SWS Announces Financial Results for March Quarter; Net Income Totals $3.6 Million on Revenues of $110.9 Million

Apr 26, 2001, 01:00 ET from Southwest Securities Group, Inc.

    DALLAS, April 26 /PRNewswire/ -- Southwest Securities Group, Inc.
 (NYSE:   SWS) today announced earnings of $3.6 million, or diluted earnings per
 share (EPS) of 22 cents, on revenues of $110.9 million for the company's third
 quarter ended March 30, 2001.
     In the prior year's third quarter, which included $57.8 million in gross
 proceeds from the sale of approximately 1.2 million shares of the company's
 common stock holdings in Knight Trading Group, Inc. (Nasdaq:   NITE), the
 company earned $55.7 million, or diluted EPS of $3.48, on revenues of
 $215.9 million.  Without the NITE sales proceeds, SWS earned $18.1 million, or
 diluted EPS of $1.13, on revenues of $158.1 million in the prior year's third
 quarter.  Prior year figures have been restated to reflect the acquisition of
 First Savings Bank, FSB.  SWS continues to hold approximately 1.2 million
 shares of NITE.
     In November 2000, the SWS Board of Directors authorized management, at its
 discretion, to repurchase up to 1 million shares of the company's common stock
 in the open market.  In March and April of this year, the company repurchased
 219,000 shares at an average cost of $17.34 per share.  Of those shares,
 14,500 were purchased before the quarter ended and are included in treasury
 stock at an approximate cost of $261,000.
     For the nine-month period, SWS earned $14.1 million, or diluted EPS of
 88 cents, on revenues of $368.1 million.  EPS was reduced 18 cents by the
 application of Statement of Financial Accounting Standards No. 133,
 "Accounting for Derivative Instruments and Hedging Activities," as amended, to
 the company's DARTS(SM), or Derivative Adjustable Ratio Securities(SM).  The
 DARTS contain an equity-based derivative designed to hedge changes in fair
 value of a portion of SWS' investment in NITE common stock.  FAS 133 will
 result in non-cash charges or credits through the income statement over the
 life of the DARTS.
     In the first three quarters of the prior year, which included
 $72.9 million in gross proceeds from the sale of approximately 1.5 million
 shares of NITE common stock, SWS earned $81.1 million, or diluted EPS of
 $5.07, on revenues of $444.5 million.  Without the NITE sales proceeds, SWS
 earned $35.1 million, or diluted EPS of $2.19, on revenues of $371.6 million.
     "General market conditions and expenditures on technology restrained
 profitability in the March quarter," said SWS President and CEO David
 Glatstein.  "SWS has a very bright future," Mr. Glatstein said, "but our
 current financial performance continues to suffer from the high cost of
 running parallel software platforms.  This is necessary until we have
 completed the conversion to Comprehensive Software Systems (CSS).  Although
 most of the work has been completed, we still have some work to do, and we
 will need to run both systems for a period of time after the conversion to
 make sure the new system is completely trouble free."
     During the past quarter, Southwest transferred all of the check processing
 for its Vision cash management accounts, the processing for its debit cards,
 and direct deposit functionality to the new software system.  The firm has
 also begun using its own bank, First Savings Bank, to provide check clearance
 processing.  In addition, Mr. Glatstein said Southwest will complete the CSS
 module for automated customer disbursements within a few days.  That module
 automatically disburses dividends and interest to customers.
     Southwest Securities cleared or executed 45.8 million securities
 transactions in the first nine months of fiscal 2001 compared with
 45.5 million in the same period of the prior year.  After the close of the
 quarter, the company added its first new clearing correspondent of this
 calendar year, a firm with more than 6,000 accounts.  "It is encouraging to be
 able to add new business on our new software system," Mr. Glatstein said.
     Excluding the NITE investment, SWS' return on equity for the quarter was
 5.3 percent compared with 37 percent for the same quarter a year earlier.
 Tangible book value per share increased to $18.92 compared with $18.64 a year
 ago.  Tangible book value excluding the investment in NITE was $16.70 per
 share.
     Southwest Securities 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.  Wholly owned subsidiaries of the company
 include Southwest Securities, Inc., Mydiscountbroker.com, First Savings Bank
 and its online division MyBankUSA.com, SWS Financial Services, Inc., Westwood
 Management Corporation, Westwood Trust, SW Capital Corporation, May Financial
 Corporation and SWS Technologies Corporation.
     This news release contains forward-looking statements within the meaning
 of the Private Securities Litigation Reform Act of 1995.  Investors are
 cautioned that any forward-looking statements, including those regarding
 intent, belief or current expectations of the company or its management, are
 not guarantees of future performance and involve risks and uncertainties.
 Actual results may differ materially from those in the forward-looking
 statements as a result of various factors.  Such factors include, but are not
 limited to, general economic conditions and competitive pressures in the
 markets in which the company operates, regulatory changes, one-time events and
 other risks detailed from time to time in the company's Securities and
 Exchange Commission filings.
 
