   |         |         |  |  |          |      |   |       |        |         |          | 






|    |                                                
|--- | -----------------------------------------------
|(1) | Taxable-equivalent rates used where applicable.



| |             
| | ------------
| | Other Assets





| |         
| | --------
| | Deposits



32



---



##### 













|                                 |                |                         |           |           |      |  |      |        |  |   |           |           |  |        |      |   |      |   |           |           |  |  |      |   | 
|-------------------------------- | -------------- | ----------------------- | --------- | --------- | ---- |  | ---- | ------ |  | - | --------- | --------- |  | ------ | ---- | - | ---- | - | --------- | --------- |  |  | ---- | - | 
|                                 |                | Year Ended December 31, |          
|                                 |                |                         |          
|                                 |                | 2004                    |           |           | 2003 |  |      | 2002   | 
|                                 |                |                         |           |           |      |  |      |        | 
|                                 |                | Amount                  |           |           | Rate |  |      | Amount |  |   | Rate      |           |  | Amount |      |   | Rate |  
|                                 |                |                         |           |           |      |  |      |        |  |   |           |           |  |        |      |   |      |  
|                                 |                | (Dollars in thousands)  |          
|Interest-bearing demand          |                | $                       | 81,286    |           |      |  | 0.38 | %      |  | $ | 45,493    |           |  |        | 0.22 | % |      | $ | 34,409    |           |  |  | 0.23 | %
|Regular savings                  |                |                         | 158,030   |           |      |  | 0.30 |        |  |   | 115,211   |           |  |        | 0.33 |   |      |   | 94,388    |           |  |  | 0.88 |  
|Premium yield                    |                |                         | 1,011,355 |           |      |  | 0.92 |        |  |   | 847,045   |           |  |        | 0.96 |   |      |   | 830,690   |           |  |  | 1.61 |  
|Money market savings             |                |                         | 876,408   |           |      |  | 0.80 |        |  |   | 827,816   |           |  |        | 0.80 |   |      |   | 593,691   |           |  |  | 1.04 |  
|Time deposits less than $100,000 |                |                         | 279,653   |           |      |  | 2.44 |        |  |   | 283,670   |           |  |        | 2.67 |   |      |   | 293,752   |           |  |  | 3.63 |  
|Time deposits $100,000 and over  |                |                         | 730,845   |           |      |  | 1.86 |        |  |   | 629,749   |           |  |        | 1.85 |   |      |   | 553,666   |           |  |  | 2.69 |  
|IRAs, QRPs and other           |                |                         | 95,358    |           |      |  | 2.51 |        |  |   | 91,509    |           |  |        | 2.74 |   |      |   | 78,583    |           |  |  | 3.73 |  
|                                 |                |                         |           |           |      |  |      |        |  |   |           |           |  |        |      |   |      |  
|Total interest-bearing deposits  |                |                         | 3,232,935 |           |      |  | 1.23 | %      |  |   | 2,840,493 |           |  |        | 1.30 | % |      |   | 2,479,179 |           |  |  | 1.97 | %
|                                 |                |                         |           |           |      |  |      |        |  |   |           |           |  |        |      |   |      |  
|Noninterest-bearing deposits     |                |                         | 1,611,636 |           |      |  |      |        |  |   | 1,281,546 |           |  |        |      |   |      |   | 994,113   |           |  |  |      |  
|                                 |                |                         |           |           |      |  |      |        |  |   |           |           |  |        |      |   |      |  
|                                 | Total deposits |                         | $         | 4,844,571 |      |  |      |        |  |   | $         | 4,122,039 |  |        |      |   |      |   | $         | 3,473,292 |  |  |      |   | 
|                                 |                |                         |           |           |      |  |      |        |  |   |           |           |  |        |      |   |      |  



|                              |                                       |                        |         |         |      |   |         |         |  |   |         |         | 
|----------------------------- | ------------------------------------- | ---------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                              |                                       | December 31,           |        
|                              |                                       |                        |        
|                              |                                       | 2004                   |         |         | 2003 |   |         | 2002    | 
|                              |                                       |                        |         |         |      |   |         |         | 
|                              |                                       | (Dollars in thousands) |        
|3 months or less              |                                       | $                      | 655,571 |         |      | $ | 417,384 |         |  | $ | 285,071 |        
|Between 3 months and 6 months |                                       |                        | 95,186  |         |      |   | 60,101  |         |  |   | 56,087  |        
|Between 6 months and 1 year   |                                       |                        | 76,703  |         |      |   | 78,948  |         |  |   | 68,934  |        
|Over 1 year                   |                                       |                        | 116,823 |         |      |   | 86,157  |         |  |   | 108,016 |        
|                              |                                       |                        |         |         |      |   |         |         | 
|                              | Total time deposits $100,000 and over |                        | $       | 944,283 |      |   | $       | 642,590 |  |   | $       | 518,108 | 
|                              |                                       |                        |         |         |      |   |         |         | 

33



---



##### 





| |                      
| | ---------------------
| | Short-term Borrowings



|                                             |                                         |                        |   |         |      |  |   |         |  
|-------------------------------------------- | --------------------------------------- | ---------------------- | - | ------- | ---- |  | - | ------- | -
|                                             |                                         | December 31,           |  
|                                             |                                         |                        |  
|                                             |                                         | 2004                   |   |         | 2003 | 
|                                             |                                         |                        |   |         |      | 
|                                             |                                         | (Dollars in thousands) |  
|Securities sold under repurchase agreements: |                                         |                        |   |         |      |  |   |        
|                                             | Average                                 |                        | $ | 357,692 |      |  | $ | 261,320 |  
|                                             | Period-end                              |                        |   | 273,344 |      |  |   | 285,571 |  
|                                             | Maximum month-end balance during period |                        |   | 518,719 |      |  |   | 303,764 |  
|Interest rate:                               |                                         |                        |   |         |      |  |   |        
|                                             | Weighted average for the period         |                        |   | 0.96    | %    |  |   | 0.88    | %
|                                             | Weighted average at period-end          |                        |   | 1.29    | %    |  |   | 0.72    | %
|Short-term borrowings:                       |                                         |                        |   |         |      |  |   |        
|                                             | Average                                 |                        | $ | 543,159 |      |  | $ | 276,193 |  
|                                             | Period-end                              |                        |   | 759,624 |      |  |   | 473,154 |  
|                                             | Maximum month-end balance during period |                        |   | 929,074 |      |  |   | 473,154 |  
|Interest rate:                               |                                         |                        |   |         |      |  |   |        
|                                             | Weighted average for the period         |                        |   | 1.49    | %    |  |   | 1.11    | %
|                                             | Weighted average at period-end          |                        |   | 2.19    | %    |  |   | 0.98    | %





| |                          
| | -------------------------
| | Interest Rate Sensitivity



34



---



##### 







|                                            |                  |                          |  |  |        |    |  |   |       |    |      |  |      |      |  |  |       |    |  |  |       |   
|------------------------------------------- | ---------------- | ------------------------ |  |  | ------ | -- |  | - | ----- | -- | ---- |  | ---- | ---- |  |  | ----- | -- |  |  | ----- | --
|                                            |                  | Change in Interest Rates | 
|                                            |                  |                          | 
|                                            |                  | -200                     |  |  | -100   |    |  | 0 |       |    | +100 |  |      | +200 | 
|                                            |                  |                          |  |  |        |    |  |   |       |    |      |  |      |      | 
|Impact on net interest income:              |                  |                          |  |  |        |    |  |   |       |    |      |  |      |      |  |  |       |    |  | 
|                                            | Next 12 months:  |                          |  |  |        |    |  |   |       |    |      |  |      |      |  |  |       |    |  |  |      
|                                            |                  | December 31, 2004        |  |  | (5.69  | )% |  |   | (0.93 | )% |      |  | 0.00 | %    |  |  | 2.03  | %  |  |  | 3.88  | % 
|                                            |                  | December 31, 2003        |  |  | (11.69 | )% |  |   | (1.20 | )% |      |  | 0.00 | %    |  |  | 1.23  | %  |  |  | 3.33  | % 
|                                            |                  | December 31, 2002        |  |  | (17.22 | )% |  |   | (6.17 | )% |      |  | 0.00 | %    |  |  | 4.39  | %  |  |  | 6.83  | % 
|                                            | Months 13 to 24: |                          |  |  |        |    |  |   |       |    |      |  |      |      |  |  |       |    |  |  |      
|                                            |                  | December 31, 2004        |  |  | (11.39 | )% |  |   | (3.36 | )% |      |  | 0.00 | %    |  |  | 3.60  | %  |  |  | 6.82  | % 
|                                            |                  | December 31, 2003        |  |  | (18.97 | )% |  |   | (4.37 | )% |      |  | 0.00 | %    |  |  | 3.37  | %  |  |  | 6.65  | % 
|                                            |                  | December 31, 2002        |  |  | (20.26 | )% |  |   | (7.13 | )% |      |  | 0.00 | %    |  |  | 5.36  | %  |  |  | 8.42  | % 
|Impact on market value of portfolio equity: |                  |                          |  |  |        |    |  |   |       |    |      |  |      |      |  |  |       |    |  | 
|                                            |                  | December 31, 2004        |  |  | (8.21  | )% |  |   | (1.78 | )% |      |  | 0.00 | %    |  |  | (0.16 | )% |  |  | (0.67 | )%
|                                            |                  | December 31, 2003        |  |  | (9.60  | )% |  |   | (2.49 | )% |      |  | 0.00 | %    |  |  | (0.32 | )% |  |  | (0.39 | )%
|                                            |                  | December 31, 2002        |  |  | (10.27 | )% |  |   | (5.34 | )% |      |  | 0.00 | %    |  |  | 2.44  | %  |  |  | 0.64  | % 



35



---



##### 







|                                                                 |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           |  |   |           |           |  |   |           |           | 
|---------------------------------------------------------------- | ------------------------------------------ | ---------------------- | --------- | --------- | ----------- | ----------- | -------- | ----------- | --------- | - | ----------- | ---------- |  | --------- | ---------- | --------- | -------------- | - | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                                                                 |                                            |                        |           |           |             | One Year to |          |             | More than |   |             | Total Rate |  |           | Total Non- |           |                |  
|                                                                 |                                            | 0-90 Days              |           |           | 91-364 Days |             |          | Three Years |           |   | Three Years |            |  | Sensitive |            |           | Rate Sensitive |   |           | Total     | 
|                                                                 |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           | 
|                                                                 |                                            | (Dollars in thousands) |          
|Cash and due from banks                                          |                                            | $                      |          |           |             | $           |         |             |           | $ |            |            |  | $         |           |           |                | $ |          |           |  | $ | 327,558   |           |  | $ | 327,558   |          
|Federal funds sold and other cash equivalents                    |                                            |                        | 14,417    |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   | 14,417    |           |  |   |          |           |  |   | 14,417    |          
|Securities                                                       |                                            |                        | 58,095    |           |             |             | 116,993  |             |           |   | 394,883     |            |  |           | 1,415,266  |           |                |   | 1,985,237 |           |  |   |          |           |  |   | 1,985,237 |          
|Loans                                                            |                                            |                        | 3,240,935 |           |             |             | 401,154  |             |           |   | 506,275     |            |  |           | 484,444    |           |                |   | 4,632,808 |           |  |   | 14,174    |           |  |   | 4,646,982 |          
|Allowance for loan losses                                        |                                            |                        |          |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   |          |           |  |   | (49,408   | )         |  |   | (49,408   | )        
|Other assets                                                     |                                            |                        | 127,189   |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   | 127,189   |           |  |   | 453,628   |           |  |   | 580,817   |          
|                                                                 |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           | 
|                                                                 | Total assets                               |                        | $         | 3,440,636 |             |             | $        | 518,147     |           |   | $           | 901,158    |  |           | $          | 1,899,710 |                |   | $         | 6,759,651 |  |   | $         | 745,952   |  |   | $         | 7,505,603 | 
|                                                                 |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           | 
|Deposits                                                         |                                            | $                      | 1,168,546 |           |             | $           | 773,565  |             |           | $ | 738,624     |            |  | $         | 1,068,080  |           |                | $ | 3,748,815 |           |  | $ | 1,871,228 |           |  | $ | 5,620,043 |          
|Securities sold under repurchase agreements and other borrowings |                                            |                        | 1,033,091 |           |             |             | 2,380    |             |           |   | 1,127       |            |  |           | 6,780      |           |                |   | 1,043,378 |           |  |   |          |           |  |   | 1,043,378 |          
|Senior subordinated debentures                                   |                                            |                        | 75,000    |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   | 75,000    |           |  |   |          |           |  |   | 75,000    |          
|Junior subordinated deferrable interest debentures               |                                            |                        | 149,486   |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   | 149,486   |           |  |   |          |           |  |   | 149,486   |          
|Other liabilities                                                |                                            |                        |          |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   |          |           |  |   | 37,282    |           |  |   | 37,282    |          
|Shareholders equity                                             |                                            |                        |          |           |             |             |         |             |           |   |            |            |  |           |           |           |                |   |          |           |  |   | 580,414   |           |  |   | 580,414   |          
|                                                                 |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           | 
|                                                                 | Total liabilities and shareholders equity |                        | $         | 2,426,123 |             |             | $        | 775,945     |           |   | $           | 739,751    |  |           | $          | 1,074,860 |                |   | $         | 5,016,679 |  |   | $         | 2,488,924 |  |   | $         | 7,505,603 | 
|                                                                 |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           | 
|Period GAP                                                       |                                            | $                      | 1,014,513 |           |             | $           | (257,798 | )           |           | $ | 161,407     |            |  | $         | 824,850    |           |                | $ | 1,742,972 |           |  |   |           |           |  |   |           |          
|Cumulative GAP                                                   |                                            | $                      | 1,014,513 |           |             | $           | 756,715  |             |           | $ | 918,122     |            |  | $         | 1,742,972  |           |                | $ | 1,742,972 |           |  |   |           |           |  |   |           |          
|Period GAP to total assets                                       |                                            |                        | 13.52     | %         |             |             | (3.43    | )%          |           |   | 2.15        | %          |  |           | 10.99      | %         |                |   | 23.23     | %         |  |   |           |           |  |   |           |          
|Cumulative GAP to total assets                                   |                                            |                        | 13.52     | %         |             |             | 10.09    | %           |           |   | 12.24       | %          |  |           | 23.23      | %         |                |   | 23.23     | %         |  |   |           |           |  |   |           |          
|As of December 31, 2003                                          |                                            |                        |           |           |             |             |          |             |           |   |             |            |  |           |            |           |                |   |           |           |  |   |           |           |  |   |           |          
|Period GAP                                                       |                                            | $                      | 470,958   |           |             | $           | (108,540 | )           |           | $ | 489,436     |            |  | $         | 462,450    |           |                | $ | 1,314,304 |           |  |   |           |           |  |   |           |          
|Cumulative GAP                                                   |                                            | $                      | 470,958   |           |             | $           | 362,418  |             |           | $ | 851,854     |            |  | $         | 1,314,304  |           |                | $ | 1,314,304 |           |  |   |           |           |  |   |           |          
|Period GAP to total assets                                       |                                            |                        | 7.92      | %         |             |             | (1.83    | )%          |           |   | 8.23        | %          |  |           | 7.78       | %         |                |   | 22.10     | %         |  |   |           |           |  |   |           |          
|Cumulative GAP to total assets                                   |                                            |                        | 7.92      | %         |             |             | 6.09     | %           |           |   | 14.32       | %          |  |           | 22.10      | %         |                |   | 22.10     | %         |  |   |           |           |  |   |           |          



| |          
| | ---------
| | Liquidity



36



---



##### 

















|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      |  |  |       |  |  |  |            | 
|------------------- |  | ---------------------- | ---------- |  | -------- | --------- | ---------- | ----------- | ------------ | - | ---------- |  |  | ------------- | ------- | ------------ | ---- |  | ------------------------ | ---- |  |  | ----- |  |  |  | ---------- | 
|                    |  |                        |            |  |          | Trust     |            |             | Junior       |   |            |  |  | Interest      |         |              |     
|                    |  |                        |            |  |          | Preferred |            |             | Subordinated |   |            |  |  | Rate at       |         |              |     
|                    |  | Issuance               |            |  | Maturity |           |            | Securities  |              |   | Debt Owned |  |  |               |         | December 31, |      |  | Redemption               |     
|Description         |  | Date                   |            |  | Date     |           |            | Outstanding |              |   | by Trust   |  |  | Interest Rate |         |              | 2004 |  |                          | Date | 
|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      | 
|                    |  | (Dollars in thousands) |           
|Statutory Trust I   |  |                        | 10/7/2003  |  |          |           | 12/17/2033 |             |              | $ | 50,000     |  |  | $             | 51,547  |              |      |  | 3-month LIBOR plus 2.85% |      |  |  | 5.35% |  |  |  | 12/17/2008 | 
|Statutory Trust II  |  |                        | 9/24/2004  |  |          |           | 10/7/2034  |             |              |   | 35,000     |  |  |               | 36,083  |              |      |  | 3-month LIBOR plus 1.90% |      |  |  | 3.84% |  |  |  | 10/7/2009  | 
|Statutory Trust III |  |                        | 12/13/2004 |  |          |           | 12/15/2034 |             |              |   | 60,000     |  |  |               | 61,856  |              |      |  | 3-month LIBOR plus 1.78% |      |  |  | 4.24% |  |  |  | 12/15/2009 | 
|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      | 
|                    |  |                        |            |  |          |           |            |             |              | $ | 145,000    |  |  | $             | 149,486 |              |      |  |                          |      |  |  |       |  |  |  |            | 
|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      | 



37



---



##### 











|                                                   |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |         |  |  |   |           | 
|-------------------------------------------------- |  | ---------------------- | --------- | --------- | ----------- | - | ----------- | ---------- |  | - | ---------- |  |  | ----- | ------- |  |  | - | --------- | 
|                                                   |  |                        |           | After One |             |   | After Three |            |  |   |            | 
|                                                   |  | Within                 |           |           | but Within  |   |             | but Within |  |   | After      |  |  |      
|                                                   |  | One Year               |           |           | Three Years |   |             | Five Years |  |   | Five Years |  |  | Total |        
|                                                   |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |        
|                                                   |  | (Dollars in thousands) |          
|Time deposits                                      |  | $                      | 1,059,003 |           |             | $ | 221,929     |            |  | $ | 35,654     |  |  | $     | 9       |  |  | $ | 1,316,595 | 
|Securities sold under repurchase agreements        |  |                        | 273,344   |           |             |   |            |            |  |   |           |  |  |       |        |  |  |   | 273,344   | 
|Short-term borrowings                              |  |                        | 759,624   |           |             |   |            |            |  |   |           |  |  |       |        |  |  |   | 759,624   | 
|Long-term borrowings                               |  |                        | 2,487     |           |             |   | 1,094       |            |  |   | 1,676      |  |  |       | 5,153   |  |  |   | 10,410    | 
|Senior subordinated debenture                      |  |                        |          |           |             |   |            |            |  |   |           |  |  |       | 75,000  |  |  |   | 75,000    | 
|Junior subordinated deferrable interest debentures |  |                        |          |           |             |   |            |            |  |   |           |  |  |       | 149,486 |  |  |   | 149,486   | 
|Interest on time deposits and borrowings           |  |                        | 30,589    |           |             |   | 26,327      |            |  |   | 21,527     |  |  |       | 191,931 |  |  |   | 270,374   | 
|Operating lease obligations                        |  |                        | 4,983     |           |             |   | 8,303       |            |  |   | 10,444     |  |  |       | 33,004  |  |  |   | 56,734    | 
|                                                   |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |        
|Total contractual obligations                      |  | $                      | 2,130,030 |           |             | $ | 257,653     |            |  | $ | 69,301     |  |  | $     | 454,583 |  |  | $ | 2,911,567 | 
|                                                   |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |        





