UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report:
(Date of earliest event reported)
November 6, 2012
SWS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 000-19483 | 75-2040825 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1201 Elm Street, Suite 3500
Dallas, Texas 75270
(Address of principal executive offices and zip code)
(214) 859-1800
(Registrants telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). |
Item 2.02 Results of Operations and Financial Condition.
On November 6, 2012, SWS Group, Inc. (SWS) issued a press release regarding its results of operations for the first quarter ended September 28, 2012. The press release is attached hereto as Exhibit 99.1.
Pursuant to General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed filed for the purposes of Section 18 of the Exchange Act, and is not incorporated by reference into any filing of SWS, whether made before or after the date hereof and regardless of any general incorporation language in such filing.
Item 9.01(d). Exhibits.
Exhibit 99.1 | Press Release issued by SWS on November 6, 2012. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SWS GROUP, INC. | ||||||
Date: November 6, 2012 | By: | /s/ Stacy M. Hodges | ||||
Stacy M. Hodges | ||||||
Chief Financial Officer |
3
EXHIBIT INDEX
Exhibit No. | Description | |
Exhibit 99.1 | Press Release issued by SWS on November 6, 2012. |
4
Exhibit 99.1
SWS Group, Inc. Reports Fiscal 2013 First Quarter Results
Broker-dealer and Banking Segments Post Pre-tax Profits;
Bank Reduces Classified Assets by 51 Percent from Last Year
DALLAS, November 6, 2012 SWS Group, Inc. (NYSE: SWS) (the Company) today reported a net loss of $5.6 million, or $0.17 per diluted share, for its fiscal 2013 first quarter ended September 28, 2012, compared with net income of $1.7 million, or $0.05 per diluted share, for the first quarter of fiscal 2012. Net revenues (total revenue less interest expense) in the first quarter of fiscal 2013 were $74.1 million, compared to $76.7 million in the first quarter of last fiscal year.
Though economic conditions remain challenging, SWS reported pre-tax profits in each of our four business segments clearing, retail, institutional and banking while continuing to reduce classified assets at our banking subsidiary in the first quarter of fiscal 2013, said James H. Ross, chief executive officer of SWS Group, Inc. While there is still work to be done to improve results, we are encouraged by the underlying strength demonstrated by our core operating units and will continue to look for opportunities to increase efficiency and expand our presence in both new and existing markets.
Net revenues decreased by $2.6 million in the first quarter of fiscal 2013, as compared to the same period last fiscal year. The primary contributors to the decrease were a $3.5 million decrease in net interest revenue and a $3.3 million decrease in commissions, due in part to five fewer trading days in the fiscal 2013 first quarter as compared to the fiscal 2012 first quarter. These decreases were partially offset by increases in net gains on principal transactions and other revenue.
Operating expenses increased $10.1 million to $83.1 million for the first quarter of fiscal 2013, as compared to $73.0 million for the same period last fiscal year. The increase was primarily due to an $8.1 million increase in the value of the warrants held by Hilltop Holdings Inc. and Oak Hill Capital Partners, as compared to an increase of $171,000 in the first quarter of fiscal 2012.
(more)
SWS Reports First Quarter Fiscal 2013 Results / 2
Clearing Segment
The clearing segment reported pre-tax income of $195,000 for the first quarter of fiscal 2013, as compared to a pre-tax loss of $76,000 for the first quarter of fiscal 2012. Net revenues of $5.0 million in the segment remained flat as compared to the same period last fiscal year. A $520,000 decrease in clearing fee revenue for the fiscal 2013 first quarter was offset by a $434,000 increase in other revenue and a $78,000 increase in net interest revenue, as compared to the same period last fiscal year. The decrease in clearing fee revenue was driven primarily by a reduction in daily general securities transaction volumes and the decrease in the number of trading days in the fiscal 2013 first quarter, as compared to the same quarter last fiscal year.
Clearing segment operating expenses decreased to $4.8 million for the first quarter of fiscal 2013, from $5.0 million for the first quarter of fiscal 2012, primarily due to a decrease in operations and information technology expense.