                          Financial Statements Follow
 
               SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                        March 30, 2001 and June 30, 2000
              (In thousands, except par values and share amounts)
 
                                                        March         June
                                                     (unaudited)
                              Assets
     Cash                                              $35,801       $72,479
     Assets segregated for regulatory purposes         402,523       393,697
     Marketable equity securities available for sale    16,938        46,283
     Receivable from brokers, dealers
      and clearing organizations                     2,357,142     3,405,209
     Receivable from clients, net                      446,944       784,434
     Loans held for sale, net                          114,836        77,936
     Loans, net                                        303,590       247,958
     Securities owned, at market value                 145,820       123,107
     Other assets                                       93,066        77,932
      Total assets                                  $3,916,660    $5,229,035
 
                  Liabilities and Stockholders' Equity
     Short-term borrowings                                $---       $49,800
     Payable to brokers, dealers
      and clearing organizations                     2,319,967     3,388,679
     Payable to clients                                759,671       986,749
     Deposits                                          336,418       265,804
     Securities sold, not yet purchased,
      at market value                                   20,252        25,279
     Drafts payable                                     27,317        30,089
     Advances from Federal Home Loan Bank               56,734        42,868
     Other liabilities                                  78,555        89,606
     Exchangeable subordinated notes                     9,845        57,500
      Total liabilities                              3,608,759     4,936,374
 
     Minority interest in consolidated subsidiaries      2,774         1,521
 
     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 15,932,311
       and outstanding 15,876,490 shares at
       March 30, 2001; issued 15,910,152 and
       outstanding 15,892,516 shares at June 30, 2000    1,593         1,591
      Additional paid-in capital                       216,330       215,620
      Retained earnings                                 53,409        43,809
      Accumulated other comprehensive income --
       unrealized holding gain (loss), net of tax       34,079        30,198
      Deferred compensation, net                         1,281           634
      Treasury stock (55,821 shares at
       March 30, 2001 and 17,636 shares at
       June 30, 2000, at cost)                          (1,565)         (712)
        Total stockholders' equity                     305,127       291,140
     Commitments and contingencies
      Total liabilities and stockholders' equity    $3,916,660    $5,229,035
 
 
               SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
       Consolidated Statements of Income and Comprehensive Income (Loss)
     For the three and nine months ended March 30, 2001 and March 31, 2000
               (In thousands, except per share and share amounts)
                                  (Unaudited)
 
                                         For the                 For the
                                   three months ended       nine months ended
                                    2001         2000       2001        2000
 
     Net revenues from
      clearing operations          $11,974     $20,332     $39,560     $45,086
     Commissions                    16,960      21,925      48,129      55,778
     Interest                       58,093      75,665     202,158     191,032
     Investment banking, advisory
      and administrative fees        8,722       7,521      26,467      21,976
     Net gains on principal
      transactions                  11,829      85,474      32,264     115,506
     Other                           3,370       4,979      19,518      15,123
      Total revenue                110,948     215,896     368,096     444,501
 