38



---



##### 





| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements



|                                                             |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |         |  |  |   |           | 
|------------------------------------------------------------ |  | ---------------------- | --------- | --------- | ----------- | - | ----------- | ---------- |  | - | ---------- |  |  | ----- | ------- |  |  | - | --------- | 
|                                                             |  |                        |           | After One |             |   | After Three |            |  |   |            | 
|                                                             |  | Within                 |           |           | but Within  |   |             | but Within |  |   | After      |  |  |      
|                                                             |  | One Year               |           |           | Three Years |   |             | Five Years |  |   | Five Years |  |  | Total |        
|                                                             |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |        
|                                                             |  | (Dollars in thousands) |          
|Unfunded loan commitments including unfunded lines of credit |  | $                      | 1,169,230 |           |             | $ | 893,319     |            |  | $ | 575,915    |  |  | $     | 81,782  |  |  | $ | 2,720,246 | 
|Standby letters of credit                                    |  |                        | 214,927   |           |             |   | 105,818     |            |  |   | 31,460     |  |  |       | 350     |  |  |   | 352,555   | 
|Commercial letters of credit                                 |  |                        | 19,496    |           |             |   |            |            |  |   |           |  |  |       |        |  |  |   | 19,496    | 
|Unfunded commitments to unconsolidated investees             |  |                        | 12,621    |           |             |   |            |            |  |   |           |  |  |       |        |  |  |   | 12,621    | 
|Commitments to sell mortgage loans                           |  |                        | 12,609    |           |             |   |            |            |  |   |           |  |  |       |        |  |  |   | 12,609    | 
|Guarantees on GNMA securities administered                   |  |                        |          |           |             |   |            |            |  |   |           |  |  |       | 82,073  |  |  |   | 82,073    | 
|                                                             |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |        
|Total financial instruments with off-balance sheet risk      |  | $                      | 1,428,883 |           |             | $ | 999,137     |            |  | $ | 607,375    |  |  | $     | 164,205 |  |  | $ | 3,199,600 | 
|                                                             |  |                        |           |           |             |   |             |            |  |   |            |  |  |       |        





| |                             
| | ----------------------------
| | Critical Accounting Policies







39



---



##### 









| |                  
| | -----------------
| | Capital Resources









40



---



##### 





|                        |                                              |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |       |  
|----------------------- | -------------------------------------------- | ---------------------- |  | --------------- | ----------- |  | ----------------- | ------------ | ----- | ---------------- | ----- | - | ------- | ------ |  |  | ------- | - |  | - | ------- |  |  |  | ----- | -
|                        |                                              |                        |  |                 |             |  |                   |              |       | Minimum To Be    |      
|                        |                                              |                        |  |                 |             |  |                   |              |       | Well Capitalized |      
|                        |                                              |                        |  |                 |             |  |                   | Under Prompt |      
|                        |                                              |                        |  | Minimum Capital |             |  | Corrective Action |             
|                        |                                              | Actual                 |  |                 | Requirement |  |                   | Provisions   |      
|                        |                                              |                        |  |                 |             |  |                   |              |      
|                        |                                              | Amount                 |  |                 | Ratio       |  |                   | Amount       |       |                  | Ratio |   |         | Amount |  |  | Ratio   |  
|                        |                                              |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |  
|                        |                                              | (Dollars in thousands) | 
|As of December 31, 2004 |                                              |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  | 
|                        | Total Capital (to Risk Weighted Assets):     |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |      
|                        |                                              | The Company            |  | $               | 683,804     |  |                   |              | 11.02 | %                |       | $ | 496,231 |        |  |  | 8.00    | % |  | $ | 620,289 |  |  |  | 10.00 | %
|                        |                                              | The Bank               |  |                 | 676,090     |  |                   |              | 10.91 |                  |       |   | 495,559 |        |  |  | 8.00    |   |  |   | 619,449 |  |  |  | 10.00 |  
|                        | Tier 1 Capital (to Risk Weighted Assets):    |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 559,396     |  |                   |              | 9.02  |                  |       |   | 248,115 |        |  |  | 4.00    |   |  |   | 372,173 |  |  |  | 6.00  |  
|                        |                                              | The Bank               |  |                 | 626,074     |  |                   |              | 10.11 |                  |       |   | 247,780 |        |  |  | 4.00    |   |  |   | 371,670 |  |  |  | 6.00  |  
|                        | Tier 1 Capital (to Adjusted Average Assets): |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 559,396     |  |                   |              | 7.81  |                  |       |   | 286,337 |        |  |  | 4.00 (1 | ) |  |   | 357,921 |  |  |  | 5.00  |  
|                        |                                              | The Bank               |  |                 | 626,074     |  |                   |              | 8.77  |                  |       |   | 285,522 |        |  |  | 4.00 (1 | ) |  |   | 356,903 |  |  |  | 5.00  |  
|As of December 31, 2003 |                                              |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  | 
|                        | Total Capital (to Risk Weighted Assets):     |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |      
|                        |                                              | The Company            |  | $               | 558,858     |  |                   |              | 11.90 | %                |       | $ | 375,630 |        |  |  | 8.00    | % |  | $ | 469,537 |  |  |  | 10.00 | %
|                        |                                              | The Bank               |  |                 | 504,960     |  |                   |              | 10.77 |                  |       |   | 375,132 |        |  |  | 8.00    |   |  |   | 468,915 |  |  |  | 10.00 |  
|                        | Tier 1 Capital (to Risk Weighted Assets):    |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 515,850     |  |                   |              | 10.99 |                  |       |   | 187,815 |        |  |  | 4.00    |   |  |   | 281,722 |  |  |  | 6.00  |  
|                        |                                              | The Bank               |  |                 | 461,438     |  |                   |              | 9.84  |                  |       |   | 187,566 |        |  |  | 4.00    |   |  |   | 281,349 |  |  |  | 6.00  |  
|                        | Tier 1 Capital (to Adjusted Average Assets): |                        |  |                 |             |  |                   |              |       |                  |       |   |         |        |  |  |         |   |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 515,850     |  |                   |              | 9.15  |                  |       |   | 225,448 |        |  |  | 4.00 (1 | ) |  |   | 281,810 |  |  |  | 5.00  |  
|                        |                                              | The Bank               |  |                 | 461,438     |  |                   |              | 8.20  |                  |       |   | 225,223 |        |  |  | 4.00 (1 | ) |  |   | 281,529 |  |  |  | 5.00  |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Tier 1 leverage ratio consists of Tier 1 capital
    divided by quarterly average total assets, excluding goodwill,
    core deposits intangibles, and certain other items. The minimum
    leverage ratio guideline is 3% for institutions with well
    diversified risk, including no undue interest rate exposure,
    excellent control systems, high liquidity, good earnings, well
    managed on- and off-balance sheet activities that are generally
    considered to be strong banking organizations, that are rated
    composite 1 under applicable federal guidelines, and that are
    not experiencing or anticipating significant growth.





41



---



##### 









| |                                                  
| | -------------------------------------------------
| | Recent Accounting Pronouncements and Developments

Accounting for Certain Loans or Debt
Securities Acquired in a Transfer


Application of Accounting Principles to Loan Commitments


Share-Based Payment, Stock-Based Compensation


The Meaning
of Other-Than-Temporary Impairment and Its Application to
Certain Investments.


42



---



##### 



Accounting for Certain
Investments in Debt and Equity Securities, Accounting for
Noncurrent Marketable Equity Securities.




|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk











43



---



##### 





|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data



Quarterly Financial Data (Unaudited)






|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |        |  |   |        |        |  |   |        |        | 
|--------------------------------------------------------------------------------- | --------------------------------------------------- | ------- | ------ | ------ | ------- | ------------------------------------- | ------ | ------- |  | - | ------- | ------ |  | ------- | ------ | ------ | ------- | - | ------ | ------- |  | - | ------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                  |                                                     | 2004    |        |        | 2003    |                                      
|                                                                                  |                                                     |         |        |        |         |                                      
|                                                                                  |                                                     | Fourth  |        |        | Third   |                                       |        | Second  |  |   | First   |        |  | Fourth  |        |        | Third   |   |        | Second  |  |   | First   |       
|                                                                                  |                                                     | Quarter |        |        | Quarter |                                       |        | Quarter |  |   | Quarter |        |  | Quarter |        |        | Quarter |   |        | Quarter |  |   | Quarter |       
|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|                                                                                  |                                                     |         |        |        |         | (In thousands, except per share data) |        |         |  |   |        
|Interest income                                                                   |                                                     | $       | 82,727 |        |         | $                                     | 71,617 |         |  | $ | 65,285  |        |  | $       | 63,600 |        |         | $ | 61,207 |         |  | $ | 60,298  |        |  | $ | 58,079 |        |  | $ | 56,660 |       
|Interest expense                                                                  |                                                     |         | 19,989 |        |         |                                       | 14,618 |         |  |   | 11,068  |        |  |         | 11,002 |        |         |   | 10,697 |         |  |   | 11,211  |        |  |   | 11,585 |        |  |   | 12,232 |       
|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|                                                                                  | Net interest income                                 |         |        | 62,738 |         |                                       |        | 56,999  |  |   |         | 54,217 |  |         |        | 52,598 |         |   |        | 50,510  |  |   |         | 49,087 |  |   |        | 46,494 |  |   |        | 44,428 | 
|Provision for loan losses                                                         |                                                     |         | 2,502  |        |         |                                       | 2,878  |         |  |   | 2,923   |        |  |         | 1,909  |        |         |   | 2,935  |         |  |   | 2,979   |        |  |   | 2,961  |        |  |   | 2,975  |       
|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|                                                                                  | Net interest income after provision for loan losses |         |        | 60,236 |         |                                       |        | 54,121  |  |   |         | 51,294 |  |         |        | 50,689 |         |   |        | 47,575  |  |   |         | 46,108 |  |   |        | 43,533 |  |   |        | 41,453 | 
|Noninterest income                                                                |                                                     |         | 26,779 |        |         |                                       | 25,324 |         |  |   | 22,514  |        |  |         | 21,888 |        |         |   | 22,509 |         |  |   | 23,207  |        |  |   | 19,026 |        |  |   | 18,467 |       
|Noninterest expense                                                               |                                                     |         | 63,998 |        |         |                                       | 52,283 |         |  |   | 50,229  |        |  |         | 50,101 |        |         |   | 46,702 |         |  |   | 49,476  |        |  |   | 39,467 |        |  |   | 38,097 |       
|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|                                                                                  | Income before income taxes                          |         |        | 23,017 |         |                                       |        | 27,162  |  |   |         | 23,579 |  |         |        | 22,476 |         |   |        | 23,382  |  |   |         | 19,839 |  |   |        | 23,092 |  |   |        | 21,823 | 
|Provision for income taxes                                                        |                                                     |         | 5,648  |        |         |                                       | 7,496  |         |  |   | 7,358   |        |  |         | 7,189  |        |         |   | 7,071  |         |  |   | 6,459   |        |  |   | 7,129  |        |  |   | 6,748  |       
|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|Net income                                                                        |                                                     | $       | 17,369 |        |         | $                                     | 19,666 |         |  | $ | 16,221  |        |  | $       | 15,287 |        |         | $ | 16,311 |         |  | $ | 13,380  |        |  | $ | 15,963 |        |  | $ | 15,075 |       
|                                                                                  |                                                     |         |        |        |         |                                       |        |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|Basic earnings per common share                                                   |                                                     | $       | 0.25   |        |         | $                                     | 0.28   |         |  | $ | 0.24    |        |  | $       | 0.22   |        |         | $ | 0.24   |         |  | $ | 0.20    |        |  | $ | 0.23   |        |  | $ | 0.22   |       
|Diluted earnings per common share                                                 |                                                     | $       | 0.24   |        |         | $                                     | 0.28   |         |  | $ | 0.23    |        |  | $       | 0.22   |        |         | $ | 0.23   |         |  | $ | 0.19    |        |  | $ | 0.23   |        |  | $ | 0.22   |       
|Dividends per common share                                                        |                                                     | $       | 0.03   |        |         | $                                     | 0.03   |         |  | $ | 0.03    |        |  | $       | 0.03   |        |         | $ | 0.02   |         |  | $ | 0.03    |        |  | $ |       |        |  | $ |       |       
|Weighted average common shares outstanding including common
    share equivalents |                                                     |         | 71,906 |        |         |                                       | 70,830 |         |  |   | 70,528  |        |  |         | 70,282 |        |         |   | 70,190 |         |  |   | 70,008  |        |  |   | 69,456 |        |  |   | 69,280 |       



|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure





|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures







44



---



##### 



Managements Report on Internal Control Over Financial
Reporting








PART III




|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant





|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation





|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



45



---



##### 



Equity Compensation Plan Information




|                                                           |       |                      |           |           |                      |     |                      |                           |  |  |           |           | 
|---------------------------------------------------------- | ----- | -------------------- | --------- | --------- | -------------------- | --- | -------------------- | ------------------------- |  |  | --------- | --------- | 
|                                                           |       |                      |           |           |                      | (c) |                     
|                                                           |       | (a)                  |           |           |                      |     | Number of Securities |                          
|                                                           |       | Number of Securities |           |           | (b)                  |     |                      | Remaining Available for   | 
|                                                           |       | to be Issued         |           |           | Weighted-Average     |     |                      | Future Issuance Under     | 
|                                                           |       | upon Exercise of     |           |           | Exercise Price of    |     |                      | Equity Compensation Plans | 
|                                                           |       | Outstanding Options, |           |           | Outstanding Options, |     |                      | (Excluding Securities     | 
|Plan Category                                              |       | Warrants and Rights  |           |           | Warrants and Rights  |     |                      | Reflected in Column(a))   | 
|                                                           |       |                      |           |           |                      |     |                      |                           | 
|Equity compensation plans approved by security holders     |       |                      | 5,801,784 |           |                      | $   | 12.22                |                           |  |  | 3,670,458 |          
|Equity compensation plans not approved by security holders |       |                      |          |           |                      |     |                     |                           |  |  |          |          
|                                                           |       |                      |           |           |                      |     |                      |                           | 
|                                                           | Total |                      |           | 5,801,784 |                      |     | $                    | 12.22                     |  |  |           | 3,670,458 | 
|                                                           |       |                      |           |           |                      |     |                      |                           | 



|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions



PART IV




|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services





|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

Financial Statements and Financial Statement
Schedules






46



---



##### 



EXHIBIT INDEX


Exhibits(1)


| |        |  |  |   |  |                                                                                                                                                                                                                                                                                         
| | ------ |  |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1    |  |  |  |  | Articles of Incorporation of the Company, restated as of
    May 1, 2001 (incorporated by reference to Exhibit 4.1
    to the Companys Form S-8 Registration Statement
    No. 333-60190)                                                                                              
| | 3.2    |  |  |  |  | Bylaws of the Company (Restated as of December 31, 1996)                                                                                                                                                                                                                                
| | 4.1    |  |  |  |  | Specimen Common Stock certificate                                                                                                                                                                                                                                                       
| | 4.2    |  |  |  |  | Indenture, dated as of September 24, 2004, between the
    Company, as Issuer, and Wells Fargo Bank National Association,
    as Trustee (incorporated by reference to Exhibit 4.2 to the
    Companys Current Report on Form 8-K filed
    September 28, 2004)                        
| | 10.1  |  |  |  |  | 1989 Stock Option Plan, amended and restated as of May 29,
    1998 (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended March 31, 2000)                                                                    
| | 10.2  |  |  |  |  | 1993 Stock Option Plan, amended and restated as of May 29,
    1998 (incorporated by reference to Exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended March 31, 2000)                                                                    
| | 10.3  |  |  |  |  | Form of Stock Option Agreement under 1989 Stock Option Plan and
    1993 Stock Option Plan                                                                                                                                                                                              
| | 10.4  |  |  |  |  | 1996 Stock Option Plan, as amended January 24, 2000
    (incorporated by reference to Exhibit 10.4 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 1999)                                                                                            
| | 10.5  |  |  |  |  | Form of Incentive Stock Option Agreement under 1996 Stock Option
    Plan (incorporated by reference to Exhibit 10.5 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2003)                                                                          
| | 10.6  |  |  |  |  | Form of Non-qualified Stock Option Agreement under 1996 Stock
    Option Plan (incorporated by reference to Exhibit 10.6 to
    the Companys Annual Report on Form 10-K for the year
    ended December 31, 2003)                                                                      
| | 10.7  |  |  |  |  | Form of Stock Option Agreement for Directors under 1996 Stock
    Option Plan (incorporated by reference to Exhibit 10.8 to
    the Companys Form S-1 Registration Statement
    No. 333-16509)                                                                                        
| | 10.8  |  |  |  |  | Form of Change in Control Agreement between the Company and each
    of Joseph H. Argue III, David C. Farries, and
    Steve D. Stephens (incorporated by reference to
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended June 30, 2000)
| | 10.9  |  |  |  |  | Form of Change in Control Agreement between the Company and Dale
    Andreas, Kenneth Olan, and Walter L. Ward, Jr.
    (incorporated by reference to Exhibit 10.10 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2002)                           
| | 10.10 |  |  |  |  | Employment Agreement, amended and restated as of
    October 19, 2004, between the Company and Walter E.
    Johnson (incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    October 22, 2004)                                             
| | 10.11 |  |  |  |  | Restricted Stock Plan (incorporated by reference to
    Appendix B to the Companys Proxy Statement dated
    March 16, 2001 for its 2001 Annual Meeting of Shareholders)                                                                                                               
| | 10.12 |  |  |  |  | Form of Restricted Stock Agreement under the Restricted Stock
    Plan (incorporated by reference to Exhibit 4.6 to the
    Companys Form S-8 Registration Statement
    No. 333-60190)                                                                                                
| | 10.13 |  |  |  |  | Non-Employee Directors Deferred Fee Plan (incorporated by
    reference to Exhibit 4.3 to the Companys
    Form S-8 Registration Statement No. 333-74452)                                                                                                                              
| | 10.14 |  |  |  |  | Form of Deferral Election Form under Non-Employee Directors
    Deferred Fee Plan (incorporated by reference to Exhibit 4.4
    to the Companys Form S-8 Registration Statement
    No. 333-74452)                                                                                     
| | 10.15  |  |  |  |  | Purchase and Sale Agreement between TCP Renaissance Partners,
    L.P. and Southwest Bank of Texas, N.A., dated May 24, 2002
    (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended September 30, 2002)   
| | 10.16  |  |  |  |  | Subordinated Debenture Purchase Agreement, dated as of
    September 22, 2004, between the Company and Wisconsin
    Capital Corporation (incorporated by reference to
    Exhibit 4.1 to the Companys Current Report on
    Form 8-K filed September 28, 2004)                        
| | 10.17  |  |  |  |  | Southwest Bancorporation of Texas, Inc. Amended and Restated
    Non-Employee Directors Deferred Fee Plan (incorporated by
    reference to Appendix A to the Companys Proxy
    Statement filed March 25, 2004)                                                                       

47



---



##### 



| |        |  |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------ |  |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.18  |  |  |  |  | Southwest Bancorporation of Texas, Inc. 2004 Omnibus Incentive
    Plan, dated May 5, 2004 (incorporated by reference to
    Appendix B to the Companys Proxy Statement, filed
    with the Commission on March 25, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 10.19 |  |  |  |  | 1996 Stock Option Plan, Amended and Restated as of June 4,
    2002 (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended June 30, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.20 |  |  |  |  | Change in Control Agreement between the Company and Paul B.
    Murphy, Jr., Amended and Restated as of June 4, 2002
    (incorporated by reference to Exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended June 30, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.21 |  |  |  |  | Form of Change in Control Agreement [Three Year] between the
    Company and Scott J. McLean, Terry Kelly, and
    Randall E. Meyer (incorporated by reference to
    Exhibit 10.21 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 10.22 |  |  |  |  | Form of Change in Control Agreement [Two Year] between the
    Company and Paul A. Port (incorporated by reference to
    Exhibit 10.22 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 10.23 |  |  |  |  | First Amendment to Change In Control Agreement [Two Year], dated
    as of June 4, 2002 between the Company and David C.
    Farries, Joseph H. Argue III, Steve D. Stephens,
    and Walter L. Ward, Jr. (incorporated by reference to
    Exhibit 10.20 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 10.24 |  |  |  |  | Form of Change in Control Agreement between the Company and John
    Drew and Marylyn Manis-Hassanein (incorporated by reference to
    Exhibit 10.9 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 10.25  |  |  |  |  | Form of Indemnification Agreements between the Company and
    Willie J. Alexander, Carin M. Barth, John B.
    Brock III, Timothy R. Brown, Kirbyjon H.
    Caldwell, Ernest H. Cockrell, J. David Heaney,
    Paul W. Hobby, John W. Johnson, Walter E.
    Johnson, Barry M. Lewis, Fred R. Lummis, Scott J.
    McLean, James G. Moses, Paul B. Murphy, Jr.,
    Andres Palandjoglou, Wilhelmina E. Robertson,
    Thomas F. Soriero, Sr., Stanley D. Stearns,
    Manuel Urquidi, Mark A. Wallace, Dale A. Andreas,
    Joseph H. Argue III, E. Reginald Brewer,
    Frank D. Cox, John O. Drew, Michael R. Duckworth,
    David C. Farries, Joseph Goyne, Debra J. Innes, Terry
    Kelley, Conrad W. Magouirk, Marylyn Manis-Hassanein, George
    Marshall, Randall E. Meyer, Kenneth W. Olan,
    P. Allan Port, Steve D. Stephens, Barbara S.
    Vilutis and W. Lane Ward (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed January 6, 2005)
| | 10.26 |  |  |  |  | Form of Change of Control Agreement [One Year] between the
    Company and Laurence L. Lehman III (incorporated by
    reference to Exhibit 10.23 to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | **21.1 |  |  |  |  | List of subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | **23.1 |  |  |  |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | **31.1 |  |  |  |  | Certification of the Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | **31.2 |  |  |  |  | Certification of the Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | **32.1 |  |  |  |  | Certification of the Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | **32.2 |  |  |  |  | Certification of the Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                






|    |                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | All Exhibits except for those filed herewith and as otherwise
    indicated are incorporated herein by reference to the Exhibits
    bearing the same Exhibit numbers in the Companys
    Form S-1 Registration Statement No. 333-16509.  
|   
|**  | Filed herewith.                                                                                                                                                                                                                            
|   
|   | Management contract or compensatory plan or arrangement.                                                                                                                                                                                   
|   
|(1) | The Company has other long-term debt agreements that meet the
    exclusion set forth in Section 601(b)(4)(iii)(A) of
    Regulation S-K. The Company hereby agrees to furnish a copy
    of such agreement to the Commission upon request.

