SWS Group, Inc. Reports Fourth Quarter and Fiscal 2013 Financial Results

   SWS Group, Inc. Reports Fourth Quarter and Fiscal 2013 Financial Results

Fourth quarter net loss of $32.5 million includes $30.4 million increase to
deferred tax asset valuation allowance and $2.5 million after tax gain from
change in valuation of warrants

PR Newswire

DALLAS, Aug. 28, 2013

DALLAS, Aug. 28, 2013 /PRNewswire/ --SWS Group, Inc. (NYSE: SWS) ("SWS" or
the "Company") today reported a net loss of $32.5 million for its fourth
quarter of fiscal 2013, or $0.99 per diluted share, on net revenues of $55.4
million, as compared to a net loss of $303,000, or $0.01 per diluted share, on
net revenues of $72.5 million for the fourth quarter of fiscal 2012.

The fiscal 2013 fourth quarter results include a $30.4 million increase to the
Company's deferred tax asset valuation allowance. Although the Company's
current financial forecasts indicate that sufficient income will be generated
in the future to realize existing deferred tax benefits, the forecasts were
not considered to constitute sufficient positive evidence, as required by
generally accepted accounting principles, to overcome the observable negative
evidence associated with the cumulative losses in recent years.

For the 2013 fiscal year, the Company reported a net loss of $33.4 million, or
$1.02 per diluted share, on net revenues of $271.7 million, as compared to a
net loss of $4.7 million, or $0.14 per diluted share, on net revenues of
$293.4 million for fiscal 2012.

"Our retail, clearing and banking segments collectively grew revenue and
reported improved performance for both the fourth quarter and 2013 fiscal
year, as equity markets continued to strengthen and economic conditions
improved," said James H. Ross, Chief Executive Officer of SWS Group, Inc. "In
addition, our banking subsidiary posted a pre-tax profit for the second
consecutive fiscal year and recorded a $6.3 million loan loss recapture in the
fourth quarter. However, market volatility continued to impact our fixed
income businesses in our fourth quarter, primarily in June, with significant
increases in municipal and taxable yields resulting in trading losses that
contributed to a decline in institutional segment revenues as compared to last
year."

Excluding the valuation allowance for deferred tax assets and the impact of
the warrant valuation, the fiscal 2013 fourth quarter adjusted net loss was
$4.6 million, compared to an adjusted net loss of $2.4 million for the fourth
quarter of fiscal 2012.

The decrease in fiscal 2013 fourth quarter net revenues, as compared to the
same quarter last year, was driven in large part by taxable and municipal
trading losses of $7.8 million, as compared to trading gains of $6.7 million
last year. Late in the quarter, the announcement of the Federal Reserve's
intentions to curtail its quantitative easing programs led to an immediate and
substantial reaction across fixed income markets. Consequently, the yield on
10-year Treasury bonds increased 65 basis points in the fourth quarter and the
impact on the municipal markets was even more pronounced. Offsetting the fixed
income declines, fiscal 2013 fourth quarter net revenues in SWS's Clearing and
Retail segments increased 4 percent and 7 percent, respectively, as equity
markets improved.

Operating expenses in the fourth quarter of fiscal 2013 decreased 18 percent
to $59.2 million, from $71.9 million in the fourth quarter of fiscal 2012,
primarily due to a $6.3 million loan loss recapture at the Company's banking
subsidiary, Southwest Securities, FSB (the "Bank"), in the fourth quarter of
fiscal 2013, and a $3.2 million decrease in commissions and other employee
compensation, primarily as a result of reduced operating revenues.

Net revenues for fiscal 2013 decreased 7 percent to $271.7 million from $293.4
million in fiscal 2012, primarily due to a $10.7 million decrease in net gains
on principal transactions and a $10.9 million decrease in net interest
revenue. The decline in net gains on principal transactions was driven by the
taxable and municipal trading losses experienced in the fourth quarter of
fiscal 2013. Decreases in the average loan balance and net interest yield at
the Bank, as compared to the same period last fiscal year, were the primary
contributors to the decline in net interest revenue.