     Commissions and other
      employee compensation         36,766      48,329     110,721     118,236
     Interest                       39,963      52,088     140,755     127,034
     Occupancy, equipment and
      computer service costs         8,973       6,688      25,430      19,548
     Communications                  4,290       4,142      11,800      12,137
     Floor brokerage and clearing
      organization charges           1,715       2,242       5,006       6,233
     Advertising and promotional     4,184       2,432      11,926      11,125
     Other                           9,277      15,762      34,154      29,996
      Total expense                105,168     131,683     339,792     324,309
 
     Income before income taxes
      and minority interest in
      consolidated subsidiaries      5,780      84,213      28,304     120,192
     Income taxes                    1,874      28,356       9,366      38,478
 
     Income before minority interest
      in consolidated subsidiaries   3,906      55,857      18,938      81,714
     Minority interest in
      consolidated subsidiaries       (349)       (171)     (1,934)       (585)
 
     Income before cumulative
      effect of a change in
      accounting principle           3,557      55,686      17,004      81,129
     Cumulative effect of a change
      in accounting principle,
      net of tax                       ---         ---      (2,874)        ---
 
     Net income                      3,557      55,686      14,130      81,129
     Net loss recognized in other
      comprehensive income (loss),
      net of tax                    (1,747)    (31,712)    (20,236)    (58,498)
 
     Comprehensive income (loss)    $1,810     $23,974     $(6,106)    $22,631
 
     Earnings per share - basic
      Income before cumulative
       effect of a change
       in accounting principle        $.22       $3.51       $1.07       $5.12
      Cumulative effect of a
       change in accounting
       principle, net of tax           ---         ---        (.18)        ---
      Net income                      $.22       $3.51        $.89       $5.12
      Weighted average shares
       outstanding - basic      15,890,059  15,850,185  15,889,328  15,856,999
 
     Earnings per share - diluted
      Income before cumulative
       effect of a change in
       accounting principle           $.22       $3.48       $1.06       $5.07
      Cumulative effect of a
       change in accounting
       principle, net of tax           ---         ---        (.18)        ---
      Net income                      $.22       $3.48        $.88       $5.07
      Weighted average shares
       outstanding - diluted    15,958,016  16,000,182  15,984,446  16,001,501
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X21755910
 
 