48



---



##### 



SIGNATURES






| |                                            
| | -------------------------------------------
| | Southwest Bancorporation
    of Texas, Inc.



| |     |                        
| | --- | -----------------------
| | By: | /s/ Paul B. Murphy, Jr.

| |                        
| | -----------------------
| |                        
| | Paul B. Murphy, Jr.    
| | Chief Executive Officer





|                                                         |  |                                                                                            |  |                |  | 
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                                |  | Title                                                                                      |  | Date          
|                                                         |  |                                                                                            |  |               
|                                                        
|/s/ Walter E. JohnsonWalter
    E. Johnson               |  | Chairman of the Board and Director                                                         |  | March 11, 2005
|                                                        
|/s/ Paul B. Murphy, Jr.Paul
    B. Murphy, Jr.           |  | Chief Executive Officer
    (Principal Executive Officer)
    and Director                 |  | March 11, 2005
|                                                        
|/s/ Randall E. MeyerRandall
    E. Meyer                 |  | Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer) |  | March 11, 2005
|                                                        
|/s/ Scott J. McLeanScott
    J. McLean                   |  | President                                                                                  |  | March 11, 2005
|                                                        
|/s/ Laurence L.
    Lehman IIILaurence
    L. Lehman III |  | Senior Vice President and Controller (Principal Accounting
    Officer)                    |  | March 11, 2005
|                                                        
|/s/ Carin M. BarthCarin
    M. Barth                     |  | Director                                                                                   |  | March 11, 2005
|                                                        
|/s/ John B.
    Brock IIIJohn
    B. Brock III           |  | Director                                                                                   |  | March 11, 2005
|                                                        
|/s/ Kirbyjon H.
    CaldwellKirbyjon
    H. Caldwell     |  | Director                                                                                   |  | March 11, 2005
|                                                        
|/s/ Ernest H. CockrellErnest
    H. Cockrell             |  | Director                                                                                   |  | March 11, 2005

49



---



##### 



|                                                           |  |          |  |                |  | 
|---------------------------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                                                  |  | Title    |  | Date          
|                                                           |  |          |  |               
|                                                          
|/s/ J. David HeaneyJ.
    David Heaney                     |  | Director |  | March 11, 2005
|                                                          
|/s/ Paul W. HobbyPaul
    W. Hobby                         |  | Director |  | March 11, 2005
|                                                          
|/s/ John W. JohnsonJohn
    W. Johnson                     |  | Director |  | March 11, 2005
|                                                          
|/s/ Barry M. LewisBarry
    M. Lewis                       |  | Director |  | March 11, 2005
|                                                          
|/s/ Fred R. LummisFred
    R. Lummis                       |  | Director |  | March 11, 2005
|                                                          
|/s/ Andres PalandjoglouAndres
    Palandjoglou             |  | Director |  | March 11, 2005
|                                                          
|/s/ Wilhelmina E.
    RobertsonWilhelmina
    E. Robertson |  | Director |  | March 11, 2005
|                                                          
|/s/ Thomas F. Soriero,
    Sr.Thomas
    F. Soriero, Sr.   |  | Director |  | March 11, 2005
|                                                          
|/s/ Stanley D. Stearns,
    Jr.Stanley
    D. Stearns, Jr. |  | Director |  | March 11, 2005

50



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                  |                                                                                                                    |      |  |    | 
|--------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ---- |  | -- | 
|                                  |                                                                                                                    | Page | 
|                                  |                                                                                                                    |      | 
|Consolidated Financial Statements |                                                                                                                    |      |  |   
|                                  | Report of Independent Registered Public Accounting Firm                                                            |      |  | 52 | 
|                                  | Consolidated Balance Sheet as of December 31, 2004 and 2003                                                        |      |  | 54 | 
|                                  | Consolidated Statement of Income for the Years Ended
    December 31, 2004, 2003 and 2002                          |      |  | 55 | 
|                                  | Consolidated Statement of Changes in Shareholders Equity
    for the Years Ended December 31, 2004, 2003 and 2002 |      |  | 56 | 
|                                  | Consolidated Statement of Cash Flows for the Years Ended
    December 31,
    2004, 2003 and 2002                  |      |  | 57 | 
|                                  | Notes to Consolidated Financial Statements                                                                         |      |  | 58 | 

51



---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Consolidated financial statements




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework




52



---



##### 













53



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEET


|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |   |           |           |           | 
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                                                           |                                                                                                                                                                                                             | December 31,                               |          
|                                                                                           |                                                                                                                                                                                                             |                                            |          
|                                                                                           |                                                                                                                                                                                                             | 2004                                       |           |           | 2003      |  
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | (Dollars in thousands,                     |          
|                                                                                           |                                                                                                                                                                                                             | except per share amounts)                  |          
|ASSETS                                                                                    
|Cash and due from banks                                                                    |                                                                                                                                                                                                             | $                                          | 327,558   |           |           | $ | 390,890   |          
|Federal funds sold and other cash equivalents                                              |                                                                                                                                                                                                             |                                            | 14,417    |           |           |   | 94,908    |          
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | Total cash and cash equivalents            |           |           | 341,975   |   |           |           | 485,798   | 
|Securities  available for sale (including $319,599
    and $254,235 pledged to creditors) |                                                                                                                                                                                                             |                                            | 1,927,204 |           |           |   | 1,549,398 |          
|Securities held to maturity (fair value of $58,569 and $0)                                 |                                                                                                                                                                                                             |                                            | 58,033    |           |           |   |          |          
|Loans held for sale                                                                        |                                                                                                                                                                                                             |                                            | 107,404   |           |           |   | 96,899    |          
|Loans held for investment, net of allowance for loan losses of
    $49,408 and $41,611     |                                                                                                                                                                                                             |                                            | 4,490,170 |           |           |   | 3,450,062 |          
|Premises and equipment, net                                                                |                                                                                                                                                                                                             |                                            | 164,443   |           |           |   | 117,951   |          
|Accrued interest receivable                                                                |                                                                                                                                                                                                             |                                            | 30,200    |           |           |   | 21,630    |          
|Goodwill                                                                                   |                                                                                                                                                                                                             |                                            | 149,846   |           |           |   | 25,647    |          
|Core deposit intangibles                                                                   |                                                                                                                                                                                                             |                                            | 27,246    |           |           |   | 6,185     |          
|Other assets                                                                               |                                                                                                                                                                                                             |                                            | 209,082   |           |           |   | 193,563   |          
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | Total assets                               |           | $         | 7,505,603 |   |           | $         | 5,947,133 | 
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                      
|Deposits:                                                                                  |                                                                                                                                                                                                             |                                            |           |           |           |   |           |          
|                                                                                           | Demand  noninterest-bearing                                                                                                                                                                                |                                            | $         | 1,871,228 |           |   | $         | 1,513,038 |          
|                                                                                           | Demand  interest-bearing                                                                                                                                                                                   |                                            |           | 135,003   |           |   |           | 43,452    |          
|                                                                                           | Money market accounts                                                                                                                                                                                       |                                            |           | 2,091,624 |           |   |           | 1,709,755 |          
|                                                                                           | Savings                                                                                                                                                                                                     |                                            |           | 205,593   |           |   |           | 131,059   |          
|                                                                                           | Time, $100 and over                                                                                                                                                                                         |                                            |           | 944,283   |           |   |           | 642,590   |          
|                                                                                           | Other time                                                                                                                                                                                                  |                                            |           | 372,312   |           |   |           | 363,345   |          
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | Total deposits                             |           |           | 5,620,043 |   |           |           | 4,403,239 | 
|Securities sold under repurchase agreements                                                |                                                                                                                                                                                                             |                                            | 273,344   |           |           |   | 285,571   |          
|Other borrowings                                                                           |                                                                                                                                                                                                             |                                            | 770,034   |           |           |   | 679,812   |          
|Senior subordinated debenture                                                              |                                                                                                                                                                                                             |                                            | 75,000    |           |           |   |          |          
|Junior subordinated deferrable interest debentures                                         |                                                                                                                                                                                                             |                                            | 149,486   |           |           |   | 51,547    |          
|Accrued interest payable                                                                   |                                                                                                                                                                                                             |                                            | 2,902     |           |           |   | 1,822     |          
|Other liabilities                                                                          |                                                                                                                                                                                                             |                                            | 34,380    |           |           |   | 25,821    |          
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | Total liabilities                          |           |           | 6,925,189 |   |           |           | 5,447,812 | 
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|Commitments and contingencies                                                              |                                                                                                                                                                                                             |                                            |           |           |           |   |           |          
|Shareholders equity:                                                                      |                                                                                                                                                                                                             |                                            |           |           |           |   |           |          
|                                                                                           | Preferred stock  $0.01 par value,
    1,000,000 shares authorized; 0 issued and outstanding at
    December 31, 2004 and 2003                                                                              |                                            |           |          |           |   |           |          |          
|                                                                                           | Common stock  $1 par value,
    150,000,000 shares authorized 70,198,456 issued and
    70,095,949 outstanding at December 31, 2004; 68,458,286
    issued and 68,427,798 outstanding at December 31, 2003 |                                            |           | 70,198    |           |   |           | 68,458    |          
|                                                                                           | Additional paid-in capital                                                                                                                                                                                  |                                            |           | 92,330    |           |   |           | 65,380    |          
|                                                                                           | Retained earnings                                                                                                                                                                                           |                                            |           | 428,311   |           |   |           | 368,069   |          
|                                                                                           | Deferred compensation                                                                                                                                                                                       |                                            |           | (5,469    | )         |   |           | (4,215    | )        
|                                                                                           | Accumulated other comprehensive income (loss)                                                                                                                                                               |                                            |           | (3,221    | )         |   |           | 2,050     |          
|                                                                                           | Treasury stock, at cost  102,507 shares and
    30,488 shares, respectively                                                                                                                                |                                            |           | (1,735    | )         |   |           | (421      | )        
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | Total shareholders equity                 |           |           | 580,414   |   |           |           | 499,321   | 
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  
|                                                                                           |                                                                                                                                                                                                             | Total liabilities and shareholders equity |           | $         | 7,505,603 |   |           | $         | 5,947,133 | 
|                                                                                           |                                                                                                                                                                                                             |                                            |           |           |           |  



54



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENT OF INCOME


|                           |                                              |                           |                                                     |         |        |         |        |         |        |         |        |         |        |         | 
|-------------------------- | -------------------------------------------- | ------------------------- | --------------------------------------------------- | ------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | 
|                           |                                              | Year Ended December 31,   |                                                    
|                           |                                              |                           |                                                    
|                           |                                              | 2004                      |                                                     |         | 2003   |         |        | 2002    |       
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              | (Dollars in thousands,    |                                                    
|                           |                                              | except per share amounts) |                                                    
|Interest income:           |                                              |                           |                                                     |         |        |         |        |         |        |         |        |        
|                           | Loans                                        |                           | $                                                   | 217,140 |        |         | $      | 185,666 |        |         | $      | 177,837 |       
|                           | Securities:                                  |                           |                                                     |         |        |         |        |         |        |         |        |         |       
|                           |                                              | Taxable                   |                                                     |         | 56,046 |         |        |         | 43,959 |         |        |         | 52,533 |        
|                           |                                              | Tax-exempt                |                                                     |         | 9,317  |         |        |         | 5,651  |         |        |         | 4,426  |        
|                           | Federal funds sold and other                 |                           |                                                     | 726     |        |         |        | 968     |        |         |        | 798     |       
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Total interest income                               |         |        | 283,229 |        |         |        | 236,244 |        |         |        | 235,594 | 
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|Interest expense:          |                                              |                           |                                                     |         |        |         |        |         |        |         |        |        
|                           | Deposits                                     |                           |                                                     | 39,830  |        |         |        | 36,971  |        |         |        | 48,962  |       
|                           | Borrowings                                   |                           |                                                     | 16,847  |        |         |        | 8,754   |        |         |        | 10,817  |       
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Total interest expense                              |         |        | 56,677  |        |         |        | 45,725  |        |         |        | 59,779  | 
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Net interest income                                 |         |        | 226,552 |        |         |        | 190,519 |        |         |        | 175,815 | 
|Provision for loan losses  |                                              |                           | 10,212                                              |         |        |         | 11,850 |         |        |         | 11,037 |        
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Net interest income after provision for loan losses |         |        | 216,340 |        |         |        | 178,669 |        |         |        | 164,778 | 
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|Noninterest income:        |                                              |                           |                                                     |         |        |         |        |         |        |         |        |        
|                           | Service charges on deposit accounts          |                           |                                                     | 46,345  |        |         |        | 40,065  |        |         |        | 33,936  |       
|                           | Investment services                          |                           |                                                     | 12,682  |        |         |        | 9,712   |        |         |        | 9,302   |       
|                           | Other fee income                             |                           |                                                     | 22,722  |        |         |        | 18,326  |        |         |        | 11,343  |       
|                           | Bank-owned life insurance income             |                           |                                                     | 7,047   |        |         |        | 6,009   |        |         |        | 4,860   |       
|                           | Other operating income                       |                           |                                                     | 6,743   |        |         |        | 6,351   |        |         |        | 4,090   |       
|                           | Gain on sale of loans, net                   |                           |                                                     | 978     |        |         |        | 1,522   |        |         |        | 1,868   |       
|                           | Gain (loss) on sale of securities, net       |                           |                                                     | (12     | )      |         |        | 1,224   |        |         |        | 1,737   |       
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Total noninterest income                            |         |        | 96,505  |        |         |        | 83,209  |        |         |        | 67,136  | 
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|Noninterest expenses:      |                                              |                           |                                                     |         |        |         |        |         |        |         |        |        
|                           | Salaries and employee benefits               |                           |                                                     | 117,869 |        |         |        | 97,176  |        |         |        | 81,486  |       
|                           | Occupancy expense                            |                           |                                                     | 37,657  |        |         |        | 29,690  |        |         |        | 24,066  |       
|                           | Professional services                        |                           |                                                     | 12,514  |        |         |        | 9,640   |        |         |        | 8,626   |       
|                           | Core deposit intangible amortization expense |                           |                                                     | 4,947   |        |         |        | 1,368   |        |         |        |        |       
|                           | Other operating expenses                     |                           |                                                     | 43,624  |        |         |        | 35,868  |        |         |        | 31,537  |       
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Total noninterest expenses                          |         |        | 216,611 |        |         |        | 173,742 |        |         |        | 145,715 | 
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              |                           | Income before income taxes                          |         |        | 96,234  |        |         |        | 88,136  |        |         |        | 86,199  | 
|Provision for income taxes |                                              |                           | 27,691                                              |         |        |         | 27,407 |         |        |         | 26,993 |        
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           | Net income                                   |                           | $                                                   | 68,543  |        |         | $      | 60,729  |        |         | $      | 59,206  |       
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|Earnings per common share: |                                              |                           |                                                     |         |        |         |        |         |        |         |        |        
|                           |                                              | Basic                     |                                                     | $       | 0.99   |         |        | $       | 0.89   |         |        | $       | 0.88   |        
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|                           |                                              | Diluted                   |                                                     | $       | 0.97   |         |        | $       | 0.87   |         |        | $       | 0.86   |        
|                           |                                              |                           |                                                     |         |        |         |        |         |       
|Dividends per common share |                                              | $                         | 0.12                                                |         |        | $       | 0.05   |         |        | $       |       |        
|                           |                                              |                           |                                                     |         |        |         |        |         |       



