18. REGULATORY CAPITAL REQUIREMENTS

Brokerage. The Company’s broker/dealer subsidiaries are subject to the SEC Uniform Net Capital Rule (the "Rule"), which requires the maintenance of minimum net capital. Southwest Securities has elected to use the alternative method, permitted by the Rule, which requires that it maintain minimum net capital, as defined in Rule 15c3-1 of the Exchange Act, equal to the greater of $1,000,000 or 2% of aggregate debit balances, as defined in Rule 15c3-3 of the Exchange Act. Additionally, the net capital rule of the NYSE provides that equity capital may not be withdrawn or cash dividends paid if resulting net capital would be less than 5% of the aggregate debit items. The net capital position of Southwest Securities was as follows (in thousands):



	June 30, 2013		June 29, 2012

Net capital	$ 141,112		$ 150,328
Less: required net capital	6,843		6,693
Excess net capital	$ 134,269		$ 143,635
Net capital as a percent of aggregate debit items	41.2	%	44.9	%
Net capital in excess of 5% aggregate debit items	$ 124,005		$ 133,595

SWS Financial follows the primary (aggregate indebtedness) method under Rule 15c3-1 of the Exchange Act, which requires the maintenance of the larger of minimum net capital of $250,000 or 1/15 of aggregate indebtedness. The net capital position of SWS Financial was (in thousands):



	June 30, 2013	June 29, 2012

Net capital	$ 713	$ 651
Less: required net capital	250	250
Excess net capital	$ 463	$ 401

Banking. The Bank is subject to various regulatory capital requirements administered by federal agencies. Quantitative measures, established by regulation to ensure capital adequacy, require maintaining minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in 12 CFR 165 and 12 CFR 167) to risk-weighted assets (as defined) and of Tier I (core) capital (as defined) to adjusted assets (as defined). Federal statutes and OCC regulations have established five capital categories for federal savings banks: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The federal banking agencies have jointly specified by regulation the relevant capital level for each category. An institution is defined as well-capitalized when its total risk-based capital ratio is at least 10.00%, its Tier I risk-based capital ratio is at least 6.00%, its Tier I (core) capital ratio is at least 5.00%, and it is not subject to any federal supervisory order or directive to meet a specific capital level. At June 30, 2013, the Bank was deemed to be well capitalized.

Until terminated on January 14, 2013, the Bank was restricted by and subject to the Order to Cease and Desist, Order No. WN-11-003, effective on February 4, 2011 (the “Order”), originally issued by the Office of Thrift Supervision and then administered by the OCC. In connection with the termination of the Order on January 14, 2013, the Bank committed to the OCC that the Bank would, among other things: (i) adhere to the Bank’s written business and capital plan as amended from time to time and (ii) maintain a Tier I (core) capital ratio at least equal to nine percent (9%) and a total risk-based capital ratio of at least twelve percent (12%).

The Bank’s capital amounts and ratios at June 30, 2013 and 2012 were (dollars in thousands):



	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount	Ratio		Amount	Ratio		Amount	Ratio
June 30, 2013
Total risk-based capital	$ 181,909	24.9	%	$ 58,465	8.0	%	$ 73,081	10.0	%
Tier I risk-based capital	172,734	23.6		29,233	4.0		43,849	6.0
Tier I (core) capital	172,734	13.5		51,081	4.0		63,851	5.0

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions			Order's Capital Requirements
	Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio
June 30, 2012
Total risk-based capital	$ 175,829	19.2	%	$ 73,334	8.0	%	$ 91,667	10.0	%	$ 110,001	12.0	%
Tier I risk-based capital	164,235	17.9		36,677	4.0		55,000	6.0		73,334	8.0
Tier I (core) capital	164,235	12.6		52,090	4.0		65,112	5.0		104,180	8.0