SOURCE Southwest Securities Group, Inc.
    DALLAS, April 26 /PRNewswire/ -- Southwest Securities Group, Inc.
 (NYSE:   SWS) today announced earnings of $3.6 million, or diluted earnings per
 share (EPS) of 22 cents, on revenues of $110.9 million for the company's third
 quarter ended March 30, 2001.
     In the prior year's third quarter, which included $57.8 million in gross
 proceeds from the sale of approximately 1.2 million shares of the company's
 common stock holdings in Knight Trading Group, Inc. (Nasdaq:   NITE), the
 company earned $55.7 million, or diluted EPS of $3.48, on revenues of
 $215.9 million.  Without the NITE sales proceeds, SWS earned $18.1 million, or
 diluted EPS of $1.13, on revenues of $158.1 million in the prior year's third
 quarter.  Prior year figures have been restated to reflect the acquisition of
 First Savings Bank, FSB.  SWS continues to hold approximately 1.2 million
 shares of NITE.
     In November 2000, the SWS Board of Directors authorized management, at its
 discretion, to repurchase up to 1 million shares of the company's common stock
 in the open market.  In March and April of this year, the company repurchased
 219,000 shares at an average cost of $17.34 per share.  Of those shares,
 14,500 were purchased before the quarter ended and are included in treasury
 stock at an approximate cost of $261,000.
     For the nine-month period, SWS earned $14.1 million, or diluted EPS of
 88 cents, on revenues of $368.1 million.  EPS was reduced 18 cents by the
 application of Statement of Financial Accounting Standards No. 133,
 "Accounting for Derivative Instruments and Hedging Activities," as amended, to
 the company's DARTS(SM), or Derivative Adjustable Ratio Securities(SM).  The
 DARTS contain an equity-based derivative designed to hedge changes in fair
 value of a portion of SWS' investment in NITE common stock.  FAS 133 will
 result in non-cash charges or credits through the income statement over the
 life of the DARTS.
     In the first three quarters of the prior year, which included
 $72.9 million in gross proceeds from the sale of approximately 1.5 million
 shares of NITE common stock, SWS earned $81.1 million, or diluted EPS of
 $5.07, on revenues of $444.5 million.  Without the NITE sales proceeds, SWS
 earned $35.1 million, or diluted EPS of $2.19, on revenues of $371.6 million.
     "General market conditions and expenditures on technology restrained
 profitability in the March quarter," said SWS President and CEO David
 Glatstein.  "SWS has a very bright future," Mr. Glatstein said, "but our
 current financial performance continues to suffer from the high cost of
 running parallel software platforms.  This is necessary until we have
 completed the conversion to Comprehensive Software Systems (CSS).  Although
 most of the work has been completed, we still have some work to do, and we
 will need to run both systems for a period of time after the conversion to
 make sure the new system is completely trouble free."
     During the past quarter, Southwest transferred all of the check processing
 for its Vision cash management accounts, the processing for its debit cards,
 and direct deposit functionality to the new software system.  The firm has
 also begun using its own bank, First Savings Bank, to provide check clearance
 processing.  In addition, Mr. Glatstein said Southwest will complete the CSS
 module for automated customer disbursements within a few days.  That module
 automatically disburses dividends and interest to customers.
     Southwest Securities cleared or executed 45.8 million securities
 transactions in the first nine months of fiscal 2001 compared with
 45.5 million in the same period of the prior year.  After the close of the
 quarter, the company added its first new clearing correspondent of this
 calendar year, a firm with more than 6,000 accounts.  "It is encouraging to be
 able to add new business on our new software system," Mr. Glatstein said.
     Excluding the NITE investment, SWS' return on equity for the quarter was
 5.3 percent compared with 37 percent for the same quarter a year earlier.
 Tangible book value per share increased to $18.92 compared with $18.64 a year
 ago.  Tangible book value excluding the investment in NITE was $16.70 per
 share.
     Southwest Securities 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.  Wholly owned subsidiaries of the company
 include Southwest Securities, Inc., Mydiscountbroker.com, First Savings Bank
 and its online division MyBankUSA.com, SWS Financial Services, Inc., Westwood
 Management Corporation, Westwood Trust, SW Capital Corporation, May Financial
 Corporation and SWS Technologies Corporation.
     This news release contains forward-looking statements within the meaning
 of the Private Securities Litigation Reform Act of 1995.  Investors are
 cautioned that any forward-looking statements, including those regarding
 intent, belief or current expectations of the company or its management, are
 not guarantees of future performance and involve risks and uncertainties.
 Actual results may differ materially from those in the forward-looking
 statements as a result of various factors.  Such factors include, but are not
 limited to, general economic conditions and competitive pressures in the
 markets in which the company operates, regulatory changes, one-time events and
 other risks detailed from time to time in the company's Securities and
 Exchange Commission filings.
 
                          Financial Statements Follow
 
               SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                        March 30, 2001 and June 30, 2000
              (In thousands, except par values and share amounts)
 
                                                        March         June
                                                     (unaudited)
                              Assets
     Cash                                              $35,801       $72,479
     Assets segregated for regulatory purposes         402,523       393,697
     Marketable equity securities available for sale    16,938        46,283
     Receivable from brokers, dealers
      and clearing organizations                     2,357,142     3,405,209
     Receivable from clients, net                      446,944       784,434
     Loans held for sale, net                          114,836        77,936
     Loans, net                                        303,590       247,958
     Securities owned, at market value                 145,820       123,107
     Other assets                                       93,066        77,932
      Total assets                                  $3,916,660    $5,229,035
 
                  Liabilities and Stockholders' Equity
     Short-term borrowings                                $---       $49,800
     Payable to brokers, dealers
      and clearing organizations                     2,319,967     3,388,679
     Payable to clients                                759,671       986,749
     Deposits                                          336,418       265,804
     Securities sold, not yet purchased,
      at market value                                   20,252        25,279
     Drafts payable                                     27,317        30,089
     Advances from Federal Home Loan Bank               56,734        42,868
     Other liabilities                                  78,555        89,606
     Exchangeable subordinated notes                     9,845        57,500
      Total liabilities                              3,608,759     4,936,374
 