Total customer assets under custody increased to $15.2 billion at September 28, 2012 from $13.5 billion at September 30, 2011.
Retail Segment
The retail segment posted pre-tax income of $319,000 for the first quarter of fiscal 2013, as compared to pre-tax income of $1.3 million for the first quarter of fiscal 2012. Net revenues decreased 4 percent to $28.1 million for the three months ended September 28, 2012, from $29.2 million for the three months ended September 30, 2011, in part because of the decrease in the number of trading days in the fiscal 2013 first quarter, as compared to the same period last fiscal year. In addition, the departure of two producers in the independent channel contributed to a $1.7 million decline in commission revenue in the retail segment, as compared to the first quarter of fiscal 2012.
Retail segment operating expenses were flat in the first quarter of fiscal 2013, as compared to the same period last fiscal year. A $1.0 million decrease in commission and other employee compensation expense in the quarter was offset by increases in legal expense, licenses and fees, and operations and information technology expense.
(more)
SWS Reports First Quarter Fiscal 2013 Results / 3
Institutional Segment
For the fiscal 2013 first quarter, the institutional segment posted pre-tax income of $9.9 million on net revenues of $32.9 million, compared to pre-tax income of $10.2 million on net revenues of $33.3 million in the first quarter of fiscal 2012. The slight decrease in net revenues in the segment was driven by a $1.6 million decline in commissions and the decrease in the number of trading days in the fiscal 2013 first quarter, as compared to the same quarter last fiscal year. Taxable fixed income accounted for $1.8 million of the decrease in commissions and municipal finance accounted for $934,000. These decreases were partially offset by a $1.1 million increase in portfolio trading commissions, as compared to the same period last fiscal year.
Investment banking fees decreased 12 percent to $6.5 million, from $7.4 million in the first quarter of fiscal 2012, due to a $1.7 million decrease in corporate finance fees. This decrease was due to a decline in merger and acquisition activity in the quarter, and was partially offset by a $734,000 increase in municipal finance fees during the quarter, as compared to the same period last fiscal year.
Net gains on principal transactions increased 52 percent to $10.1 million for the fiscal 2013 first quarter, from $6.6 million for the first quarter of fiscal 2012. The increase was primarily due to a $3.9 million increase in taxable fixed income trading gains, partially offset by a $447,000 decrease in municipal finance trading gains.
Institutional segment operating expenses decreased 1 percent for the first quarter of fiscal 2013, as compared to last fiscal years first quarter, primarily due to a decline in commission and other employee compensation expense.
(more)
SWS Reports First Quarter Fiscal 2013 Results / 4
Banking Segment
The banking segment reported pre-tax income of $1.3 million in the first quarter of fiscal 2013, on net revenues of $11.6 million, as compared to pre-tax income of $2.7 million on net revenues of $13.0 million in the first quarter of fiscal 2012. The primary contributor to the decrease in net revenues was a $1.1 million decline in net interest revenue. This decline was due to a 16 percent decrease in average loan balances and a 20-basis point decrease in the net yield on interest-earning assets at the Companys banking subsidiary, Southwest Securities, FSB (the Bank), as compared to the same period last fiscal year. Other revenue for the Bank decreased $281,000, primarily due to a $227,000 increase in net losses on the sale of real estate owned.
The Banks operating expenses remained flat for the three-month period ended September 30, 2012, as compared to the three months ended September 30, 2011.
The Bank did not record a provision for loan losses in the first quarters of fiscal 2013 or 2012. At September 30, 2012, the Banks allowance for loan losses was $20.9 million, or 4.28 percent of loans held for investment, excluding purchased mortgage loans, as compared to $39.7 million, or 4.90 percent of loans held for investment, excluding purchased mortgage loans, at September 30, 2011.