Fiscal 2013 operating expenses decreased $21.0 million to $278.3 million from
$299.4 million in fiscal 2012, primarily due to a $10.2 million decrease in
the loan loss provision at the Bank, and a $7.3 million decrease in the change
in value of the Company's outstanding warrants.

Clearing Segment
The Clearing segment reported pre-tax income of $56,000 for the fiscal 2013
fourth quarter on net revenues of $4.7 million, as compared to a pre-tax loss
of $327,000 on net revenues of $4.6 million for the fourth quarter of fiscal
2012. The primary contributor to the increase in net revenues was a $248,000
increase in net revenue from clearing fees. Despite a slight decrease in the
number of clearing correspondents, revenue per ticket increased 57 percent to
$11.76 in the fiscal 2013 fourth quarter from $7.47 in the fourth quarter of
fiscal 2012.

Operating expenses in the Clearing segment were $4.7 million for the fiscal
2013 fourth quarter, as compared to $4.9 million for the fourth quarter of
fiscal 2012. The primary contributor to the decrease was a decline in
operating and information technology expenses.

For the 2013 fiscal year, the Clearing segment reported a pre-tax loss of
$481,000 on net revenues of $18.9 million, as compared to a pre-tax loss of
$1.8 million on net revenues of $18.6 million in fiscal 2012. The increase in
net revenues was primarily due to a $982,000 increase in other revenues driven
by an increase in revenue sharing with money market fund providers and
increased earnings on customer assets. These increases were partially offset
by a $665,000 decline in clearing fee revenues due to lower activity levels
for existing correspondents and seven fewer trading days in fiscal 2013 as
compared to fiscal 2012.

Fiscal 2013 Clearing segment operating expenses decreased 5 percent to $19.4
million in fiscal 2013 from $20.4 million in fiscal 2012, primarily due to a
decrease in operations and information technology expenses.

Retail Segment
The Retail segment reported pre-tax income of $1.3 million for the fourth
quarter of fiscal 2013 on net revenues of $28.5 million, as compared to a
pre-tax loss of $1.9 million on net revenues of $26.6 million for the fourth
quarter of fiscal 2012. The primary contributor to the increase in net
revenues was a $1.0 million increase in advisory fees due to an increase in
assets under management from $761.1 million at June 29, 2012, to $1.1 billion
at June 30, 2013.

The Retail segment's operating expenses were $27.1 million in the fiscal 2013
fourth quarter, as compared to $28.5 million in the fourth quarter of fiscal
2012. The $1.4 million decrease was primarily driven by a $2.0 million
decrease in legal expenses, partially offset by a $551,000 increase in
commission expense due to increased revenues in the segment.

For fiscal 2013, the Retail segment reported pre-tax income of $2.5 million on
net revenues of $110.4 million, as compared to a pre-tax loss of $1.9 million
on net revenues of $106.9 million in fiscal 2012. Retail segment advisory fees
were up in all areas of the business, due to a 43 percent increase in assets
under management and increased fees from money market fund revenue sharing.
Insurance product revenue also increased $1.7 million in fiscal 2013, as
compared to fiscal 2012. Total customer assets increased to $14.3 billion at
June 30, 2013, from $13.6 billion at June 29, 2012.

For fiscal 2013, operating expenses in the Retail segment decreased slightly
to $107.9 million from $108.8 million in fiscal 2012. The 1 percent decrease
was primarily due to a $2.5 million decrease in legal expenses, offset by a
$1.1 million increase in commissions and other employee compensation in fiscal
2013, as compared to fiscal 2012.

Institutional Segment
The Institutional segment reported a pre-tax loss of $3.2 million for the
fiscal 2013 fourth quarter on net revenues of $16.3 million, as compared to
pre-tax income of $11.1 million on net revenues of $34.1 million for the
fourth quarter of fiscal 2012. The 52 percent decrease in net revenues was
driven by a $14.5 million decrease in net gains on principal transactions due
to market conditions in the fourth quarter of fiscal 2013. Commission revenue
also decreased $2.3 million in the fiscal 2013 fourth quarter, as compared to
the same quarter last fiscal year, due to a decrease in customer activity.

Institutional segment operating expenses in the fourth quarter of fiscal 2013
were $19.6 million, as compared to $23.1 million in the fourth quarter of
fiscal 2012. The primary contributor to the decrease was a $4.9 million
decrease in commissions expense, as a result of reduced revenue.

