From the neighbor status, we notice the "Flags" are SP. "P" here means the neighbor is in Passive mode. In order to create an Etherchannel interface, the (local) SW1 ports should be in Active mode. Moreover, the "Port State" in the exhibit is "0x3c" (which equals to "00111100" in binary format). Bit 3 is "1" which means the ports are synchronizing -> the ports are working so the local ports should be in Active mode.
Reference: https://www.cisco.com/c/en/us/td/docs/switches/lan/catalyst3650/software/release/3se/consolidated_guide/command_reference/b_c