Total classified assets at the Bank were $100.7 million, or 52.7 percent of capital plus allowance for loan losses, at September 30, 2012, down 51 percent from $206.7 million, or 111.0 percent of capital plus allowance for loan losses, at September 30, 2011. Non-performing assets were $67.8 million at September 30, 2012, down 13 percent from $78.3 million, at September 30, 2011.
At September 30, 2012, the Banks Tier 1 core capital ratio was 12.7 percent and total risk-based capital ratio was 19.2 percent, as compared to a Tier 1 core capital ratio of 10.4 percent and total risk-based capital ratio of 15.4 percent at September 30, 2011.
Conference Call
SWS Group will hold a conference call to discuss its results for the fiscal 2013 first quarter on Wednesday, November 7, 2012, at 10 a.m. Eastern Time (9 a.m. Central Time). The conference call will be broadcast live over the internet at http://www.videonewswire.com/event.asp?id=89873 or www.swst.com. An archive of the webcast will also be posted to the Companys website at www.swst.com.
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SWS Reports First Quarter Fiscal 2013 Results / 5
Forward-Looking Statements
This news release contains forward-looking statements. 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 the Companys control, including, but not limited to, volume of trading in securities, volatility of securities prices and interest rates, liquidity in capital and credit markets, availability of lines of credit, customer margin loan activity, creditworthiness of the Companys correspondents and customers, demand for housing, general economic conditions, especially in Texas and New Mexico, changes in the commercial lending and regulatory environments and other factors discussed in the Companys Annual Report on Form 10-K and in the Companys other reports filed with and available from the Securities and Exchange Commission.
Segment Results
(In thousands)
Net Revenues Three Months Ended |
Pre-Tax Income Three Months Ended |
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Sept. 28, 2012 | Sept. 30, 2011 | Sept. 28, 2012 | Sept. 30, 2011 | |||||||||||||
Clearing |
$ | 4,958 | $ | 4,966 | $ | 195 | $ | (76 | ) | |||||||
Retail |
28,066 | 29,210 | 319 | 1,279 | ||||||||||||
Institutional |
32,895 | 33,272 | 9,925 | 10,160 | ||||||||||||
Bank |
11,633 | 13,021 | 1,281 | 2,748 | ||||||||||||
Other consolidated entities |
(3,443 | ) | (3,730 | ) | (20,752 | ) | (10,415 | ) | ||||||||
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Consolidated |
$ | 74,109 | $ | 76,739 | $ | (9,032 | ) | $ | 3,696 | |||||||
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SWS Reports First Quarter Fiscal 2013 Results / 6
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 28, 2012 and June 29, 2012
(In thousands, except par values and share amounts)
September 28, 2012 |
June 29, 2012 |
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(Unaudited) | ||||||||
Assets |
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Cash and cash equivalents |
$ | 71,153 | $ | 81,826 | ||||
Restricted cash and cash equivalents |
30,045 | 30,044 | ||||||
Assets segregated for regulatory purposes |
213,636 | 176,299 | ||||||
Receivable from brokers, dealers and clearing organizations |
1,261,812 | 1,425,697 | ||||||
Receivable from clients, net of allowances |
251,328 | 256,840 | ||||||
Loans, net |
796,578 | 833,640 | ||||||
Securities owned, at fair value |
265,562 | 231,151 | ||||||
Securities held to maturity |
23,880 | 25,904 | ||||||
Securities purchased under agreements to resell |
21,823 | 25,186 | ||||||
Goodwill |
7,552 | 7,552 | ||||||
Securities available for sale |
356,713 | 307,789 | ||||||
Other assets |
145,118 | 144,915 | ||||||
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Total assets |
$ | 3,445,200 | $ | 3,546,843 | ||||
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Liabilities and Stockholders Equity |
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Short-term borrowings |
$ | 126,500 | $ | 67,500 | ||||
Payable to brokers, dealers and clearing organizations |
1,167,808 | 1,349,370 | ||||||
Payable to clients |
378,074 | 347,574 | ||||||
Deposits |
1,059,250 | 1,062,233 | ||||||
Securities sold under agreements to repurchase |
23,173 | 27,465 | ||||||
Securities sold, not yet purchased, at fair value |
77,046 | 70,155 | ||||||
Drafts payable |
24,586 | 24,970 | ||||||
