Southwest Bancorporation of Texas, Inc. and Subsidiaries
Notes to Consolidated Financial Statements— (Continued)

The following table compares the Company’s and the Bank’s leverage and risk-weighted capital ratios as of December 31, 2000 and 1999 to the minimum regulatory standards:

The Company and the Bank are also subject to certain restrictions on the amount of dividends that they may declare without prior regulatory approval.

14. Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk:

The Company is party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the financing needs of its customers. These financial instruments, which are for purposes other than trading, include loan commitments, letters of credit, commitments to sell mortgage loans to permanent investors, purchased option contracts and financial guarantees on GNMA mortgage-backed securities administered. These financial instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the financial statements.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the loan commitments and letters of credit is limited to the contractual amount of those instruments. The Company uses the same credit policies in evaluating loan commitments and letters of credit as it does for on-balance sheet instruments. In order to control the credit risk associated with entering into commitments, the Company subjects such activity to the same credit quality and monitoring controls as its lending activities. For commitments to sell mortgage loans to permanent investors, the contract amounts do not represent exposure to credit loss. For purchased put options, the Company’s exposure is limited to the option premium paid, not the notional amount of the option. For GNMA mortgage-backed securities administered, the contract amount administered exceeds the Company’s exposure to credit loss.