EX-99 3 dex99.htm PRESS RELEASE Press Release
Exhibit 99
For Immediate Release
 
SWS Reports Second Quarter Results  
Net Income Totaled $849,000 on Revenues of $66.4 Million
 
DALLAS, Jan. 23, 2003—SWS Group, Inc. (NYSE: SWS) today reported net income of $849,000, or diluted earnings per share (EPS) of 5 cents, on revenues of $66.4 million for the company’s second quarter ended Dec. 31, 2002, compared with net income of $822,000, or diluted EPS of 5 cents, on revenues of $91 million in the prior year’s second quarter.
Prior year figures include a loss of $2.6 million for Westwood Holdings Group, a subsidiary that was spun-off to shareholders, and a non-cash gain of $3 million, net of tax, on the sale of common stock held in Knight Trading Group, Inc. (Nasdaq: NITE). Prior year results were also restated as a result of converting the firm’s investment in a software company to the equity method of accounting.
For the first half of fiscal 2003, SWS recorded revenues of $132.1 million, net income of $539,000 and diluted EPS of 3 cents, compared with revenues of $178.4 million, net income of $2.8 million and diluted EPS of 16 cents in the same period of the prior fiscal year.
“We continue to face a soft economy, volatile markets and lackluster trading volumes,” said Chief Executive Officer Donald W. Hultgren. “However, by the actions we have taken to streamline the company and make it more efficient, we believe we have positioned SWS for success when conditions improve.”
Mr. Hultgren said results for SWS’ fixed income and equity capital markets operations improved over those of the prior year, as the company was successful in recruiting new professionals. “The clearing business remained soft as volumes and margin balances continued to decline,” he said. “Below the revenue line, we were able to produce ongoing reductions of almost $9 million by controlling operating expenses.”
SWS’ banking segment produced favorable year-over-year results. Mr. Hultgren said that after a thorough review, the company has concluded that the $3.4 million pre-tax reserve announced in the September quarter will be sufficient to cover the suspect loans that its banking subsidiary had purchased from a New York mortgage bank and that no additional suspect loans were found. “As previously announced, we have implemented additional safeguards to protect against future mortgage purchase losses,” he added.
Fiscal-year-to-date transactions processed by SWS Securities, Inc. totaled 14.1 million compared with 27.1 million in the prior year period. During the quarter, the company repurchased 94,100 shares of its common stock at an average price of $12.72 per share. The company has 336,200 shares of authorization remaining under the stock buy-back program. Book value per share was $14.71 compared with $16.93 a year ago. Last year’s book value figure includes Westwood.
SWS Group, Inc. is a Dallas-based holding company that offers a broad range of investment and financial services through its subsidiaries. The company’s common stock is listed and traded on the New York Stock Exchange under the symbol SWS. SWS Group, Inc. subsidiaries include SWS Securities, Inc., First Savings Bank, SWS Financial Services, Inc., SWS Capital Corporation, and Mydiscountbroker.
 
This release contains forward-looking statements regarding the company’s future overall performance. Readers are cautioned that any forward-looking statements, including those predicting or forecasting future events or results, which depend on future events for their accuracy, embody projections or assumptions, or express the intent, belief or current

expectations of the company or management, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially as a result of various factors, some of which are out of our control, including, but not limited to those factors discussed in our Annual Report on Form 10-K and in our other reports filed with and available from the Securities and Exchange Commission.

 
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 2002 and June 28, 2002
(In thousands, except par values and share amounts)
 
    
December
(Unaudited)
     
June
  
Assets
                  
Cash
   
$
39,039
 
   
$
24,777
 
Assets segregated for regulatory purposes
   
 
490,488
 
   
 
442,707
 
Marketable equity securities available for sale
   
 
3,728
 
   
 
3,932
 
Receivable from brokers, dealers and clearing organizations
   
 
1,932,180
 
   
 
1,770,055
 
Receivable from clients, net
   
 
316,370
 
   
 
467,131
 
Loans held for sale, net
   
 
200,709
 
   
 
103,124
 
Loans, net
   
 
356,019
 
   
 
345,538
 
Securities owned, at market value
   
 
81,275
 
   
 
103,888
 
Other assets
   
 
106,860
 
   
 
102,501
 
    
  
Total assets
   
$
3,526,668
 
   
$
3,363,653
 
    
  
Liabilities and Stockholders’ Equity
                  
Short-term borrowings
   
$
—  
 
   
$
37,600
 
Payable to brokers, dealers and clearing organizations
   
 
1,917,981
 
   
 
1,764,741
 
Payable to clients
   
 
669,816
 
   
 
747,534
 
Deposits
   
 
425,615
 
   
 
265,370
 
Securities sold, not yet purchased, at market value
   
 
32,049
 
   
 
19,657
 
Drafts payable
   
 
30,069
 
   
 
34,531
 
Advances from Federal Home Loan Bank
   
 
123,400
 
   
 
160,468
 
Other liabilities
   
 
71,231
 
   
 
69,920
 
Exchangeable subordinated notes
   
 
6,624
 
   
 
6,785
 
    
  
Total liabilities
   
 
3,276,785
 
   
 
3,106,606
 
Minority interest in consolidated subsidiaries
   
 
1,806
 
   
 