55



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS
EQUITY


|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        |        |  
|-------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------- | ---------- | --------- | ---------- | - | ------ | -------- |  | ----- | -------- | ------------- |  | ------------ | ------- | ------ | -------- | - | ------ | ------------- | - | - | ------ | - | ------ | - | ------ | ------ | - | - | ------- | ------ | ------ | -
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          | Accumulated   |  |              |         |        |         
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  | Other |          |               |  |              |        
|                           |                                                                                | Common Stock                                                                                                               |            |           | Additional |   |        |          |  |       |          | Comprehensive |  |              |         |        | Total    |  
|                           |                                                                                |                                                                                                                            |            |           | Paid-In    |   |        | Retained |  |       | Deferred |               |  | Income       |         |        | Treasury |   |        | Shareholders |  
|                           |                                                                                | Shares                                                                                                                     |            |           | Dollars    |   |        | Capital  |  |       | Earnings |               |  | Compensation |         |        | (Loss)   |   |        | Stock         |   |   | Equity |  
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|                           |                                                                                | (Dollars in thousands, except per share amounts)                                                                           |           
|BALANCE, DECEMBER 31, 2001 |                                                                                |                                                                                                                            | 65,848,196 |           |            | $ | 65,848 |          |  | $     | 41,828   |               |  | $            | 251,552 |        |          | $ | (1,364 | )             |   | $ | 3,870  |   |        | $ |       |        |   | $ | 361,734 |       
|                           | Exercise of stock options                                                      |                                                                                                                            |            | 1,539,406 |            |   |        | 1,539    |  |       |          | 12,803        |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         | 14,342 |       
|                           | Issuance of restricted common stock, net of shares forfeited
    into Treasury |                                                                                                                            |            | 324,528   |            |   |        | 325      |  |       |          | 3,389         |  |              |         |        |          |   |        | (3,714        | ) |   |        |   |        |   |        |        |   |   |         |       |       
|                           | Deferred compensation amortization                                             |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        | 853           |   |   |        |   |        |   |        |        |   |   |         | 853    |       
|                           | Comprehensive income:                                                          |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        |       
|                           |                                                                                | Net income for the year ended December 31, 2002                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        | 59,206   |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        | 59,206 |  
|                           |                                                                                | Net change in unrealized appreciation on securities available
    for sale, net of deferred taxes of ($6,195)              |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | 11,427 |   |        |        |   |   |         |        | 11,427 |  
|                           |                                                                                | Reclassification adjustment for gains included in net income,
    net of deferred taxes of $696                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (1,264 | ) |        |        |   |   |         |        | (1,264 | )
|                           |                                                                                | Minimum pension liability, net of deferred taxes of $418                                                                   |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (775   | ) |        |        |   |   |         |        | (775   | )
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|                           |                                                                                | Total comprehensive income                                                                                                 |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        | 68,594 |  
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|BALANCE, DECEMBER 31, 2002 |                                                                                |                                                                                                                            | 67,712,130 |           |            |   | 67,712 |          |  |       | 58,020   |               |  |              | 310,758 |        |          |   | (4,225 | )             |   |   | 13,258 |   |        |   |       |        |   |   | 445,523 |       
|                           | Exercise of stock options                                                      |                                                                                                                            |            | 638,376   |            |   |        | 638      |  |       |          | 5,962         |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         | 6,600  |       
|                           | Issuance of restricted common stock, net of shares forfeited
    into Treasury |                                                                                                                            |            | 107,000   |            |   |        | 107      |  |       |          | 1,386         |  |              |         |        |          |   |        | (1,488        | ) |   |        |   |        |   |        | (5     | ) |   |         |       |       
|                           | Issuance of non-employee director stock                                        |                                                                                                                            |            | 780       |            |   |        | 1        |  |       |          | 12            |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         | 13     |       
|                           | Purchase of treasury stock                                                     |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        | (416   | ) |   |         | (416   | )     
|                           | Deferred compensation amortization                                             |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        | 1,498         |   |   |        |   |        |   |        |        |   |   |         | 1,498  |       
|                           | Cash dividends, $0.05 per common share                                         |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         | (3,418 | )        |   |        |               |   |   |        |   |        |   |        |        |   |   |         | (3,418 | )     
|                           | Comprehensive income:                                                          |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        |       
|                           |                                                                                | Net income for the year ended December 31, 2003                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        | 60,729   |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        | 60,729 |  
|                           |                                                                                | Net change in unrealized appreciation on securities available
    for sale, net of deferred taxes of $5,109                |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (9,484 | ) |        |        |   |   |         |        | (9,484 | )
|                           |                                                                                | Reclassification adjustment for gains included in net income,
    net of deferred taxes of $849                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (1,576 | ) |        |        |   |   |         |        | (1,576 | )
|                           |                                                                                | Minimum pension liability, net of deferred taxes of $80                                                                    |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (148   | ) |        |        |   |   |         |        | (148   | )
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|                           |                                                                                | Total comprehensive income                                                                                                 |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        | 49,521 |  
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|BALANCE, DECEMBER 31, 2003 |                                                                                |                                                                                                                            | 68,458,286 |           |            |   | 68,458 |          |  |       | 65,380   |               |  |              | 368,069 |        |          |   | (4,215 | )             |   |   | 2,050  |   |        |   | (421   | )      |   |   | 499,321 |       
|                           | Exercise of stock options                                                      |                                                                                                                            |            | 837,684   |            |   |        | 838      |  |       |          | 8,892         |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         | 9,730  |       
|                           | Issuance of restricted common stock, net of shares forfeited
    into Treasury |                                                                                                                            |            | 147,390   |            |   |        | 147      |  |       |          | 2,879         |  |              |         |        |          |   |        | (3,020        | ) |   |        |   |        |   |        | (6     | ) |   |         |       |       
|                           | Issuance of non-employee director stock                                        |                                                                                                                            |            | 7,628     |            |   |        | 8        |  |       |          | 124           |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         | 132    |       
|                           | Purchase of Klein Bancshares, Inc.                                             |                                                                                                                            |            | 747,468   |            |   |        | 747      |  |       |          | 15,055        |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         | 15,802 |       
|                           | Purchase of treasury stock                                                     |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        | (1,308 | ) |   |         | (1,308 | )     
|                           | Deferred compensation amortization                                             |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        | 1,766         |   |   |        |   |        |   |        |        |   |   |         | 1,766  |       
|                           | Cash dividends, $0.12 per common share                                         |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         | (8,301 | )        |   |        |               |   |   |        |   |        |   |        |        |   |   |         | (8,301 | )     
|                           | Comprehensive income:                                                          |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        |       
|                           |                                                                                | Net income for the year ended December 31, 2004                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        | 68,543   |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        | 68,543 |  
|                           |                                                                                | Net change in unrealized appreciation (depreciation) on
    securities available for sale, net of deferred taxes of $2,630 |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (5,533 | ) |        |        |   |   |         |        | (5,533 | )
|                           |                                                                                | Reclassification adjustment for losses included in net income,
    net of deferred taxes of ($187)                         |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | 310    |   |        |        |   |   |         |        | 310    |  
|                           |                                                                                | Minimum pension liability, net of deferred taxes of $26                                                                    |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   | (48    | ) |        |        |   |   |         |        | (48    | )
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|                           |                                                                                | Total comprehensive income                                                                                                 |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |   |        |   |        |        |   |   |         |        | 63,272 |  
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  
|BALANCE, DECEMBER 31, 2004 |                                                                                |                                                                                                                            | 70,198,456 |           |            | $ | 70,198 |          |  | $     | 92,330   |               |  | $            | 428,311 |        |          | $ | (5,469 | )             |   | $ | (3,221 | ) |        | $ | (1,735 | )      |   | $ | 580,414 |       
|                           |                                                                                |                                                                                                                            |            |           |            |   |        |          |  |       |          |               |  |              |         |        |          |   |        |               |   |   |        |  



56



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |            |         |          |        |          |         |          |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | --------------------------------- | ----------------------------------------- | ---------- | ------- | -------- | ------ | ---------- | ------- | -------- | ------ | -------- | ------- | -------- | -
|                                                     |                                                                                       | Year Ended December 31,                                                          |                                  
|                                                     |                                                                                       |                                                                                  |                                  
|                                                     |                                                                                       | 2004                                                                             |                                   |                                           | 2003       |         |          | 2002   |           
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|                                                     |                                                                                       | (Dollars in thousands)                                                           |                                  
|Cash flows from operating activities:                |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |            |         |          |       
|                                                     | Net income                                                                            |                                                                                  | $                                 | 68,543                                    |            |         | $        | 60,729 |            |         | $        | 59,206 |         
|                                                     | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                                  |                                   |                                           |            |         |          |        |            |         |          |        |         
|                                                     |                                                                                       | Provision for loan losses                                                        |                                   |                                           | 10,212     |         |          |        | 11,850     |         |          |        | 11,037   |        
|                                                     |                                                                                       | Deferred tax expense (benefit)                                                   |                                   |                                           | (1,345     | )       |          |        | (640       | )       |          |        | 2,758    |        
|                                                     |                                                                                       | Depreciation                                                                     |                                   |                                           | 14,861     |         |          |        | 11,927     |         |          |        | 9,201    |        
|                                                     |                                                                                       | Valuation adjustments for mortgage servicing rights, net                         |                                   |                                           |           |         |          |        | (2,371     | )       |          |        | 2,371    |        
|                                                     |                                                                                       | Realized (gain) loss on securities available for sale, net                       |                                   |                                           | 12         |         |          |        | (1,224     | )       |          |        | (1,737   | )      
|                                                     |                                                                                       | Gain on sale of premises and equipment, net                                      |                                   |                                           | (27        | )       |          |        | (8         | )       |          |        | (839     | )      
|                                                     |                                                                                       | Amortization and accretion of securities premiums and
    discounts, net        |                                   |                                           | 5,237      |         |          |        | 11,176     |         |          |        | 6,058    |        
|                                                     |                                                                                       | Amortization of mortgage servicing rights                                        |                                   |                                           | 2,224      |         |          |        | 4,806      |         |          |        | 4,180    |        
|                                                     |                                                                                       | Amortization of computer software                                                |                                   |                                           | 6,612      |         |          |        | 4,927      |         |          |        | 3,677    |        
|                                                     |                                                                                       | Amortization of core deposit intangibles                                         |                                   |                                           | 4,947      |         |          |        | 1,368      |         |          |        |         |        
|                                                     |                                                                                       | Other amortization                                                               |                                   |                                           | 1,766      |         |          |        | 1,498      |         |          |        | 853      |        
|                                                     |                                                                                       | Minority interest in net income of consolidated subsidiary                       |                                   |                                           |           |         |          |        |           |         |          |        | 40       |        
|                                                     |                                                                                       | Gain on sale of subsidiary                                                       |                                   |                                           |           |         |          |        |           |         |          |        | (1,068   | )      
|                                                     |                                                                                       | Income tax benefit from exercise of stock options                                |                                   |                                           | 2,973      |         |          |        | 1,885      |         |          |        | 6,500    |        
|                                                     |                                                                                       | Net change in:                                                                   |                                   |                                           |            |         |          |        |            |         |          |        |          |        
|                                                     |                                                                                       |                                                                                  | Loans held for sale               |                                           |            | (10,505 | )        |        |            | 4,490   |          |        |          | (14,365 | )       
|                                                     |                                                                                       |                                                                                  | Other assets and liabilities, net |                                           |            | (6,734  | )        |        |            | (16,802 | )        |        |          | 28,157  |         
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|                                                     |                                                                                       |                                                                                  |                                   | Net cash provided by operating activities |            |         | 98,776   |        |            |         | 93,611   |        |          |         | 116,029  |  
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|Cash flows from investing activities:                |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |            |         |          |       
|                                                     |                                                                                       | Proceeds from maturity and call of securities available for sale                 |                                   |                                           | 53,280     |         |          |        | 71,119     |         |          |        | 25,370   |        
|                                                     |                                                                                       | Proceeds from sale of securities available for sale                              |                                   |                                           | 1,162,060  |         |          |        | 652,529    |         |          |        | 139,436  |        
|                                                     |                                                                                       | Proceeds from sale of subsidiary, net of cash sold                               |                                   |                                           |           |         |          |        |           |         |          |        | (3,003   | )      
|                                                     |                                                                                       | Principal paydowns of mortgage-backed securities available for
    sale          |                                   |                                           | 297,108    |         |          |        | 533,194    |         |          |        | 445,632  |        
|                                                     |                                                                                       | Principal paydowns of mortgage-backed securities held to maturity                |                                   |                                           | 3,775      |         |          |        |           |         |          |        |         |        
|                                                     |                                                                                       | Purchase of securities available for sale                                        |                                   |                                           | (1,593,349 | )       |          |        | (1,573,915 | )       |          |        | (724,668 | )      
|                                                     |                                                                                       | Purchase of Federal Reserve Bank stock                                           |                                   |                                           | (4,052     | )       |          |        | (28        | )       |          |        | (294     | )      
|                                                     |                                                                                       | Proceeds from redemption of Federal Home Loan Bank stock                         |                                   |                                           | 28,716     |         |          |        | 6,765      |         |          |        | 5,699    |        
|                                                     |                                                                                       | Purchase of Federal Home Loan Bank stock                                         |                                   |                                           | (36,020    | )       |          |        | (5,046     | )       |          |        | (24,395  | )      
|                                                     |                                                                                       | Net increase in loans held for investment                                        |                                   |                                           | (732,835   | )       |          |        | (280,191   | )       |          |        | (461,126 | )      
|                                                     |                                                                                       | Proceeds from sale of premises and equipment                                     |                                   |                                           | 829        |         |          |        | 82         |         |          |        | 1,905    |        
|                                                     |                                                                                       | Purchase of premises and equipment                                               |                                   |                                           | (46,022    | )       |          |        | (32,531    | )       |          |        | (46,947  | )      
|                                                     |                                                                                       | Purchase of mortgage servicing rights                                            |                                   |                                           |           |         |          |        | (281       | )       |          |        | (804     | )      
|                                                     |                                                                                       | Purchase of Bank-owned life insurance policies                                   |                                   |                                           |           |         |          |        | (30,000    | )       |          |        |         |        
|                                                     |                                                                                       | Purchase of Maxim Financial Holdings, Inc., net of cash acquired
    of $142,658 |                                   |                                           |           |         |          |        | 79,618     |         |          |        |         |        
|                                                     |                                                                                       | Purchase of Reunion Bancshares, Inc., net of cash acquired of
    $30,596        |                                   |                                           | (20,004    | )       |          |        |           |         |          |        |         |        
|                                                     |                                                                                       | Purchase of Klein Bancshares, Inc., net of cash acquired of
    $78,060          |                                   |                                           | (71,138    | )       |          |        |           |         |          |        |         |        
|                                                     |                                                                                       | Investment in unconsolidated equity investees                                    |                                   |                                           | (5,808     | )       |          |        | (3,053     | )       |          |        | (862     | )      
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|                                                     |                                                                                       |                                                                                  |                                   | Net cash used in investing activities     |            |         | (963,460 | )      |            |         | (581,738 | )      |          |         | (644,057 | )
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|Cash flows from financing activities:                |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |            |         |          |       
|                                                     |                                                                                       | Net increase in noninterest-bearing demand deposits                              |                                   |                                           | 118,692    |         |          |        | 153,445    |         |          |        | 309,613  |        
|                                                     |                                                                                       | Net increase (decrease) in time deposits                                         |                                   |                                           | 202,737    |         |          |        | 61,395     |         |          |        | (33,882  | )      
|                                                     |                                                                                       | Net increase in other interest-bearing deposits                                  |                                   |                                           | 153,350    |         |          |        | 34,814     |         |          |        | 231,470  |        
|                                                     |                                                                                       | Net increase (decrease) in securities sold under repurchase
    agreements       |                                   |                                           | (12,227    | )       |          |        | 10,128     |         |          |        | (82,958  | )      
|                                                     |                                                                                       | Issuance of junior subordinated deferrable interest debentures,
    net of cost  |                                   |                                           | 97,939     |         |          |        | 51,047     |         |          |        |         |        
|                                                     |                                                                                       | Issuance of senior subordinated debentures                                       |                                   |                                           | 75,000     |         |          |        |           |         |          |        |         |        
|                                                     |                                                                                       | Net increase in other short-term borrowings                                      |                                   |                                           | 286,470    |         |          |        | 27,242     |         |          |        | 186,212  |        
|                                                     |                                                                                       | Proceeds from long-term borrowings                                               |                                   |                                           | 2,200      |         |          |        | 200,000    |         |          |        | 100,000  |        
|                                                     |                                                                                       | Payments on long-term borrowings                                                 |                                   |                                           | (200,448   | )       |          |        | (100,391   | )       |          |        | (361     | )      
|                                                     |                                                                                       | Payments of cash dividends                                                       |                                   |                                           | (8,301     | )       |          |        | (3,418     | )       |          |        |         |        
|                                                     |                                                                                       | Net proceeds from exercise of stock options                                      |                                   |                                           | 6,757      |         |          |        | 4,715      |         |          |        | 7,842    |        
|                                                     |                                                                                       | Purchase of treasury stock                                                       |                                   |                                           | (1,308     | )       |          |        | (416       | )       |          |        |         |        
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|                                                     |                                                                                       |                                                                                  |                                   | Net cash provided by financing activities |            |         | 720,861  |        |            |         | 438,561  |        |          |         | 717,936  |  
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|Net increase (decrease) in cash and cash equivalents |                                                                                       |                                                                                  | (143,823                          | )                                         |            |         | (49,566  | )      |            |         | 189,908  |       
|Cash and cash equivalents at beginning of period     |                                                                                       |                                                                                  | 485,798                           |                                           |            |         | 535,364  |        |            |         | 345,456  |       
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           
|Cash and cash equivalents at end of period           |                                                                                       | $                                                                                | 341,975                           |                                           |            | $       | 485,798  |        |            | $       | 535,364  |       
|                                                     |                                                                                       |                                                                                  |                                   |                                           |            |         |          |        |           



57



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     Nature of Operations and
Summary of Significant Accounting Policies




| |                                               
| | ----------------------------------------------
| | Basis of Presentation and Nature of Operations













| |                       
| | ----------------------
| | Managements Estimates



58



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Cash and Cash Equivalents







| |           
| | ----------
| | Securities











| |      
| | -----
| | Loans





59



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












| |                          
| | -------------------------
| | Allowance for Loan Losses







60



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                    
| | -------------------
| | Loan Fees and Costs





| |                       
| | ----------------------
| | Premises and Equipment





| |                               
| | ------------------------------
| | Goodwill and Other Intangibles





| |                        
| | -----------------------
| | Other Real Estate Owned





| |                                        
| | ---------------------------------------
| | Investments in Unconsolidated Investees





| |                          
| | -------------------------
| | Bank-Owned Life Insurance



61



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Mortgage Servicing Rights











| |                                        
| | ---------------------------------------
| | Earnings and Dividends per Common Share







62



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |             
| | ------------
| | Income Taxes





| |                     
| | --------------------
| | Comprehensive Income





| |                      
| | ---------------------
| | Deferred Compensation





| |                         
| | ------------------------
| | Stock-Based Compensation



Accounting for Stock-Based Compensation,


63



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                   |             |                           |   |        |      |  |   |        |  |  |   |        | 
|-------------------------------------------------- | ----------- | ------------------------- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                   |             | Year Ended December 31,   |  
|                                                   |             |                           |  
|                                                   |             | 2004                      |   |        | 2003 |  |   | 2002   | 
|                                                   |             |                           |   |        |      |  |   |        | 
|                                                   |             | (Dollars in thousands,    |  
|                                                   |             | except per share amounts) |  
|Net income                                         |             |                           |   |        |      |  |   |        |  |  |   |       
|                                                   | As reported |                           | $ | 68,543 |      |  | $ | 60,729 |  |  | $ | 59,206 | 
|                                                   | Pro forma   |                           | $ | 65,834 |      |  | $ | 58,312 |  |  | $ | 57,009 | 
|Stock-based compensation cost, net of income taxes |             |                           |   |        |      |  |   |        |  |  |   |       
|                                                   | As reported |                           | $ | 1,148  |      |  | $ | 1,034  |  |  | $ | 586    | 
|                                                   | Pro forma   |                           | $ | 3,857  |      |  | $ | 3,451  |  |  | $ | 2,783  | 
|Basic earnings per common share                    |             |                           |   |        |      |  |   |        |  |  |   |       
|                                                   | As reported |                           | $ | 0.99   |      |  | $ | 0.89   |  |  | $ | 0.88   | 
|                                                   | Pro forma   |                           | $ | 0.95   |      |  | $ | 0.86   |  |  | $ | 0.85   | 
|Diluted earnings per common share                  |             |                           |   |        |      |  |   |        |  |  |   |       
|                                                   | As reported |                           | $ | 0.97   |      |  | $ | 0.87   |  |  | $ | 0.86   | 
|                                                   | Pro forma   |                           | $ | 0.93   |      |  | $ | 0.84   |  |  | $ | 0.83   | 



Share-Based
Payment,




| |                                 
| | --------------------------------
| | Derivative Financial Instruments





| |                                        
| | ---------------------------------------
| | Off-Balance Sheet Financial Instruments



64



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                    
| | -------------------
| | Segment Information

Disclosure about
Segments of an Enterprise and Related Information,






| |                  
| | -----------------
| | Reclassifications





| |                              
| | -----------------------------
| | New Accounting Pronouncements

Accounting for Certain Loans or Debt
Securities Acquired in a Transfer


Application of Accounting Principles to Loan Commitments


Stock-Based Compensation


65



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


The Meaning
of Other-Than-Temporary Impairment and Its Application to
Certain Investments. Accounting for
Certain Investments in Debt and Equity Securities, Accounting for
Noncurrent Marketable Equity Securities.




|   |                        
|-- | -----------------------
|2. | Merger Related Activity

Goodwill and Other Intangible
Assets.