Advances from Federal Home Loan Bank |
67,318 | 68,641 | ||||||
Long-term debt, net |
80,027 | 79,076 | ||||||
Warrants |
35,995 | 27,810 | ||||||
Other liabilities |
52,787 | 66,347 | ||||||
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Total liabilities |
3,092,564 | 3,191,141 | ||||||
Commitments and contingencies |
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Stockholders equity: |
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Preferred stock of $1.00 par value. Authorized 100,000 shares; none issued |
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Common stock of $0.10 par value. Authorized 60,000,000 shares, issued 33,312,140 and outstanding 32,557,735 shares at September 28, 2012; issued 33,312,140 and outstanding 32,576,307 shares at June 29, 2012 |
3,331 | 3,331 | ||||||
Additional paid-in capital |
324,895 | 324,556 | ||||||
Retained earnings |
24,440 | 30,084 | ||||||
Accumulated other comprehensive income unrealized holding gain, net of tax |
5,043 | 2,745 | ||||||
Deferred compensation, net |
3,436 | 3,427 | ||||||
Treasury stock (754,405 shares at September 28, 2012 and 735,833 shares at June 29, 2012, at cost) |
(8,509 | ) | (8,441 | ) | ||||
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Total stockholders equity |
352,636 | 355,702 | ||||||
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Total liabilities and stockholders equity |
$ | 3,445,200 | $ | 3,546,843 | ||||
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(more)
SWS Reports First Quarter Fiscal 2013 Results / 7
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the three months ended September 28, 2012 and September 30, 2011
(In thousands, except per share and share amounts)
(Unaudited)
Three Months Ended September 28, 2012 |
Three Months Ended September 30, 2011 |
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Revenues: |
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Net revenues from clearing operations |
$ | 2,139 | $ | 2,660 | ||||
Commissions |
32,323 | 35,639 | ||||||
Interest |
26,625 | 33,661 | ||||||
Investment banking, advisory and administrative fees |
9,794 | 9,876 | ||||||
Net gains on principal transactions |
9,358 | 6,271 | ||||||
Other |
6,185 | 4,490 | ||||||
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Total revenue |
86,424 | 92,597 | ||||||
Interest expense |
12,315 | 15,858 | ||||||
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Net revenues |
74,109 | 76,739 | ||||||
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Non-interest expenses: |
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Commissions and other employee compensation |
54,259 | 53,158 | ||||||
Occupancy, equipment and computer service costs |
7,697 | 7,877 | ||||||
Communications |
3,219 | 2,919 | ||||||
Floor brokerage and clearing organization charges |
1,023 | 1,073 | ||||||
Advertising and promotional |
668 | 549 | ||||||
Unrealized loss on Warrant valuation |
8,185 | 171 | ||||||
Other |
8,090 | 7,296 | ||||||
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Total non-interest expenses |
83,141 | 73,043 | ||||||
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Income (loss) before income tax expense (benefit) |
(9,032 | ) | 3,696 | |||||
Less: Income tax expense (benefit) |
(3,388 | ) | 2,044 | |||||
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Net income (loss) |
(5,644 | ) | 1,652 | |||||
Net gain (loss) recognized in other comprehensive income |
2,298 | (78 | ) | |||||
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Comprehensive income (loss) |
$ | (3,346 | ) | $ | 1,574 | |||
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Earnings (loss) per share basic |
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Net income (loss) |
$ | (0.17 | ) | $ | 0.05 | |||
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Weighted average shares outstanding basic |
32,801,381 | 32,506,613 | ||||||
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Earnings (loss) per share diluted |
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Net income (loss) |
$ | (0.17 | ) | $ | 0.05 | |||
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Weighted average shares outstanding diluted |
32,801,381 | 32,506,613 | ||||||
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CONTACT: Ben Brooks, Corporate Communications, 214.859.6351, bdbrooks@swst.com
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