1,762
 
Stockholders’ equity:
                  
Preferred stock of $1.00 par value. Authorized 100,000 shares;
none issued
   
 
—  
 
   
 
—  
 
Common stock of $.10 par value. Authorized 60,000,000 shares,
issued 17,612,326 and outstanding 16,868,246 shares at
December 31, 2002; issued 17,601,705 and outstanding
17,240,570 shares at June 28, 2002
   
 
1,761
 
   
 
1,760
 
Additional paid-in capital
   
 
245,017
 
   
 
247,199
 
Accumulated deficit
   
 
(533
)
   
 
—  
 
Accumulated other comprehensive income—unrealized holding gain
(loss), net of tax
   
 
11,403
 
   
 
11,472
 
Deferred compensation, net
   
 
1,449
 
   
 
1,502
 
Treasury stock (744,080 shares at December 31, 2002 and 361,135
shares at June 28, 2002, at cost)
   
 
(11,020
)
   
 
(6,648
)
    
  
Total stockholders’ equity
   
 
248,077
 
   
 
255,285
 
Commitments and contingencies
                  
    
  
Total liabilities and stockholders’ equity
   
$
3,526,668
 
   
$
3,363,653
 
    
  

 
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (Loss)
For the three and six months ended December 31, 2002 and 2001
(In thousands, except per share and share amounts)
(Unaudited)
 
    
For the three months ended
     
For the six months ended
  
    
2002
     
2001
Restated
     
2002
     
2001
Restated
  
Net revenues from clearing operations
   
$
4,864
 
   
$
9,443
 
   
$
10,174
 
   
$
16,684
 
Commissions
   
 
22,519
 
   
 
20,035
 
   
 
40,669
 
   
 
36,120
 
Interest
   
 
24,194
 
   
 
31,904
 
   
 
49,011
 
   
 
71,534
 
Investment banking, advisory and administrative fees
   
 
7,025
 
   
 
10,843
 
   
 
13,995
 
   
 
20,299
 
Net gains on principal transactions
   
 
2,804
 
   
 
13,864
 
   
 
9,566
 
   
 
25,079
 
Other
   
 
4,950
 
   
 
4,897
 
   
 
8,730
 
   
 
8,639
 
    
  
  
  
Total revenue
   
 
66,356
 
   
 
90,986
 
   
 
132,145
 
   
 
178,355
 
    
  
  
  
Commissions and other employee compensation
   
 
33,184
 
   
 
38,621
 
   
 
64,175
 
   
 
70,919
 
Interest
   
 
10,348
 
   
 
17,207
 
   
 
21,128
 
   
 
41,751
 
Occupancy, equipment and computer service costs
   
 
7,915
 
   
 
13,317
 
   
 
16,744
 
   
 
23,203
 
Communications
   
 
3,869
 
   
 
4,886
 
   
 
7,852
 
   
 
9,256
 
Floor brokerage and clearing organization charges
   
 
1,755
 
   
 
2,338
 
   
 
3,537
 
   
 
3,934
 
Advertising and promotional
   
 
961
 
   
 
2,654
 
   
 
1,708
 
   
 
5,684
 
Other
   
 
7,034
 
   
 
9,278
 
   
 
15,943
 
   
 
17,584
 
    
  
  
  
Total expense
   
 
65,066
 
   
 
88,301
 
   
 
131,087
 
   
 
172,331
 
    
  
  
  
Income before income tax expense and minority interest in
consolidated subsidiaries
   
 
1,290
 
   
 
2,685
 
   
 
1,058
 
   
 
6,024
 
Income tax expense
   
 
325
 
   
 
2,202
 
   
 
74
 
   
 
3,348
 
    
  
  
  
Income before minority interest in consolidated subsidiaries
   
 
965
 
   
 
483
 
   
 
984
 
   
 
2,676
 
Minority interest in consolidated subsidiaries
   
 
(116
)
   
 
339
 
   
 
(445
)
   
 
76
 
    
  
  
  
Net income
   
 
849
 
   
 
822
 
   
 
539
 
   
 
2,752
 
Net income (loss) recognized in other comprehensive income (loss), net of tax
   
 
310
 
   
 
(2,136
)
   
 
(70
)
   
 
(9,629
)
    
  
  
  
Comprehensive income (loss)
   
$
1,159
 
   
$
(1,314
)
   
$
469
 
   
$
(6,877
)
    
  
  
  
Earnings per share—basic
                                    
Net income
   
$
0.05
 
   
$
0.05
 
   
$
0.03
 
   
$
0.16
 
    
  
  
  
Weighted average shares outstanding—basic
   
 
16,915,491
 
   
 
17,162,610
 
   
 
17,018,241
 
   
 
17,200,591
 
    
  
  
  
Earnings per share—diluted
                                    
Net income
   
$
0.05
 
   
$
0.05
 
   
$
0.03
 
   
$
0.16
 
    
  
  
  
Weighted average shares outstanding—diluted
   
 
16,922,640
 
   
 
17,237,934
 
   
 
17,030,219
 
   
 
17,259,193
 
    
  
  
  
 
# # # # #
 
CONTACT:
   
Jim Bowman, Vice President—Corporate Communications, (214) 859-9335
    
jbowman@swst.com