66



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |  |                        |          |   |                  |   |          |                 |  |   |          |  
|-------------------------- |  | ---------------------- | -------- | - | ---------------- | - | -------- | --------------- |  | - | -------- | -
|                           |  | Maxim                  |          |   | Reunion          |   |          | Klein           | 
|                           |  | July 1, 2003           |          |   | January 31, 2004 |   |          | October 1, 2004 | 
|                           |  |                        |          |   |                  |   |          |                 | 
|                           |  | (Dollars in thousands) |         
|Cash                       |  | $                      | 142,658  |   |                  | $ | 30,596   |                 |  | $ | 78,060   |  
|Securities                 |  |                        | 59,781   |   |                  |   | 30,946   |                 |  |   | 329,862  |  
|Loans                      |  |                        | 98,362   |   |                  |   | 163,822  |                 |  |   | 163,086  |  
|Loan premium (discount)    |  |                        | 6,678    |   |                  |   | (1,038   | )               |  |   | 5,574    |  
|Allowance for loan losses  |  |                        | (1,426   | ) |                  |   | (2,116   | )               |  |   | (1,354   | )
|Goodwill                   |  |                        | 23,253   |   |                  |   | 29,755   |                 |  |   | 94,248   |  
|Core deposit intangibles   |  |                        | 7,553    |   |                  |   | 6,379    |                 |  |   | 19,629   |  
|Other assets               |  |                        | 11,929   |   |                  |   | 3,779    |                 |  |   | 23,969   |  
|Deposits                   |  |                        | (241,129 | ) |                  |   | (207,026 | )               |  |   | (535,644 | )
|Deposit (premium) discount |  |                        | (407     | ) |                  |   | (39      | )               |  |   | 684      |  
|Borrowings                 |  |                        | (37,531  | ) |                  |   | (2,000   | )               |  |   |         |  
|Other liabilities          |  |                        | (6,681   | ) |                  |   | (2,458   | )               |  |   | (13,114  | )
|                           |  |                        |          |   |                  |   |          |                 | 
|Cost                       |  | $                      | 63,040   |   |                  | $ | 50,600   |                 |  | $ | 165,000  |  
|                           |  |                        |          |   |                  |   |          |                 | 





|                                                                               |  |                        |         |  |      |   |         | 
|------------------------------------------------------------------------------ |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                                                                               |  | Pro Forma Year Ended   |        
|                                                                               |  | December 31,           |        
|                                                                               |  |                        |        
|                                                                               |  | 2004                   |         |  | 2003 |  
|                                                                               |  |                        |         |  |      |  
|                                                                               |  | (Dollars in thousands, |        
|                                                                               |  | except per share       |        
|                                                                               |  | amounts)               |        
|Net interest income after provision for loan losses and
    noninterest income |  | $                      | 343,598 |  |      | $ | 316,251 | 
|Income before income taxes                                                     |  |                        | 104,430 |  |      |   | 98,999  | 
|Net income                                                                     |  |                        | 73,938  |  |      |   | 68,113  | 
|Earnings per common share, basic                                               |  | $                      | 1.06    |  |      | $ | 0.99    | 
|Earnings per common share, diluted                                             |  | $                      | 1.04    |  |      | $ | 0.97    | 



67



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |           
|-- | ----------
|3. | Securities



|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |         |         |   |   |           |           | 
|------------------- | ------------------------------------- | ----------------------------------- | - | ---------------------- | --------- |  | - | ----- | ------ |  | ---------- | ------- | ------- | - | - | --------- | --------- | 
|                    |                                       | December 31, 2004                   |  
|                    |                                       |                                     |  
|                    |                                       |                                     |   | Gross Unrealized       |           |  |  
|                    |                                       | Amortized                           |   |                        |           |  |   |      
|                    |                                       | Cost                                |   |                        | Gain      |  |   | Loss  |        |  | Fair Value |        
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |        
|                    |                                       |                                     |   | (Dollars in thousands) |           |  |  
|Available for sale: |                                       |                                     |   |                        |           |  |   |       |        |  |            |         |         |   |   |          
|                    | U.S. Government and agency securities |                                     | $ | 388,061                |           |  | $ | 246   |        |  | $          | (2,623  | )       |   | $ | 385,684   |          
|                    | Mortgage-backed securities            |                                     |   | 1,237,420              |           |  |   | 3,820 |        |  |            | (11,076 | )       |   |   | 1,230,164 |          
|                    | Municipal securities                  |                                     |   | 246,705                |           |  |   | 7,564 |        |  |            | (1,392  | )       |   |   | 252,877   |          
|                    | Federal Reserve Bank stock            |                                     |   | 8,511                  |           |  |   |      |        |  |            |        |         |   |   | 8,511     |          
|                    | Federal Home Loan Bank stock          |                                     |   | 32,772                 |           |  |   |      |        |  |            |        |         |   |   | 32,772    |          
|                    | Other securities                      |                                     |   | 17,196                 |           |  |   |      |        |  |            |        |         |   |   | 17,196    |          
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |        
|                    |                                       | Total securities available for sale |   | $                      | 1,930,665 |  |   | $     | 11,630 |  |            | $       | (15,091 | ) |   | $         | 1,927,204 | 
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |        
|Held to maturity:   |                                       |                                     |   |                        |           |  |   |       |        |  |            |         |         |   |   |          
|                    | Mortgage-backed securities            |                                     | $ | 58,033                 |           |  | $ | 536   |        |  | $          |        |         |   | $ | 58,569    |          
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |        
|                    |                                       | Total securities held to maturity   |   | $                      | 58,033    |  |   | $     | 536    |  |            | $       |        |   |   | $         | 58,569    | 
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |        

|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |        |        |   |   |           |           | 
|------------------- | ------------------------------------- | ----------------------------------- | - | ---------------------- | --------- |  | - | ----- | ------ |  | ---------- | ------ | ------ | - | - | --------- | --------- | 
|                    |                                       | December 31, 2003                   |  
|                    |                                       |                                     |  
|                    |                                       |                                     |   | Gross Unrealized       |           |  |  
|                    |                                       | Amortized                           |   |                        |           |  |   |      
|                    |                                       | Cost                                |   |                        | Gain      |  |   | Loss  |        |  | Fair Value |       
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |       
|                    |                                       |                                     |   | (Dollars in thousands) |           |  |  
|Available for sale: |                                       |                                     |   |                        |           |  |   |       |        |  |            |        |        |   |   |          
|                    | U.S. Government and agency securities |                                     | $ | 250,359                |           |  | $ | 841   |        |  | $          | (102   | )      |   | $ | 251,098   |          
|                    | Mortgage-backed securities            |                                     |   | 1,101,988              |           |  |   | 7,078 |        |  |            | (8,320 | )      |   |   | 1,100,746 |          
|                    | Municipal securities                  |                                     |   | 152,927                |           |  |   | 5,905 |        |  |            | (754   | )      |   |   | 158,078   |          
|                    | Federal Reserve Bank stock            |                                     |   | 4,459                  |           |  |   |      |        |  |            |       |        |   |   | 4,459     |          
|                    | Federal Home Loan Bank stock          |                                     |   | 25,469                 |           |  |   |      |        |  |            |       |        |   |   | 25,469    |          
|                    | Other securities                      |                                     |   | 9,455                  |           |  |   | 93    |        |  |            |        |        |   |   | 9,548     |          
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |       
|                    |                                       | Total securities available for sale |   | $                      | 1,544,657 |  |   | $     | 13,917 |  |            | $      | (9,176 | ) |   | $         | 1,549,398 | 
|                    |                                       |                                     |   |                        |           |  |   |       |        |  |            |       



|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |   |         |           |  |   |         |         |  
|------------------------------------- | ----- | ---------------------- | ------- | --------- | ---------------------- | - | ------ | ------- | - | - | ---------- | ------- |  | ----- | ------ | ------ | ---------- | - | ------- | --------- |  | - | ------- | ------- | -
|                                      |       | Less Than 12 Months    |         |           | Greater Than 12 Months |   |        | Total   |  
|                                      |       |                        |         |           |                        |   |        |         |  
|                                      |       | Fair                   |         |           | Unrealized             |   |        | Fair    |   |   | Unrealized |         |  | Fair  |        |        | Unrealized |  
|                                      |       | Value                  |         |           | Loss                   |   |        | Value   |   |   | Loss       |         |  | Value |        |        | Loss       |  
|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |  
|                                      |       | (Dollars in thousands) |        
|U.S. Government and agency securities |       | $                      | 272,478 |           |                        | $ | (2,623 | )       |   | $ |           |         |  | $     |       |        |            | $ | 272,478 |           |  | $ | (2,623  | )      
|Mortgage-backed securities            |       |                        | 722,889 |           |                        |   | (7,035 | )       |   |   | 202,543    |         |  |       | (4,041 | )      |            |   | 925,432 |           |  |   | (11,076 | )      
|Municipal securities                  |       |                        | 56,349  |           |                        |   | (1,048 | )       |   |   | 12,668     |         |  |       | (344   | )      |            |   | 69,017  |           |  |   | (1,392  | )      
|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |  
|                                      | Total |                        | $       | 1,051,716 |                        |   | $      | (10,706 | ) |   | $          | 215,211 |  |       | $      | (4,385 | )          |   | $       | 1,266,927 |  |   | $       | (15,091 | )
|                                      |       |                        |         |           |                        |   |        |         |   |   |            |         |  |       |        |        |            |  

68



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |           |           |  |         |           |           | 
|------------------- | ---------------------------------- | ----------------------------------- | ------- | ---------------------- | ----------------- |  | --------- | --------- | --------- |  | ---------- | --------- | --------- |  | ------- | --------- | --------- | 
|                    |                                    | December 31, 2004                   |         |                        | December 31, 2003 | 
|                    |                                    |                                     |         |                        |                   | 
|                    |                                    | Amortized                           |         |                        |                   |  | Amortized |           |           | 
|                    |                                    | Cost                                |         |                        | Fair Value        |  |           | Cost      |           |  | Fair Value |          
|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |          
|                    |                                    |                                     |         | (Dollars in thousands) |                   |  |          
|Available for sale: |                                    |                                     |         |                        |                   |  |           |           |           |  |            |           |           |  |         |          
|                    | Within one year                    |                                     | $       | 112,383                |                   |  | $         | 112,287   |           |  | $          | 24,833    |           |  | $       | 25,056    |          
|                    | After one year through five years  |                                     |         | 301,809                |                   |  |           | 300,350   |           |  |            | 231,279   |           |  |         | 232,022   |          
|                    | After five years through ten years |                                     |         | 124,951                |                   |  |           | 127,665   |           |  |            | 19,248    |           |  |         | 19,962    |          
|                    | Over ten years                     |                                     |         | 95,623                 |                   |  |           | 98,259    |           |  |            | 127,926   |           |  |         | 132,136   |          
|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |          
|                    |                                    |                                     | 634,766 |                        |                   |  | 638,561   |           |           |  | 403,286    |           |           |  | 409,176 |          
|                    | Mortgage-backed securities         |                                     |         | 1,237,420              |                   |  |           | 1,230,164 |           |  |            | 1,101,988 |           |  |         | 1,100,746 |          
|                    | Federal Reserve Bank stock         |                                     |         | 8,511                  |                   |  |           | 8,511     |           |  |            | 4,459     |           |  |         | 4,459     |          
|                    | Federal Home Loan Bank stock       |                                     |         | 32,772                 |                   |  |           | 32,772    |           |  |            | 25,469    |           |  |         | 25,469    |          
|                    | Other securities                   |                                     |         | 17,196                 |                   |  |           | 17,196    |           |  |            | 9,455     |           |  |         | 9,548     |          
|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |          
|                    |                                    | Total securities available for sale |         | $                      | 1,930,665         |  |           | $         | 1,927,204 |  |            | $         | 1,544,657 |  |         | $         | 1,549,398 | 
|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |          
|Held to maturity:   |                                    |                                     |         |                        |                   |  |           |           |           |  |            |           |           |  |         |          
|                    | Mortgage-backed securities         |                                     | $       | 58,033                 |                   |  | $         | 58,569    |           |  | $          |          |           |  | $       |          |          
|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |          
|                    |                                    | Total securities held to maturity   |         | $                      | 58,033            |  |           | $         | 58,569    |  |            | $         |          |  |         | $         |          | 
|                    |                                    |                                     |         |                        |                   |  |           |           |           |  |            |          





69



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |      
|-- | -----
|4. | Loans



|                                               |                                   |                        |           |         |           |   |           |         |           | 
|---------------------------------------------- | --------------------------------- | ---------------------- | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                               |                                   | December 31,           |          
|                                               |                                   |                        |          
|                                               |                                   | 2004                   |           |         | 2003      |  
|                                               |                                   |                        |           |         |           |  
|                                               |                                   | (Dollars in thousands) |          
|Commercial and industrial                      |                                   | $                      | 2,052,051 |         |           | $ | 1,502,802 |        
|Real estate:                                   |                                   |                        |           |         |           |   |           |        
|                                               | Construction and land development |                        |           | 800,335 |           |   |           | 709,914 |          
|                                               | 1-4 family residential            |                        |           | 720,825 |           |   |           | 562,954 |          
|                                               | Other                             |                        |           | 835,416 |           |   |           | 575,155 |          
|Consumer                                       |                                   |                        | 132,226   |         |           |   | 142,512   |        
|Unamortized loan premiums and discounts, net   |                                   |                        | 9,465     |         |           |   | 6,107     |        
|Unearned income and fees, net of related costs |                                   |                        | (10,740   | )       |           |   | (7,771    | )      
|Allowance for loan losses                      |                                   |                        | (49,408   | )       |           |   | (41,611   | )      
|                                               |                                   |                        |           |         |           |  
|Loans held for investment, net                 |                                   |                        | 4,490,170 |         |           |   | 3,450,062 |        
|Loans held for sale                            |                                   |                        | 107,404   |         |           |   | 96,899    |        
|                                               |                                   |                        |           |         |           |  
|                                               |                                   | Total loans, net       |           | $       | 4,597,574 |   |           | $       | 3,546,961 | 
|                                               |                                   |                        |           |         |           |  



|                                                    |  |                         |        |   |      |   |        |      |  |   |        |  
|--------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                    |  | Year Ended December 31, |       
|                                                    |  |                         |       
|                                                    |  | 2004                    |        |   | 2003 |   |        | 2002 | 
|                                                    |  |                         |        |   |      |   |        |      | 
|                                                    |  | (Dollars in thousands)  |       
|Allowance for loan losses, beginning balance        |  | $                       | 41,611 |   |      | $ | 35,449 |      |  | $ | 30,856 |  
|Provision charged against operations                |  |                         | 10,212 |   |      |   | 11,850 |      |  |   | 11,037 |  
|Charge-offs                                         |  |                         | (9,032 | ) |      |   | (8,265 | )    |  |   | (7,092 | )
|Recoveries                                          |  |                         | 3,147  |   |      |   | 1,151  |      |  |   | 736    |  
|Allowance acquired through mergers and acquisitions |  |                         | 3,470  |   |      |   | 1,426  |      |  |   |       |  
|Adjustment for sale of subsidiary                   |  |                         |       |   |      |   |       |      |  |   | (88    | )
|                                                    |  |                         |        |   |      |   |        |      | 
|Allowance for loan losses, ending balance           |  | $                       | 49,408 |   |      | $ | 41,611 |      |  | $ | 35,449 |  
|                                                    |  |                         |        |   |      |   |        |      | 



|                                                      |                                             |                        |        |        |      |   |       |        | 
|----------------------------------------------------- | ------------------------------------------- | ---------------------- | ------ | ------ | ---- | - | ----- | ------ | 
|                                                      |                                             | December 31,           |       
|                                                      |                                             |                        |       
|                                                      |                                             | 2004                   |        |        | 2003 |  
|                                                      |                                             |                        |        |        |      |  
|                                                      |                                             | (Dollars in thousands) |       
|Impaired loans with no SFAS No. 114 valuation reserve |                                             | $                      | 4,342  |        |      | $ | 8,838 |       
|Impaired loans with a SFAS No. 114 valuation reserve  |                                             |                        | 20,944 |        |      |   | 7,970 |       
|                                                      |                                             |                        |        |        |      |  
|                                                      | Total recorded investment in impaired loans |                        | $      | 25,286 |      |   | $     | 16,808 | 
|                                                      |                                             |                        |        |        |      |  
|Valuation allowance related to impaired loans         |                                             | $                      | 5,848  |        |      | $ | 2,768 |       
|                                                      |                                             |                        |        |        |      |  



70



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                                                   |  |                        |         |   |      |   |         |  
|-------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                   |  | December 31,           |        
|                                                   |  |                        |        
|                                                   |  | 2004                   |         |   | 2003 |  
|                                                   |  |                        |         |   |      |  
|                                                   |  | (Dollars in thousands) |        
|Balance, beginning of year                         |  | $                      | 59,207  |   |      | $ | 46,562  |  
|New loans                                          |  |                        | 49,182  |   |      |   | 37,199  |  
|Repayments                                         |  |                        | (16,697 | ) |      |   | (24,554 | )
|                                                   |  |                        |         |   |      |  
|Balance, end of year                               |  | $                      | 91,692  |   |      | $ | 59,207  |  
|                                                   |  |                        |         |   |      |  
|Revolving lines of credit to related parties       |  | $                      | 84,052  |   |      | $ | 78,292  |  
|Amount outstanding under revolving lines of credit |  |                        | 35,756  |   |      |   | 43,209  |  



|   |                       
|-- | ----------------------
|5. | Premises and Equipment



|                                               |  |                        |         |   |      |   |         |  
|---------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                               |  | December 31,           |        
|                                               |  |                        |        
|                                               |  | 2004                   |         |   | 2003 |  
|                                               |  |                        |         |   |      |  
|                                               |  | (Dollars in thousands) |        
|Land                                           |  | $                      | 39,056  |   |      | $ | 20,035  |  
|Premises and leasehold improvements            |  |                        | 111,938 |   |      |   | 87,689  |  
|Furniture and equipment                        |  |                        | 112,847 |   |      |   | 91,842  |  
|                                               |  |                        |         |   |      |  
|                                               |  |                        | 263,841 |   |      |   | 199,566 |  
|Less accumulated depreciation and amortization |  |                        | (99,398 | ) |      |   | (81,615 | )
|                                               |  |                        |         |   |      |  
|                                               |  | $                      | 164,443 |   |      | $ | 117,951 |  
|                                               |  |                        |         |   |      |  



|   |                                      
|-- | -------------------------------------
|6. | Goodwill and Core Deposit Intangibles



|                           |                                    |                         |         |              |             |   |        |          |              |   |             |        |  |   |       |        |  
|-------------------------- | ---------------------------------- | ----------------------- | ------- | ------------ | ----------- | - | ------ | -------- | ------------ | - | ----------- | ------ |  | - | ----- | ------ | -
|                           |                                    | Year Ended December 31, |        
|                           |                                    |                         |        
|                           |                                    | 2004                    |         |              | 2003        |  
|                           |                                    |                         |         |              |             |  
|                           |                                    |                         |         | Core Deposit |             |   |        |          | Core Deposit |  
|                           |                                    | Goodwill                |         |              | Intangibles |   |        | Goodwill |              |   | Intangibles |       
|                           |                                    |                         |         |              |             |   |        |          |              |   |             |       
|                           |                                    | (Dollars in thousands)  |        
|Balance, beginning of year |                                    | $                       | 25,647  |              |             | $ | 6,185  |          |              | $ | 2,590       |        |  | $ |      |       
|                           | Acquisition of Maxim               |                         |         |             |             |   |        |         |              |   |             | 23,057 |  |   |       | 7,553  |  
|                           | Acquisition of Reunion             |                         |         | 29,755       |             |   |        | 6,379    |              |   |             |       |  |   |       |       |  
|                           | Acquisition of Klein               |                         |         | 94,248       |             |   |        | 19,629   |              |   |             |       |  |   |       |       |  
|                           | Adjustment to acquisition of Maxim |                         |         | 196          |             |   |        |         |              |   |             |       |  |   |       |       |  
|                           | Amortization                       |                         |         |             |             |   |        | (4,947   | )            |   |             |       |  |   |       | (1,368 | )
|                           |                                    |                         |         |              |             |   |        |          |              |   |             |       
|Balance, end of year       |                                    | $                       | 149,846 |              |             | $ | 27,246 |          |              | $ | 25,647      |        |  | $ | 6,185 |       
|                           |                                    |                         |         |              |             |   |        |          |              |   |             |       

71



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                     |  |                        |       | 
|------------------------------------ |  | ---------------------- | ----- | 
|                                     |  | Core Deposit           |      
|                                     |  | Intangibles            |      
|                                     |  |                        |      
|                                     |  | (Dollars in thousands) |      
|Year ended December 31, 2004         |  | $                      | 4,947 | 
|Estimate for year ended December 31, |  |                        |       | 
|2005                                 |  | $                      | 7,980 | 
|2006                                 |  |                        | 5,431 | 
|2007                                 |  |                        | 4,141 | 
|2008                                 |  |                        | 3,137 | 
|2009                                 |  |                        | 2,212 | 
|Thereafter                           |  |                        | 4,345 | 



|   |             
|-- | ------------
|7. | Other Assets



|                                          |  |                        |         |  |      |   |         | 
|----------------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                                          |  | December 31,           |        
|                                          |  |                        |        
|                                          |  | 2004                   |         |  | 2003 |  
|                                          |  |                        |         |  |      |  
|                                          |  | (Dollars in thousands) |        
|Other real estate and foreclosed property |  | $                      | 8,887   |  |      | $ | 4,248   | 
|Deferred income taxes                     |  |                        |        |  |      |   | 2,561   | 
|Bankers acceptances                      |  |                        | 429     |  |      |   | 2,422   | 
|Investment in unconsolidated investees    |  |                        | 9,671   |  |      |   | 4,549   | 
|Cash value of Bank-owned life insurance   |  |                        | 127,189 |  |      |   | 121,665 | 
|Factored receivables                      |  |                        | 35,126  |  |      |   | 31,958  | 
|Mortgage servicing rights, net            |  |                        | 7,121   |  |      |   | 8,299   | 
|Other                                     |  |                        | 20,659  |  |      |   | 17,861  | 
|                                          |  |                        |         |  |      |  
|                                          |  | $                      | 209,082 |  |      | $ | 193,563 | 
|                                          |  |                        |         |  |      |  





|   |                          
|-- | -------------------------
|8. | Mortgage Servicing Rights