     Minority interest in consolidated subsidiaries      2,774         1,521
 
     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 15,932,311
       and outstanding 15,876,490 shares at
       March 30, 2001; issued 15,910,152 and
       outstanding 15,892,516 shares at June 30, 2000    1,593         1,591
      Additional paid-in capital                       216,330       215,620
      Retained earnings                                 53,409        43,809
      Accumulated other comprehensive income --
       unrealized holding gain (loss), net of tax       34,079        30,198
      Deferred compensation, net                         1,281           634
      Treasury stock (55,821 shares at
       March 30, 2001 and 17,636 shares at
       June 30, 2000, at cost)                          (1,565)         (712)
        Total stockholders' equity                     305,127       291,140
     Commitments and contingencies
      Total liabilities and stockholders' equity    $3,916,660    $5,229,035
 
 
               SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
       Consolidated Statements of Income and Comprehensive Income (Loss)
     For the three and nine months ended March 30, 2001 and March 31, 2000
               (In thousands, except per share and share amounts)
                                  (Unaudited)
 
                                         For the                 For the
                                   three months ended       nine months ended
                                    2001         2000       2001        2000
 
     Net revenues from
      clearing operations          $11,974     $20,332     $39,560     $45,086
     Commissions                    16,960      21,925      48,129      55,778
     Interest                       58,093      75,665     202,158     191,032
     Investment banking, advisory
      and administrative fees        8,722       7,521      26,467      21,976
     Net gains on principal
      transactions                  11,829      85,474      32,264     115,506
     Other                           3,370       4,979      19,518      15,123
      Total revenue                110,948     215,896     368,096     444,501
 
     Commissions and other
      employee compensation         36,766      48,329     110,721     118,236
     Interest                       39,963      52,088     140,755     127,034
     Occupancy, equipment and
      computer service costs         8,973       6,688      25,430      19,548
     Communications                  4,290       4,142      11,800      12,137
     Floor brokerage and clearing
      organization charges           1,715       2,242       5,006       6,233
     Advertising and promotional     4,184       2,432      11,926      11,125
     Other                           9,277      15,762      34,154      29,996
      Total expense                105,168     131,683     339,792     324,309
 
     Income before income taxes
      and minority interest in
      consolidated subsidiaries      5,780      84,213      28,304     120,192
     Income taxes                    1,874      28,356       9,366      38,478
 
     Income before minority interest
      in consolidated subsidiaries   3,906      55,857      18,938      81,714
     Minority interest in
      consolidated subsidiaries       (349)       (171)     (1,934)       (585)
 
     Income before cumulative
      effect of a change in
      accounting principle           3,557      55,686      17,004      81,129
     Cumulative effect of a change
      in accounting principle,
      net of tax                       ---         ---      (2,874)        ---
 
     Net income                      3,557      55,686      14,130      81,129
     Net loss recognized in other
      comprehensive income (loss),
      net of tax                    (1,747)    (31,712)    (20,236)    (58,498)
 
     Comprehensive income (loss)    $1,810     $23,974     $(6,106)    $22,631
 
     Earnings per share - basic
      Income before cumulative
       effect of a change
       in accounting principle        $.22       $3.51       $1.07       $5.12
      Cumulative effect of a
       change in accounting
       principle, net of tax           ---         ---        (.18)        ---
      Net income                      $.22       $3.51        $.89       $5.12
      Weighted average shares
       outstanding - basic      15,890,059  15,850,185  15,889,328  15,856,999
 
     Earnings per share - diluted
      Income before cumulative
       effect of a change in
       accounting principle           $.22       $3.48       $1.06       $5.07
      Cumulative effect of a
       change in accounting
       principle, net of tax           ---         ---        (.18)        ---
      Net income                      $.22       $3.48        $.88       $5.07
      Weighted average shares
       outstanding - diluted    15,958,016  16,000,182  15,984,446  16,001,501
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X21755910
 
 SOURCE  Southwest Securities Group, Inc.