72



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                               |              |                         |       |        |      |   |        |        |   |   |        |        |  
|------------------------------ | ------------ | ----------------------- | ----- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                               |              | Year Ended December 31, |      
|                               |              |                         |      
|                               |              | 2004                    |       |        | 2003 |   |        | 2002   |  
|                               |              |                         |       |        |      |   |        |        |  
|                               |              | (Dollars in thousands)  |      
|Mortgage servicing rights:     |              |                         |       |        |      |   |        |        |   |   |        |       
|Balance, beginning of period   |              | $                       | 8,299 |        |      | $ | 10,628 |        |   | $ | 12,008 |       
|                               | Originations |                         |       | 1,046  |      |   |        | 2,196  |   |   |        | 1,996  |  
|                               | Purchases    |                         |       |       |      |   |        | 281    |   |   |        | 804    |  
|                               | Amortization |                         |       | (2,224 | )    |   |        | (4,806 | ) |   |        | (4,180 | )
|                               |              |                         |       |        |      |   |        |        |  
|Balance, end of period         |              |                         | 7,121 |        |      |   | 8,299  |        |   |   | 10,628 |       
|                               |              |                         |       |        |      |   |        |        |  
|Valuation allowance:           |              |                         |       |        |      |   |        |        |   |   |        |       
|Balance, beginning of period   |              |                         |      |        |      |   | 2,371  |        |   |   |       |       
|                               | Provision    |                         |       |       |      |   |        | 234    |   |   |        | 2,700  |  
|                               | Recovery     |                         |       |       |      |   |        | (2,605 | ) |   |        | (329   | )
|                               |              |                         |       |        |      |   |        |        |  
|Balance, end of period         |              |                         |      |        |      |   |       |        |   |   | 2,371  |       
|                               |              |                         |       |        |      |   |        |        |  
|Mortgage servicing rights, net |              | $                       | 7,121 |        |      | $ | 8,299  |        |   | $ | 8,257  |       
|                               |              |                         |       |        |      |   |        |        |  









73



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |         
|-- | --------
|9. | Deposits



|           |  |                        |           | 
|---------- |  | ---------------------- | --------- | 
|           |  | December 31,           |          
|           |  | 2004                   |          
|           |  |                        |          
|           |  | (Dollars in thousands) |          
|2004       |  | $                      | 1,059,003 | 
|2005       |  |                        | 185,799   | 
|2006       |  |                        | 36,130    | 
|2007       |  |                        | 22,330    | 
|2008       |  |                        | 13,324    | 
|Thereafter |  |                        | 9         | 
|           |  |                        |          
|           |  | $                      | 1,316,595 | 
|           |  |                        |          







|    |                        
|--- | -----------------------
|10. | Subordinated Debentures



| |                                                   
| | --------------------------------------------------
| | Junior Subordinated Deferrable Interest Debentures



|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      |  |  |       |  |  |  |            | 
|------------------- |  | ---------------------- | ---------- |  | -------- | --------- | ---------- | ----------- | ------------ | - | ---------- |  |  | ------------- | ------- | ------------ | ---- |  | ------------------------ | ---- |  |  | ----- |  |  |  | ---------- | 
|                    |  |                        |            |  |          | Trust     |            |             | Junior       |   |            |  |  | Interest      |         |              |     
|                    |  |                        |            |  |          | Preferred |            |             | Subordinated |   |            |  |  | Rate at       |         |              |     
|                    |  | Issuance               |            |  | Maturity |           |            | Securities  |              |   | Debt Owned |  |  |               |         | December 31, |      |  | Redemption               |     
|Description         |  | Date                   |            |  | Date     |           |            | Outstanding |              |   | by Trust   |  |  | Interest Rate |         |              | 2004 |  |                          | Date | 
|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      | 
|                    |  | (Dollars in thousands) |           
|Statutory Trust I   |  |                        | 10/7/2003  |  |          |           | 12/17/2033 |             |              | $ | 50,000     |  |  | $             | 51,547  |              |      |  | 3-month LIBOR plus 2.85% |      |  |  | 5.35% |  |  |  | 12/17/2008 | 
|Statutory Trust II  |  |                        | 9/24/2004  |  |          |           | 10/7/2034  |             |              |   | 35,000     |  |  |               | 36,083  |              |      |  | 3-month LIBOR plus 1.90% |      |  |  | 3.84% |  |  |  | 10/7/2009  | 
|Statutory Trust III |  |                        | 12/13/2004 |  |          |           | 12/15/2034 |             |              |   | 60,000     |  |  |               | 61,856  |              |      |  | 3-month LIBOR plus 1.78% |      |  |  | 4.24% |  |  |  | 12/15/2009 | 
|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      | 
|                    |  |                        |            |  |          |           |            |             |              | $ | 145,000    |  |  | $             | 149,486 |              |      |  |                          |      |  |  |       |  |  |  |            | 
|                    |  |                        |            |  |          |           |            |             |              |   |            |  |  |               |         |              |      |  |                          |      | 



74



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










| |                               
| | ------------------------------
| | Senior Subordinated Debentures





|    |                                                                     
|--- | --------------------------------------------------------------------
|11. | Securities Sold Under Repurchase Agreements and Other
    Borrowings



75



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                             |                                         |                        |   |         |      |  |   |         |  
|-------------------------------------------- | --------------------------------------- | ---------------------- | - | ------- | ---- |  | - | ------- | -
|                                             |                                         | December 31,           |  
|                                             |                                         |                        |  
|                                             |                                         | 2004                   |   |         | 2003 | 
|                                             |                                         |                        |   |         |      | 
|                                             |                                         | (Dollars in thousands) |  
|Securities sold under repurchase agreements: |                                         |                        |   |         |      |  |   |        
|                                             | Average                                 |                        | $ | 357,692 |      |  | $ | 261,320 |  
|                                             | Period-end                              |                        |   | 273,344 |      |  |   | 285,571 |  
|                                             | Maximum month-end balance during period |                        |   | 518,719 |      |  |   | 303,764 |  
|                                             | Interest rate:                          |                        |   |         |      |  |   |         |  
|                                             | Weighted average for the period         |                        |   | 0.96    | %    |  |   | 0.88    | %
|                                             | Weighted average at period-end          |                        |   | 1.29    | %    |  |   | 0.72    | %
|Short-term borrowings:                       |                                         |                        |   |         |      |  |   |        
|                                             | Average                                 |                        | $ | 543,159 |      |  | $ | 276,193 |  
|                                             | Period-end                              |                        |   | 759,624 |      |  |   | 473,154 |  
|                                             | Maximum month-end balance during period |                        |   | 929,074 |      |  |   | 473,154 |  
|                                             | Interest rate:                          |                        |   |         |      |  |   |         |  
|                                             | Weighted average for the period         |                        |   | 1.40    | %    |  |   | 1.11    | %
|                                             | Weighted average at period-end          |                        |   | 2.19    | %    |  |   | 0.98    | %
|Long-term borrowings:                        |                                         |                        |   |         |      |  |   |        
|                                             | Average                                 |                        | $ | 109,983 |      |  | $ | 172,744 |  
|                                             | Period-end                              |                        |   | 10,410  |      |  |   | 206,658 |  
|                                             | Maximum month-end balance during period |                        |   | 210,788 |      |  |   | 306,824 |  
|                                             | Interest rate:                          |                        |   |         |      |  |   |         |  
|                                             | Weighted average for the period         |                        |   | 1.61    | %    |  |   | 1.68    | %
|                                             | Weighted average at period-end          |                        |   | 6.01    | %    |  |   | 1.30    | %





76



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|           |  |              |        | 
|---------- |  | ------------ | ------ | 
|           |  | Year Ending  |       
|           |  | December 31, |       
|           |  |              |       
|           |  | (Dollars in  |       
|           |  | thousands)   |       
|2005       |  | $            | 2,487  | 
|2006       |  |              | 526    | 
|2007       |  |              | 568    | 
|2008       |  |              | 1,024  | 
|2009       |  |              | 652    | 
|Thereafter |  |              | 5,153  | 
|           |  |              |       
|           |  | $            | 10,410 | 
|           |  |              |       



|    |             
|--- | ------------
|12. | Income Taxes



|         |       |                        |        |        |      |   |        |        |  |   |        |        | 
|-------- | ----- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|         |       | 2004                   |        |        | 2003 |   |        | 2002   | 
|         |       |                        |        |        |      |   |        |        | 
|         |       | (Dollars in thousands) |       
|Current  |       | $                      | 29,036 |        |      | $ | 28,047 |        |  | $ | 24,235 |       
|Deferred |       |                        | (1,345 | )      |      |   | (640   | )      |  |   | 2,758  |       
|         |       |                        |        |        |      |   |        |        | 
|         | Total |                        | $      | 27,691 |      |   | $      | 27,407 |  |   | $      | 26,993 | 
|         |       |                        |        |        |      |   |        |        | 



|                               |                                                  |                           |   |        |                   |  |   |             |        |  |        |        |        |  |   |        |        | 
|------------------------------ | ------------------------------------------------ | ------------------------- | - | ------ | ----------------- |  | - | ----------- | ------ |  | ------ | ------ | ------ |  | - | ------ | ------ | 
|                               |                                                  | December 31, 2004         |   |        | December 31, 2003 | 
|                               |                                                  |                           |   |        |                   | 
|                               |                                                  | Temporary                 |   |        | Tax               |  |   | Temporary   |        |  | Tax    |       
|                               |                                                  | Differences               |   |        | Effect            |  |   | Differences |        |  | Effect |       
|                               |                                                  |                           |   |        |                   |  |   |             |        |  |        |       
|                               |                                                  | (Dollars in thousands)    |  
|Future deductible differences: |                                                  |                           |   |        |                   |  |   |             |        |  |        |        |        |  |   |       
|                               | Allowance for loan losses                        |                           | $ | 34,330 |                   |  | $ | 12,015      |        |  | $      | 31,264 |        |  | $ | 10,942 |       
|                               | Mortgage servicing rights                        |                           |   | 2,485  |                   |  |   | 870         |        |  |        | 3,558  |        |  |   | 1,245  |       
|                               | Unrealized loss on securities available for sale |                           |   | 3,461  |                   |  |   | 1,211       |        |  |        |       |        |  |   |       |       
|                               | Unfunded pension liability                       |                           |   | 1,494  |                   |  |   | 523         |        |  |        | 1,420  |        |  |   | 497    |       
|                               | Other                                            |                           |   | 3,457  |                   |  |   | 1,210       |        |  |        | 961    |        |  |   | 336    |       
|                               |                                                  |                           |   |        |                   |  |   |             |        |  |        |       
|                               |                                                  | Deferred income tax asset |   | $      | 45,227            |  |   |             | 15,829 |  |        | $      | 37,203 |  |   |        | 13,020 | 
|                               |                                                  |                           |   |        |                   |  |   |             |        |  |        |       

77



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                                   |                                                  |                               |   |        |                   |   |        |             |        |  |        |        |        |   |       |       |        | 
|---------------------------------- | ------------------------------------------------ | ----------------------------- | - | ------ | ----------------- | - | ------ | ----------- | ------ |  | ------ | ------ | ------ | - | ----- | ----- | ------ | 
|                                   |                                                  | December 31, 2004             |   |        | December 31, 2003 |  
|                                   |                                                  |                               |   |        |                   |  
|                                   |                                                  | Temporary                     |   |        | Tax               |   |        | Temporary   |        |  | Tax    |       
|                                   |                                                  | Differences                   |   |        | Effect            |   |        | Differences |        |  | Effect |       
|                                   |                                                  |                               |   |        |                   |   |        |             |        |  |        |       
|                                   |                                                  | (Dollars in thousands)        |  
|Future taxable differences:        |                                                  |                               |   |        |                   |   |        |             |        |  |        |        |        |   |       |      
|                                   | Unrealized gain on securities available for sale |                               | $ |       |                   |   | $      |            |        |  | $      | 4,741  |        |   | $     | 1,763 |       
|                                   | Market discount on securities                    |                               |   | 1,946  |                   |   |        | 681         |        |  |        | 1,626  |        |   |       | 569   |       
|                                   | Federal Home Loan Bank stock dividends           |                               |   | 2,793  |                   |   |        | 978         |        |  |        | 2,304  |        |   |       | 806   |       
|                                   | Bank premises                                    |                               |   | 17,461 |                   |   |        | 6,111       |        |  |        | 8,792  |        |   |       | 3,077 |       
|                                   | Core deposit intangibles and loan premiums       |                               |   | 37,298 |                   |   |        | 13,054      |        |  |        | 12,126 |        |   |       | 4,244 |       
|                                   |                                                  |                               |   |        |                   |   |        |             |        |  |        |       
|                                   |                                                  | Deferred income tax liability |   | $      | 59,498            |   |        |             | 20,824 |  |        | $      | 29,589 |   |       |       | 10,459 | 
|                                   |                                                  |                               |   |        |                   |   |        |             |        |  |        |       
|Net deferred tax asset (liability) |                                                  |                               |   |        |                   | $ | (4,995 | )           |        |  |        |        |        | $ | 2,561 |      
|                                   |                                                  |                               |   |        |                   |   |        |             |        |  |        |       



|                                                 |  |                         |       |   |      |  |       |      |  |  |       |  
|------------------------------------------------ |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                 |  | Year Ended December 31, |      
|                                                 |  |                         |      
|                                                 |  | 2004                    |       |   | 2003 |  |       | 2002 | 
|                                                 |  |                         |       |   |      |  |       |      | 
|Statutory federal income tax rate                |  |                         | 35.00 | % |      |  | 35.00 | %    |  |  | 35.00 | %
|Tax-exempt income from Bank-owned life insurance |  |                         | (2.55 | ) |      |  | (2.38 | )    |  |  | (1.90 | )
|Tax-exempt interest income                       |  |                         | (3.66 | ) |      |  | (2.59 | )    |  |  | (1.95 | )
|Other                                            |  |                         | 0.29  |   |      |  | 1.07  |      |  |  | 0.16  |  
|                                                 |  |                         |       |   |      |  |       |      | 
|Effective income tax rate                        |  |                         | 29.08 | % |      |  | 31.10 | %    |  |  | 31.31 | %
|                                                 |  |                         |       |   |      |  |       |      | 



|    |                     
|--- | --------------------
|13. | Comprehensive Income





|                                                            |  |                        |        |   |      |   |       |  
|----------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ----- | -
|                                                            |  | December 31,           |       
|                                                            |  |                        |       
|                                                            |  | 2004                   |        |   | 2003 |  
|                                                            |  |                        |        |   |      |  
|                                                            |  | (Dollars in thousands) |       
|Net unrealized gain (loss) on securities available for sale |  | $                      | (2,250 | ) |      | $ | 2,973 |  
|Minimum pension liability                                   |  |                        | (971   | ) |      |   | (923  | )
|                                                            |  |                        |        |   |      |  
|Total accumulated other comprehensive income (loss)         |  | $                      | (3,221 | ) |      | $ | 2,050 |  
|                                                            |  |                        |        |   |      |  



|    |                  
|--- | -----------------
|14. | Employee Benefits



| |                              
| | -----------------------------
| | Stock-Based Compensation Plan



78



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |              
| | -------------
| | Stock Options









|                                     |  |            |           |   |          |   |       |            |  |  |           |   |  |            |       |  |          |  |            |   |  |   |       | 
|------------------------------------ |  | ---------- | --------- | - | -------- | - | ----- | ---------- |  |  | --------- | - |  | ---------- | ----- |  | -------- |  | ---------- | - |  | - | ----- | 
|                                     |  | 2004       |           |   | 2003     |   |       | 2002       | 
|                                     |  |            |           |   |          |   |       |            | 
|                                     |  | Number of  |           |   | Weighted |   |       | Number of  |  |  | Weighted  |   |  | Number of  |       |  | Weighted | 
|                                     |  | Shares     |           |   | Average  |   |       | Shares     |  |  | Average   |   |  | Shares     |       |  | Average  | 
|                                     |  | Underlying |           |   | Exercise |   |       | Underlying |  |  | Exercise  |   |  | Underlying |       |  | Exercise | 
|                                     |  | Options    |           |   | Prices   |   |       | Options    |  |  | Prices    |   |  | Options    |       |  | Prices   | 
|                                     |  |            |           |   |          |   |       |            |  |  |           |   |  |            |       |  |          | 
|Outstanding at beginning of the year |  |            | 5,588,106 |   |          | $ | 11.36 |            |  |  | 5,146,192 |   |  | $          | 10.00 |  |          |  | 5,471,866  |   |  | $ | 7.36  | 
|Granted at-the-money                 |  |            | 861,051   |   |          |   | 20.78 |            |  |  | 1,237,200 |   |  |            | 15.52 |  |          |  | 1,276,000  |   |  |   | 15.60 | 
|Exercised                            |  |            | (837,684  | ) |          |   | 8.07  |            |  |  | (638,376  | ) |  |            | 7.34  |  |          |  | (1,539,406 | ) |  |   | 5.16  | 
|Forfeited                            |  |            | (235,772  | ) |          |   | 15.17 |            |  |  | (156,910  | ) |  |            | 16.15 |  |          |  | (62,268    | ) |  |   | 11.18 | 
|                                     |  |            |           |   |          |   |       |            |  |  |           |   |  |            |       |  |          | 
|Outstanding at end of year           |  |            | 5,375,701 |   |          | $ | 13.18 |            |  |  | 5,588,106 |   |  | $          | 11.36 |  |          |  | 5,146,192  |   |  | $ | 10.00 | 
|                                     |  |            |           |   |          |   |       |            |  |  |           |   |  |            |       |  |          | 
|Exercisable at end of year           |  |            | 2,455,914 |   |          | $ | 9.02  |            |  |  | 2,555,350 |   |  | $          | 7.53  |  |          |  | 2,400,210  |   |  | $ | 6.21  | 
|                                     |  |            |           |   |          |   |       |            |  |  |           |   |  |            |       |  |          | 



|                                                                       |  |      |      |  |      |   |      |      |  |   |      | 
|---------------------------------------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                                                       |  | 2004 |      |  | 2003 |   |      | 2002 | 
|                                                                       |  |      |      |  |      |   |      |      | 
|Weighted-average fair value of options granted at-the-money            |  | $    | 6.61 |  |      | $ | 4.76 |      |  | $ | 5.34 | 
|Weighted-average fair value of all options granted during the
    year |  | $    | 6.61 |  |      | $ | 4.76 |      |  | $ | 5.34 | 

79



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                         |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | --------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |           | Options Exercisable | 
|                         |  |                     |           |           |                     | 
|                         |  |                     |           | Weighted  |                     |  |          |          | 
|                         |  |                     |           | Average   |                     |  | Weighted |          |  |   |             | Weighted | 
|                         |  |                     |           | Remaining |                     |  | Average  |          |  |   |             | Average  | 
|                         |  | Number              |           |           | Contractual         |  |          | Exercise |  |   | Number      |          |  | Exercise |          
|Range of Exercise Prices |  | Outstanding         |           |           | Life                |  |          | Price    |  |   | Exercisable |          |  | Price    |          
|                         |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |          
|$0.10 to $2.50           |  |                     | 341,000   |           |                     |  | *        |          |  | $ | 1.62        |          |  |          | 341,000   |  |  | $ | 1.62  | 
|$2.51 to $5.58           |  |                     | 397,634   |           |                     |  | 2.1      |          |  |   | 4.33        |          |  |          | 397,634   |  |  |   | 4.33  | 
|$5.59 to $7.63           |  |                     | 170,700   |           |                     |  | 3.9      |          |  |   | 6.35        |          |  |          | 170,700   |  |  |   | 6.35  | 
|$7.64 to $10.10          |  |                     | 964,306   |           |                     |  | 4.5      |          |  |   | 9.02        |          |  |          | 806,888   |  |  |   | 8.92  | 
|$10.11 to $18.32         |  |                     | 2,441,710 |           |                     |  | 7.6      |          |  |   | 15.15       |          |  |          | 613,672   |  |  |   | 14.78 | 
|$18.33 to $20.96         |  |                     | 388,400   |           |                     |  | 7.9      |          |  |   | 19.55       |          |  |          | 126,020   |  |  |   | 20.01 | 
|$20.97 to $24.00         |  |                     | 671,951   |           |                     |  | 9.5      |          |  |   | 21.17       |          |  |          |          |  |  |   |      | 
|                         |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |          
|$0.10 to $24.00          |  |                     | 5,375,701 |           |                     |  | *        |          |  | $ | 13.18       |          |  |          | 2,455,914 |  |  | $ | 9.02  | 
|                         |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |          






|  |                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------
|* | All options with an exercise price between $0.10 to $2.50 are
    exercisable while the employee remains an employee at the
    Company.



| |                 
| | ----------------
| | Restricted Stock







|                                          |  |           |           |   |           |  |          |           |  |  |         |  
|----------------------------------------- |  | --------- | --------- | - | --------- |  | -------- | --------- |  |  | ------- | -
|                                          |  | 2004      |           |   | 2003      |  |          | 2002      | 
|                                          |  |           |           |   |           |  |          |           | 
|                                          |  | Number    |           |   | Number    |  |          | Number    | 
|                                          |  | of Shares |           |   | of Shares |  |          | of Shares | 
|                                          |  |           |           |   |           |  |          |           | 
|Outstanding at beginning of the year      |  |           | 293,810   |   |           |  | 324,528  |           |  |  | 94,670  |  
|Awards granted                            |  |           | 147,390   |   |           |  | 107,000  |           |  |  | 236,000 |  
|Awards vested                             |  |           | (103,310  | ) |           |  | (128,690 | )         |  |  |        |  
|Awards cancelled                          |  |           | (5,700    | ) |           |  | (9,028   | )         |  |  | (6,142  | )
|                                          |  |           |           |   |           |  |          |           | 
|Outstanding at end of year                |  |           | 332,190   |   |           |  | 293,810  |           |  |  | 324,528 |  
|                                          |  |           |           |   |           |  |          |           | 
|Shares available for award at end of year |  |           | 1,351,610 |   |           |  | 177,500  |           |  |  | 275,472 |  
|                                          |  |           |           |   |           |  |          |           | 

80



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                         
| | ----------------------------------------
| | Non-Employee Directors Deferred Fee Plan





| |              
| | -------------
| | Benefit Plans







|    |                          
|--- | -------------------------
|15. | Earnings Per Common Share



|                                                               |                                                            |                           |        |        |      |   |        |        |  |   |        |        | 
|-------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                               |                                                            | Year Ended December 31,   |       
|                                                               |                                                            |                           |       
|                                                               |                                                            | 2004                      |        |        | 2003 |   |        | 2002   | 
|                                                               |                                                            |                           |        |        |      |   |        |        | 
|                                                               |                                                            | (In thousands,            |       
|                                                               |                                                            | except per share amounts) |       
|Net income                                                     |                                                            | $                         | 68,543 |        |      | $ | 60,729 |        |  | $ | 59,206 |       
|Divided by average common shares and common share equivalents: |                                                            |                           |        |        |      |   |        |        |  |   |        |       
|                                                               | Average common shares outstanding                          |                           |        | 69,104 |      |   |        | 68,088 |  |   |        | 66,952 | 
|                                                               | Average common shares issuable under the stock option plan |                           |        | 1,771  |      |   |        | 1,628  |  |   |        | 1,940  | 
|                                                               |                                                            |                           |        |        |      |   |        |        | 
|                                                               | Total average common shares and common share equivalents   |                           |        | 70,875 |      |   |        | 69,716 |  |   |        | 68,892 | 
|                                                               |                                                            |                           |        |        |      |   |        |        | 
|Basic earnings per common share                                |                                                            | $                         | 0.99   |        |      | $ | 0.89   |        |  | $ | 0.88   |       
|                                                               |                                                            |                           |        |        |      |   |        |        | 
|Diluted earnings per common share                              |                                                            | $                         | 0.97   |        |      | $ | 0.87   |        |  | $ | 0.86   |       
|                                                               |                                                            |                           |        |        |      |   |        |        | 

81



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|    |                              
|--- | -----------------------------
|16. | Commitments and Contingencies



| |           
| | ----------
| | Litigation





| |       
| | ------
| | Leases



|           |  |                        |        | 
|---------- |  | ---------------------- | ------ | 
|           |  | Year Ending            |       
|           |  | December 31,           |       
|           |  |                        |       
|           |  | (Dollars in thousands) |       
|2005       |  | $                      | 4,983  | 
|2006       |  |                        | 4,506  | 
|2007       |  |                        | 3,797  | 
|2008       |  |                        | 5,371  | 
|2009       |  |                        | 5,073  | 
|Thereafter |  |                        | 33,004 | 
|           |  |                        |       
|           |  | $                      | 56,734 | 
|           |  |                        |       





|           |  |                        |       | 
|---------- |  | ---------------------- | ----- | 
|           |  | Year Ending            |      
|           |  | December 31,           |      
|           |  |                        |      
|           |  | (Dollars in thousands) |      
|2005       |  | $                      | 946   | 
|2006       |  |                        | 760   | 
|2007       |  |                        | 397   | 
|2008       |  |                        | 33    | 
|2009       |  |                        | 2     | 
|Thereafter |  |                        |      | 
|           |  |                        |      
|           |  | $                      | 2,138 | 
|           |  |                        |      

82



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|17. | Regulatory Capital Compliance









|                        |                                              |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |       |  
|----------------------- | -------------------------------------------- | ---------------------- |  | --------------- | ----------- |  | ----------------- | ----------------- | ----- | ------------------ | ----- | - | ------- | ------ |  |  | ----- | --- |  | - | ------- |  |  |  | ----- | -
|                        |                                              |                        |  |                 |             |  |                   |                   |       | Minimum to Be Well |      
|                        |                                              |                        |  |                 |             |  |                   | Capitalized Under |      
|                        |                                              |                        |  | Minimum Capital |             |  | Prompt Corrective |                  
|                        |                                              | Actual                 |  |                 | Requirement |  |                   | Action Provisions |      
|                        |                                              |                        |  |                 |             |  |                   |                   |      
|                        |                                              | Amount                 |  |                 | Ratio       |  |                   | Amount            |       |                    | Ratio |   |         | Amount |  |  | Ratio |    
|                        |                                              |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |    
|                        |                                              | (Dollars in thousands) | 
|As of December 31, 2004 |                                              |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  | 
|                        | Total Capital (to Risk Weighted Assets):     |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |      
|                        |                                              | The Company            |  | $               | 683,804     |  |                   |                   | 11.02 | %                  |       | $ | 496,231 |        |  |  | 8.00  | %   |  | $ | 620,289 |  |  |  | 10.00 | %
|                        |                                              | The Bank               |  |                 | 676,090     |  |                   |                   | 10.91 |                    |       |   | 495,559 |        |  |  | 8.00  |     |  |   | 619,449 |  |  |  | 10.00 |  
|                        | Tier 1 Capital (to Risk Weighted Assets):    |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 559,396     |  |                   |                   | 9.02  |                    |       |   | 248,115 |        |  |  | 4.00  |     |  |   | 372,173 |  |  |  | 6.00  |  
|                        |                                              | The Bank               |  |                 | 626,074     |  |                   |                   | 10.11 |                    |       |   | 247,780 |        |  |  | 4.00  |     |  |   | 371,670 |  |  |  | 6.00  |  
|                        | Tier 1 Capital (to Adjusted Average Assets): |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 559,396     |  |                   |                   | 7.81  |                    |       |   | 286,337 |        |  |  | 4.00  | (1) |  |   | 357,921 |  |  |  | 5.00  |  
|                        |                                              | The Bank               |  |                 | 626,074     |  |                   |                   | 8.77  |                    |       |   | 285,522 |        |  |  | 4.00  | (1) |  |   | 356,903 |  |  |  | 5.00  |  

83



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                        |                                              |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |       |  
|----------------------- | -------------------------------------------- | ---------------------- |  | --------------- | ----------- |  | ----------------- | ----------------- | ----- | ------------------ | ----- | - | ------- | ------ |  |  | ----- | --- |  | - | ------- |  |  |  | ----- | -
|                        |                                              |                        |  |                 |             |  |                   |                   |       | Minimum to Be Well |      
|                        |                                              |                        |  |                 |             |  |                   | Capitalized Under |      
|                        |                                              |                        |  | Minimum Capital |             |  | Prompt Corrective |                  
|                        |                                              | Actual                 |  |                 | Requirement |  |                   | Action Provisions |      
|                        |                                              |                        |  |                 |             |  |                   |                   |      
|                        |                                              | Amount                 |  |                 | Ratio       |  |                   | Amount            |       |                    | Ratio |   |         | Amount |  |  | Ratio |    
|                        |                                              |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |    
|                        |                                              | (Dollars in thousands) | 
|As of December 31, 2003 |                                              |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  | 
|                        | Total Capital (to Risk Weighted Assets):     |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |      
|                        |                                              | The Company            |  | $               | 558,858     |  |                   |                   | 11.90 | %                  |       | $ | 375,630 |        |  |  | 8.00  | %   |  | $ | 469,537 |  |  |  | 10.00 | %
|                        |                                              | The Bank               |  |                 | 504,960     |  |                   |                   | 10.77 |                    |       |   | 375,132 |        |  |  | 8.00  |     |  |   | 468,915 |  |  |  | 10.00 |  
|                        | Tier 1 Capital (to Risk Weighted Assets):    |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 515,850     |  |                   |                   | 10.99 |                    |       |   | 187,815 |        |  |  | 4.00  |     |  |   | 281,722 |  |  |  | 6.00  |  
|                        |                                              | The Bank               |  |                 | 461,438     |  |                   |                   | 9.84  |                    |       |   | 187,566 |        |  |  | 4.00  |     |  |   | 281,349 |  |  |  | 6.00  |  
|                        | Tier 1 Capital (to Adjusted Average Assets): |                        |  |                 |             |  |                   |                   |       |                    |       |   |         |        |  |  |       |     |  |   |         |  |  |  |      
|                        |                                              | The Company            |  |                 | 515,850     |  |                   |                   | 9.15  |                    |       |   | 225,448 |        |  |  | 4.00  | (1) |  |   | 281,810 |  |  |  | 5.00  |  
|                        |                                              | The Bank               |  |                 | 461,438     |  |                   |                   | 8.20  |                    |       |   | 225,223 |        |  |  | 4.00  | (1) |  |   | 281,529 |  |  |  | 5.00  |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Tier 1 leverage ratio consists of Tier 1 capital
    divided by quarterly average total assets, excluding goodwill,
    core deposits intangibles, and certain other items. The minimum
    leverage ratio guideline is 3% for institutions with well
    diversified risk, including no undue interest rate exposure,
    excellent control systems, high liquidity, good earnings, well
    managed on- and off-balance sheet activities that are generally
    considered to be strong banking organizations, rated composite 1
    under applicable federal guidelines, and that are not
    experiencing or anticipating significant growth.









84



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                    
|--- | -------------------
|18. | Segment Information







|                           |  |                         |           |  |          |   |         |              |  |   |              |   |  |      |           |  |          |   |           |              |  |   |              |  |  |   |          |   |  |   |           | 
|-------------------------- |  | ----------------------- | --------- |  | -------- | - | ------- | ------------ |  | - | ------------ | - |  | ---- | --------- |  | -------- | - | --------- | ------------ |  | - | ------------ |  |  | - | -------- | - |  | - | --------- | 
|                           |  | Year Ended December 31, |          
|                           |  |                         |          
|                           |  | 2004                    |           |  | 2003     |  
|                           |  |                         |           |  |          |  
|                           |  | Bank                    |           |  | Mortgage |   |         | Eliminations |  |   | Consolidated |   |  | Bank |           |  | Mortgage |   |           | Eliminations |  |   | Consolidated | 
|                           |  |                         |           |  |          |   |         |              |  |   |              |   |  |      |           |  |          |   |           |              |  |   |              | 
|                           |  | (Dollars in thousands)  |          
|Interest income            |  | $                       | 273,942   |  |          | $ | 15,544  |              |  | $ | (6,257       | ) |  | $    | 283,229   |  |          | $ | 226,222   |              |  | $ | 15,571       |  |  | $ | (5,549   | ) |  | $ | 236,244   | 
|Interest expense           |  |                         | 56,677    |  |          |   | 6,257   |              |  |   | (6,257       | ) |  |      | 56,677    |  |          |   | 45,725    |              |  |   | 5,549        |  |  |   | (5,549   | ) |  |   | 45,725    | 
|                           |  |                         |           |  |          |   |         |              |  |   |              |   |  |      |           |  |          |   |           |              |  |   |              | 
|Net interest
    income    |  |                         | 217,265   |  |          |   | 9,287   |              |  |   |             |   |  |      | 226,552   |  |          |   | 180,497   |              |  |   | 10,022       |  |  |   |         |   |  |   | 190,519   | 
|Provision for loan losses  |  |                         | 6,090     |  |          |   | 4,122   |              |  |   |             |   |  |      | 10,212    |  |          |   | 11,036    |              |  |   | 814          |  |  |   |         |   |  |   | 11,850    | 
|Noninterest
    income     |  |                         | 91,938    |  |          |   | 4,567   |              |  |   |             |   |  |      | 96,505    |  |          |   | 76,955    |              |  |   | 6,254        |  |  |   |         |   |  |   | 83,209    | 
|Noninterest
    expense    |  |                         | 209,432   |  |          |   | 7,179   |              |  |   |             |   |  |      | 216,611   |  |          |   | 165,829   |              |  |   | 7,913        |  |  |   |         |   |  |   | 173,742   | 
|                           |  |                         |           |  |          |   |         |              |  |   |              |   |  |      |           |  |          |   |           |              |  |   |              | 
|Income before income taxes |  | $                       | 93,681    |  |          | $ | 2,553   |              |  | $ |             |   |  | $    | 96,234    |  |          | $ | 80,587    |              |  | $ | 7,549        |  |  | $ |         |   |  | $ | 88,136    | 
|                           |  |                         |           |  |          |   |         |              |  |   |              |   |  |      |           |  |          |   |           |              |  |   |              | 
|Total assets               |  | $                       | 7,474,551 |  |          | $ | 387,878 |              |  | $ | (356,826     | ) |  | $    | 7,505,603 |  |          | $ | 5,917,762 |              |  | $ | 287,725      |  |  | $ | (258,354 | ) |  | $ | 5,947,133 | 
|                           |  |                         |           |  |          |   |         |              |  |   |              |   |  |      |           |  |          |   |           |              |  |   |              | 

|                           |  |                              |           |  |          |   |         |              |  |   |              |   |  |   |           | 
|-------------------------- |  | ---------------------------- | --------- |  | -------- | - | ------- | ------------ |  | - | ------------ | - |  | - | --------- | 
|                           |  | Year Ended December 31, 2002 |          
|                           |  |                              |          
|                           |  | Bank                         |           |  | Mortgage |   |         | Eliminations |  |   | Consolidated |  
|                           |  |                              |           |  |          |   |         |              |  |   |              |  
|                           |  | (Dollars in thousands)       |          
|Interest income            |  | $                            | 225,974   |  |          | $ | 15,821  |              |  | $ | (6,201       | ) |  | $ | 235,594   | 
|Interest expense           |  |                              | 59,779    |  |          |   | 6,201   |              |  |   | (6,201       | ) |  |   | 59,779    | 
|                           |  |                              |           |  |          |   |         |              |  |   |              |  
|Net interest income        |  |                              | 166,195   |  |          |   | 9,620   |              |  |   |             |   |  |   | 175,815   | 
|Provision for loan losses  |  |                              | 10,746    |  |          |   | 291     |              |  |   |             |   |  |   | 11,037    | 
|Noninterest income         |  |                              | 66,209    |  |          |   | 927     |              |  |   |             |   |  |   | 67,136    | 
|Noninterest expense        |  |                              | 139,375   |  |          |   | 6,340   |              |  |   |             |   |  |   | 145,715   | 
|                           |  |                              |           |  |          |   |         |              |  |   |              |  
|Income before income taxes |  | $                            | 82,283    |  |          | $ | 3,916   |              |  | $ |             |   |  | $ | 86,199    | 
|                           |  |                              |           |  |          |   |         |              |  |   |              |  
|Total assets               |  | $                            | 5,148,137 |  |          | $ | 289,021 |              |  | $ | (263,954     | ) |  | $ | 5,173,204 | 
|                           |  |                              |           |  |          |   |         |              |  |   |              |  



85



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|19. | Financial Instruments with Off-Balance Sheet Risk and
    Concentrations of Credit Risk





|                                                             |  |                        |           |  |          |   |           | 
|------------------------------------------------------------ |  | ---------------------- | --------- |  | -------- | - | --------- | 
|                                                             |  | December 31,           |          
|                                                             |  |                        |          
|                                                             |  | 2004                   |           |  | 2003     |  
|                                                             |  | Contract               |           |  | Contract |  
|                                                             |  | Amount                 |           |  | Amount   |  
|                                                             |  |                        |           |  |          |  
|                                                             |  | (Dollars in thousands) |          
|Unfunded loan commitments including unfunded lines of credit |  | $                      | 2,720,246 |  |          | $ | 2,135,973 | 
|Standby letters of credit                                    |  |                        | 352,555   |  |          |   | 227,041   | 
|Commercial letters of credit                                 |  |                        | 19,496    |  |          |   | 9,528     | 
|Unfunded commitments to unconsolidated investees             |  |                        | 12,621    |  |          |   | 3,753     | 
|Commitments to sell mortgage loans                           |  |                        | 12,609    |  |          |   | 10,577    | 
|Guarantees on GNMA securities administered                   |  |                        | 82,073    |  |          |   | 86,045    | 







86



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|    |                                     
|--- | ------------------------------------
|20. | Fair Values of Financial Instruments









Cash and Cash Equivalents:


Securities:


Loans Held for Sale:


Loans and Accrued Interest Receivable:


87



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Derivatives.


Off-Balance-Sheet Instruments:


Deposit Liabilities and Accrued Interest Payable:


Borrowings:




|                                              |  |                        |           |   |                   |   |           |          |  |   |            |   |  |   |           |  
|--------------------------------------------- |  | ---------------------- | --------- | - | ----------------- | - | --------- | -------- |  | - | ---------- | - |  | - | --------- | -
|                                              |  | December 31, 2004      |           |   | December 31, 2003 |  
|                                              |  |                        |           |   |                   |  
|                                              |  | Carrying               |           |   | Estimated         |   |           | Carrying |  |   | Estimated  |  
|                                              |  | Amount                 |           |   | Fair Value        |   |           | Amount   |  |   | Fair Value |  
|                                              |  |                        |           |   |                   |   |           |          |  |   |            |  
|                                              |  | (Dollars in thousands) |          
|ASSETS                                       
|Cash and due from banks                       |  | $                      | 327,558   |   |                   | $ | 327,558   |          |  | $ | 390,890    |   |  | $ | 390,890   |  
|Federal funds sold and other cash equivalents |  |                        | 14,417    |   |                   |   | 14,417    |          |  |   | 94,908     |   |  |   | 94,908    |  
|Securities                                    |  |                        | 1,985,237 |   |                   |   | 1,985,773 |          |  |   | 1,549,398  |   |  |   | 1,549,398 |  
|Loans held for sale                           |  |                        | 107,404   |   |                   |   | 107,512   |          |  |   | 96,899     |   |  |   | 96,899    |  
|Loans held for investment                     |  |                        | 4,539,578 |   |                   |   | 4,526,456 |          |  |   | 3,491,673  |   |  |   | 3,469,022 |  
|Allowance for loan losses                     |  |                        | (49,408   | ) |                   |   | (49,408   | )        |  |   | (41,611    | ) |  |   | (41,611   | )
|Accrued interest receivable                   |  |                        | 30,200    |   |                   |   | 30,200    |          |  |   | 21,630     |   |  |   | 21,630    |  
|                                             
|LIABILITIES                                  
|Deposits                                      |  | $                      | 5,620,043 |   |                   | $ | 5,064,643 |          |  | $ | 4,403,239  |   |  | $ | 4,092,790 |  
|Securities sold under repurchase agreements   |  |                        | 273,344   |   |                   |   | 273,344   |          |  |   | 285,571    |   |  |   | 285,460   |  
|Borrowings                                    |  |                        | 994,520   |   |                   |   | 996,175   |          |  |   | 731,359    |   |  |   | 732,099   |  
|Accrued interest payable                      |  |                        | 2,902     |   |                   |   | 2,902     |          |  |   | 1,822      |   |  |   | 1,822     |  



88



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                                   
|--- | ----------------------------------
|21. | Supplemental Cash Flow Information



|                                             |                                                    |                        |        |        |      |   |        |       |  |   |        |       | 
|-------------------------------------------- | -------------------------------------------------- | ---------------------- | ------ | ------ | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                             |                                                    | December 31,           |       
|                                             |                                                    |                        |       
|                                             |                                                    | 2004                   |        |        | 2003 |   |        | 2002  | 
|                                             |                                                    |                        |        |        |      |   |        |       | 
|                                             |                                                    | (Dollars in thousands) |       
|Cash paid for interest                       |                                                    | $                      | 55,597 |        |      | $ | 45,557 |       |  | $ | 60,687 |      
|Cash paid for income taxes                   |                                                    |                        | 27,884 |        |      |   | 30,850 |       |  |   | 13,050 |      
|Non-cash investing and financing activities: |                                                    |                        |        |        |      |   |        |       |  |   |        |      
|                                             | Loans transferred to foreclosed real estate        |                        |        | 10,489 |      |   |        | 4,393 |  |   |        | 1,115 | 
|                                             | Issuance of common stock for the Klein acquisition |                        |        | 15,802 |      |   |        |      |  |   |        |      | 



|                                |                     |                        |         |         |                  |   |         |                 |  |   |          |         | 
|------------------------------- | ------------------- | ---------------------- | ------- | ------- | ---------------- | - | ------- | --------------- |  | - | -------- | ------- | 
|                                |                     | Maxim                  |         |         | Reunion          |   |         | Klein           | 
|                                |                     | July 1, 2003           |         |         | January 31, 2004 |   |         | October 1, 2004 | 
|                                |                     |                        |         |         |                  |   |         |                 | 
|                                |                     | (Dollars in thousands) |        
|Fair value of assets acquired   |                     | $                      | 348,788 |         |                  | $ | 261,523 |                 |  | $ | 713,074  |        
|Cash paid for the capital stock |                     |                        | (63,040 | )       |                  |   | (50,000 | )               |  |   | (165,000 | )      
|                                |                     |                        |         |         |                  |   |         |                 | 
|                                | Liabilities assumed |                        | $       | 285,748 |                  |   | $       | 211,523         |  |   | $        | 548,074 | 
|                                |                     |                        |         |         |                  |   |         |                 | 



|    |                                                   
|--- | --------------------------------------------------
|22. | Parent Company Only Condensed Financial Statements



BALANCE SHEET


|                                                   |                                            |                        |         |         |      |   |         |         | 
|-------------------------------------------------- | ------------------------------------------ | ---------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                                   |                                            | December 31,           |        
|                                                   |                                            |                        |        
|                                                   |                                            | 2004                   |         |         | 2003 |  
|                                                   |                                            |                        |         |         |      |  
|                                                   |                                            | (Dollars in thousands) |        
|ASSETS                                            
|Cash and cash equivalents                          |                                            | $                      | 943     |         |      | $ | 48,720  |        
|Securities  available for sale                    |                                            |                        |        |         |      |   | 2,257   |        
|Investment in subsidiary                           |                                            |                        | 801,643 |         |      |   | 498,784 |        
|Other assets                                       |                                            |                        | 2,962   |         |      |   | 2,053   |        
|                                                   |                                            |                        |         |         |      |  
|                                                   | Total assets                               |                        | $       | 805,548 |      |   | $       | 551,814 | 
|                                                   |                                            |                        |         |         |      |  
|LIABILITIES AND SHAREHOLDERS EQUITY              
|Senior subordinated debenture                      |                                            | $                      | 75,000  |         |      | $ |        |        
|Junior subordinated deferrable interest debentures |                                            |                        | 149,486 |         |      |   | 51,547  |        
|Accrued interest payable                           |                                            |                        | 645     |         |      |   | 493     |        
|Other liabilities                                  |                                            |                        | 3       |         |      |   | 453     |        
|Shareholders equity                               |                                            |                        | 580,414 |         |      |   | 499,321 |        
|                                                   |                                            |                        |         |         |      |  
|                                                   | Total liabilities and shareholders equity |                        | $       | 805,548 |      |   | $       | 551,814 | 
|                                                   |                                            |                        |         |         |      |  

89



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


STATEMENT OF INCOME


|                                             |                                    |                         |        |        |      |   |        |        |   |   |        |        |  
|-------------------------------------------- | ---------------------------------- | ----------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                             |                                    | Year Ended December 31, |       
|                                             |                                    |                         |       
|                                             |                                    | 2004                    |        |        | 2003 |   |        | 2002   |  
|                                             |                                    |                         |        |        |      |   |        |        |  
|                                             |                                    | (Dollars in thousands)  |       
|Interest income on securities                |                                    | $                       | 86     |        |      | $ | 100    |        |   | $ | 118    |       
|Interest expense on borrowings               |                                    |                         | 3,561  |        |      |   | 516    |        |   |   | 106    |       
|                                             |                                    |                         |        |        |      |   |        |        |  
|                                             | Net interest expense               |                         |        | (3,475 | )    |   |        | (416   | ) |   |        | 12     |  
|                                             |                                    |                         |        |        |      |   |        |        |  
|Other income:                                |                                    |                         |        |        |      |   |        |        |   |   |        |       
|                                             | Dividends received from subsidiary |                         |        | 64,400 |      |   |        | 51,000 |   |   |        | 10,980 |  
|                                             | Other operating income             |                         |        | 9      |      |   |        |       |   |   |        |       |  
|                                             | Gain on sale of securities         |                         |        | 6      |      |   |        |       |   |   |        | 334    |  
|                                             |                                    |                         |        |        |      |   |        |        |  
|                                             | Total other income                 |                         |        | 64,415 |      |   |        | 51,000 |   |   |        | 11,314 |  
|                                             |                                    |                         |        |        |      |   |        |        |  
|Operating expenses                           |                                    |                         | 2,133  |        |      |   | 1,661  |        |   |   | 953    |       
|Equity in undistributed income of subsidiary |                                    |                         | 7,742  |        |      |   | 11,067 |        |   |   | 48,643 |       
|                                             |                                    |                         |        |        |      |   |        |        |  
|                                             | Income before income taxes         |                         |        | 66,549 |      |   |        | 59,990 |   |   |        | 59,016 |  
|                                             | Income tax benefit                 |                         |        | (1,994 | )    |   |        | (739   | ) |   |        | (190   | )
|                                             |                                    |                         |        |        |      |   |        |        |  
|Net income                                   |                                    | $                       | 68,543 |        |      | $ | 60,729 |        |   | $ | 59,206 |       
|                                             |                                    |                         |        |        |      |   |        |        |  

90



---



##### 



SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


STATEMENT OF CASH FLOWS


|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |         |         |     |         |         |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | --------------------------------------------------- | -------- | ------ | -------- | ------ | -------- | ------- | ------- | --- | ------- | ------- | ------ | -
|                                                     |                                                                                       | Year Ended December 31,                                                   |                                                    
|                                                     |                                                                                       |                                                                           |                                                    
|                                                     |                                                                                       | 2004                                                                      |                                                     |          | 2003   |          |        | 2002     |        
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|                                                     |                                                                                       | (Dollars in thousands)                                                    |                                                    
|Cash flows from operating activities:                |                                                                                       |                                                                           |                                                     |          |        |          |        |          |         |         |     |        
|                                                     | Net income                                                                            |                                                                           | $                                                   | 68,543   |        |          | $      | 60,729   |         |         | $   | 59,206  |        
|                                                     | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                           |                                                     |          |        |          |        |          |         |         |     |         |        
|                                                     |                                                                                       | Equity in undistributed income of subsidiary                              |                                                     |          | (7,742 | )        |        |          | (11,067 | )       |     |         | (48,643 | )     
|                                                     |                                                                                       | Gain on sale of securities                                                |                                                     |          | (6     | )        |        |          |        |         |     |         |        |       
|                                                     |                                                                                       | Amortization                                                              |                                                     |          | 1,766  |          |        |          | 1,498   |         |     |         | 853     |       
|                                                     |                                                                                       | Increase in other assets                                                  |                                                     |          | (774   | )        |        |          | (189    | )       |     |         | (186    | )     
|                                                     |                                                                                       | Increase (decrease) in accrued interest payable and other
    liabilities |                                                     |          | (298   | )        |        |          | 946     |         |     |         |        |       
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|                                                     |                                                                                       |                                                                           | Net cash provided by operating activities           |          |        | 61,489   |        |          |         | 51,917  |     |         |         | 11,230 |  
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|Cash flow from investing activities:                 |                                                                                       |                                                                           |                                                     |          |        |          |        |          |         |         |     |        
|                                                     | Purchase of securities available for sale                                             |                                                                           |                                                     | (3       | )      |          |        | (2,128   | )       |         |     | (7,968  | )      
|                                                     | Sales of securities available for sale                                                |                                                                           |                                                     | 2,258    |        |          |        | 12,025   |         |         |     |        |        
|                                                     | Contributions to subsidiaries                                                         |                                                                           |                                                     | (191,066 | )      |          |        | (145,413 | )       |         |     | (845    | )      
|                                                     | Purchase of Maxim, net of cash acquired of $142,658                                   |                                                                           |                                                     |         |        |          |        | 79,618   |         |         |     |        |        
|                                                     | Purchase of Reunion, net of cash acquired of $30,596                                  |                                                                           |                                                     | (19,404  | )      |          |        |         |         |         |     |        |        
|                                                     | Purchase of Klein, net of cash acquired of $78,060                                    |                                                                           |                                                     | (71,138  | )      |          |        |         |         |         |     |        |        
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|                                                     |                                                                                       |                                                                           | Net cash used in investing activities               |          |        | (279,353 | )      |          |         | (55,898 | )   |         |         | (8,813 | )
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|Cash flows from financing activities:                |                                                                                       |                                                                           |                                                     |          |        |          |        |          |         |         |     |        
|                                                     | Proceeds from borrowings                                                              |                                                                           |                                                     | 172,939  |        |          |        | 51,547   |         |         |     |        |        
|                                                     | Payments on borrowings                                                                |                                                                           |                                                     |         |        |          |        |         |         |         |     | (10,000 | )      
|                                                     | Payments of dividends on common stock                                                 |                                                                           |                                                     | (8,301   | )      |          |        | (3,418   | )       |         |     |        |        
|                                                     | Net proceeds from issuance of common stock                                            |                                                                           |                                                     | 6,757    |        |          |        | 4,715    |         |         |     | 7,842   |        
|                                                     | Purchase of treasury stock                                                            |                                                                           |                                                     | (1,308   | )      |          |        | (416     | )       |         |     |        |        
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|                                                     |                                                                                       |                                                                           | Net cash provided by (used in) financing activities |          |        | 170,087  |        |          |         | 52,428  |     |         |         | (2,158 | )
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|Net increase (decrease) in cash and cash equivalents |                                                                                       |                                                                           | (47,777                                             | )        |        |          | 48,447 |          |         |         | 259 |        
|Cash and cash equivalents at beginning of period     |                                                                                       |                                                                           | 48,720                                              |          |        |          | 273    |          |         |         | 14  |        
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        
|Cash and cash equivalents at end of period           |                                                                                       | $                                                                         | 943                                                 |          |        | $        | 48,720 |          |         | $       | 273 |        
|                                                     |                                                                                       |                                                                           |                                                     |          |        |          |        |          |        

91



---



##### 



EXHIBIT INDEX


(b) * Exhibits (1)


| |        |  |  |   |  |                                                                                                                                                                                                                                                                                         
| | ------ |  |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1    |  |  |  |  | Articles of Incorporation of the Company, restated as of
    May 1, 2001 (incorporated by reference to Exhibit 4.1
    to the Companys Form S-8 Registration Statement
    No. 333-60190)                                                                                              
| | 3.2    |  |  |  |  | Bylaws of the Company (Restated as of December 31, 1996)                                                                                                                                                                                                                                
| | 4.1    |  |  |  |  | Specimen Common Stock certificate                                                                                                                                                                                                                                                       
| | 4.2    |  |  |  |  | Indenture, dated as of September 24, 2004, between the
    Company, as Issuer, and Wells Fargo Bank National Association,
    as Trustee (incorporated by reference to Exhibit 4.2 to the
    Companys Current Report on Form 8-K filed
    September 28, 2004)                        
| | 10.1  |  |  |  |  | 1989 Stock Option Plan, amended and restated as of May 29,
    1998 (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended March 31, 2000)                                                                    
| | 10.2  |  |  |  |  | 1993 Stock Option Plan, amended and restated as of May 29,
    1998 (incorporated by reference to Exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended March 31, 2000)                                                                    
| | 10.3  |  |  |  |  | Form of Stock Option Agreement under 1989 Stock Option Plan and
    1993 Stock Option Plan                                                                                                                                                                                              
| | 10.4  |  |  |  |  | 1996 Stock Option Plan, as amended January 24, 2000
    (incorporated by reference to Exhibit 10.4 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 1999)                                                                                            
| | 10.5  |  |  |  |  | Form of Incentive Stock Option Agreement under 1996 Stock Option
    Plan (incorporated by reference to Exhibit 10.5 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2003)                                                                          
| | 10.6  |  |  |  |  | Form of Non-qualified Stock Option Agreement under 1996 Stock
    Option Plan (incorporated by reference to Exhibit 10.6 to
    the Companys Annual Report on Form 10-K for the year
    ended December 31, 2003)                                                                      
| | 10.7  |  |  |  |  | Form of Stock Option Agreement for Directors under 1996 Stock
    Option Plan (incorporated by reference to Exhibit 10.8 to
    the Companys Form S-1 Registration Statement
    No. 333-16509)                                                                                        
| | 10.8  |  |  |  |  | Form of Change in Control Agreement between the Company and each
    of Joseph H. Argue III, David C. Farries, and
    Steve D. Stephens (incorporated by reference to
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended June 30, 2000)
| | 10.9  |  |  |  |  | Form of Change in Control Agreement between the Company and Dale
    Andreas, Kenneth Olan, and Walter L. Ward, Jr.
    (incorporated by reference to Exhibit 10.10 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2002)                           
| | 10.10 |  |  |  |  | Employment Agreement, amended and restated as of
    October 19, 2004, between the Company and Walter E.
    Johnson (incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    October 22, 2004)                                             
| | 10.11 |  |  |  |  | Restricted Stock Plan (incorporated by reference to
    Appendix B to the Companys Proxy Statement dated
    March 16, 2001 for its 2001 Annual Meeting of Shareholders)                                                                                                               
| | 10.12 |  |  |  |  | Form of Restricted Stock Agreement under the Restricted Stock
    Plan (incorporated by reference to Exhibit 4.6 to the
    Companys Form S-8 Registration Statement
    No. 333-60190)                                                                                                
| | 10.13 |  |  |  |  | Non-Employee Directors Deferred Fee Plan (incorporated by
    reference to Exhibit 4.3 to the Companys
    Form S-8 Registration Statement No. 333-74452)                                                                                                                              
| | 10.14 |  |  |  |  | Form of Deferral Election Form under Non-Employee Directors
    Deferred Fee Plan (incorporated by reference to Exhibit 4.4
    to the Companys Form S-8 Registration Statement
    No. 333-74452)                                                                                     
| | 10.15  |  |  |  |  | Purchase and Sale Agreement between TCP Renaissance Partners,
    L.P. and Southwest Bank of Texas, N.A., dated May 24, 2002
    (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended September 30, 2002)   
| | 10.16  |  |  |  |  | Subordinated Debenture Purchase Agreement, dated as of
    September 22, 2004, between the Company and Wisconsin
    Capital Corporation (incorporated by reference to
    Exhibit 4.1 to the Companys Current Report on
    Form 8-K filed September 28, 2004)                        

92



---



##### 



| |        |  |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------ |  |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.17  |  |  |  |  | Southwest Bancorporation of Texas, Inc. Amended and Restated
    Non-Employee Directors Deferred Fee Plan (incorporated by
    reference to Appendix A to the Companys Proxy
    Statement filed March 25, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 10.18  |  |  |  |  | Southwest Bancorporation of Texas, Inc. 2004 Omnibus Incentive
    Plan, dated May 5, 2004 (incorporated by reference to
    Appendix B to the Companys Proxy Statement, filed
    with the Commission on March 25, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 10.19 |  |  |   |  | 1996 Stock Option Plan, Amended and Restated as of June 4,
    2002 (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended June 30, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.20 |  |  |  |  | Change in Control Agreement between the Company and Paul B.
    Murphy, Jr., Amended and Restated as of June 4, 2002
    (incorporated by reference to Exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended June 30, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.21 |  |  |  |  | Form of Change in Control Agreement [Three Year] between the
    Company and Scott J. McLean, Terry Kelly, and
    Randall E. Meyer (incorporated by reference to
    Exhibit 10.21 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 10.22 |  |  |  |  | Form of Change in Control Agreement [Two Year] between the
    Company and Paul A. Port (incorporated by reference to
    Exhibit 10.22 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 10.23 |  |  |  |  | First Amendment to Change In Control Agreement [Two Year], dated
    as of June 4, 2002 between the Company and David C.
    Farries, Joseph H. Argue III, Steve D. Stephens,
    and Walter L. Ward, Jr. (incorporated by reference to
    Exhibit 10.20 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 10.24 |  |  |  |  | Form of Change in Control Agreement between the Company and John
    Drew and Marylyn Manis-Hassanein (incorporated by reference to
    Exhibit 10.9 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 10.25  |  |  |  |  | Form of Indemnification Agreements between the Company and
    Willie J. Alexander, Carin M. Barth, John B.
    Brock III, Timothy R. Brown, Kirbyjon H. Caldwell,
    Ernest H. Cockrell, J. David Heaney, Paul W.
    Hobby, John W. Johnson, Walter E. Johnson,
    Barry M. Lewis, Fred R. Lummis, Scott J. McLean,
    James G. Moses, Paul B. Murphy, Jr., Andres
    Palandjoglou, Wilhelmina E. Robertson, Thomas F.
    Soriero, Sr., Stanley D. Stearns, Manuel Urquidi,
    Mark A. Wallace, Dale A. Andreas, Joseph H.
    Argue III, E. Reginald Brewer, Frank D. Cox,
    John O. Drew, Michael R. Duckworth, David C.
    Farries, Joseph Goyne, Debra J. Innes, Terry Kelley,
    Conrad W. Magouirk, Marylyn Manis-Hassanein, George
    Marshall, Randall E. Meyer, Kenneth W. Olan,
    P. Allan Port, Steve D. Stephens, Barbara S.
    Vilutis and W. Lane Ward (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed January 6, 2005)
| | 10.26 |  |  |  |  | Form of Change of Control Agreement [One Year] between the
    Company and Laurence L. Lehman III (incorporated by
    reference to Exhibit 10.23 to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | **21.1 |  |  |  |  | List of subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | **23.1 |  |  |  |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | **31.1 |  |  |  |  | Certification of the Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | **31.2 |  |  |  |  | Certification of the Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | **32.1 |  |  |  |  | Certification of the Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | **32.2 |  |  |  |  | Certification of the Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

93



---



##### 








|    |                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | All Exhibits except for those filed herewith and as otherwise
    indicated are incorporated herein by reference to the Exhibits
    bearing the same Exhibit numbers in the Companys
    Form S-1 Registration Statement No. 333-16509.  
|   
|**  | Filed herewith.                                                                                                                                                                                                                            
|   
|   | Management contract or compensatory plan or arrangement.                                                                                                                                                                                   
|   
|(1) | The Company has other long-term debt agreements that meet the
    exclusion set forth in Section 601(b)(4)(iii)(A) of
    Regulation S-K. The Company hereby agrees to furnish a copy
    of such agreement to the Commission upon request.

94