For the 2013 fiscal year, the Institutional segment reported pre-tax income of
$20.9 million on net revenues of $107.9 million, as compared to pre-tax income
of $39.7 million on net revenues of $130.1 million in fiscal 2012. The 17
percent decrease in net revenues was primarily due to a $14.7 million decrease
in net gains on principal transactions, a $4.7 million decrease in commission
revenues and a $3.2 million decline in net interest revenue.

The decrease in net gains on principal transactions was primarily driven by a
$12.5 million decrease in municipal finance trading gains and a $2.3 million
decrease in taxable fixed income gains due to market conditions in the second
half of fiscal 2013. Market volatility during this period and a narrowing of
the bid/ask spread also contributed to the decrease in commission revenues.
The decline in net interest revenue was primarily driven by a 12 basis point
decrease in the average net interest spread in the Company's stock loan
business and 6 percent reduction in average stock loan balances.

Fiscal 2013 operating expenses in the Institutional segment decreased 4
percent to $87.1 million from $90.4 million in fiscal 2012, primarily due to a
$6.6 million decrease in compensation expense due to weaker revenues in the
segment, partially offset by a $1.1 million increase in quotations and a
$941,000 increase in operations and technology expense.

Banking Segment
The Bank reported pre-tax income of $7.3 million on net revenues of $10.2
million for the fourth quarter fiscal 2013, as compared to pre-tax income of
$1.4 million on net revenues of $11.6 million for the fourth quarter of fiscal
2012. The decrease in net revenues was driven by a decrease in net interest
revenue due to a 20 percent decline in the average loan balance and a 36 basis
point decrease in the net yield on earning assets in the fiscal 2013 fourth
quarter, as compared to the same quarter last fiscal year.

Operating expenses in the Banking segment decreased to $2.9 million for the
fiscal 2013 fourth quarter, as compared to $10.1 million in the fourth quarter
of fiscal 2012, primarily due to the $6.3 million loan loss recapture. The
Bank did not record a provision for loan loss in the fourth quarter of fiscal
2012. At June 30, 2013, the Bank's allowance for loan losses was $12.3
million, or 2.85 percent of loans held for investment excluding purchased
mortgage loans and loans measured at fair value, compared to $22.4 million, or
3.99 percent of loans held for investment excluding purchased mortgage loans,
at June 30, 2012.

For the 2013 fiscal year, the Bank reported pre-tax income of $12.7 million on
net revenues of $44.1 million, as compared to pre-tax income of $7.3 million
on net revenues of $49.9 million in fiscal 2012. The decrease in the Bank's
net revenues was driven by a $5.8 million decline in net interest, primarily
due to a 21 percent decrease in average loan balances and a 30 basis point
decrease in the net yield on earning assets in fiscal 2013, as compared to
fiscal 2012.

Fiscal 2013 operating expenses for the Bank decreased $11.3 million to $31.4
million in fiscal 2013, from $42.6 million in fiscal 2012, primarily due to a
$10.2 million decrease in the provision for loan losses. The Bank recorded a
$7.7 million loan loss recapture in fiscal 2013, compared to a $2.5 million
provision expense in fiscal 2012. Other operating expenses decreased $1.1
million in fiscal 2013, as compared to fiscal 2012, due to decreases in legal
expenses, regulatory fees and real estate owned related expenses, partially
offset by an increase in employee compensation.

At June 30, 2013, the Bank's non-performing assets were $38.0 million, a
decrease of 48 percent from $72.7 million at June 30, 2012. Total classified
assets were $67.6 million at June 30, 2013, or 37.4 percent of capital plus
allowance for loan losses, as compared to $110.7 million, or 58 percent of
capital plus allowance for loan losses at June 30, 2012.

At June 30, 2013, the Bank's Tier 1 (core) capital ratio was 13.5 percent and
total risk-based capital ratio was 24.9 percent, compared to a Tier 1 (core)
capital ratio of 12.6 percent and total risk-based capital ratio of 19.2
percent at June 30, 2012.

Conference Call
SWS Group will hold a conference call to discuss its results for the fiscal
2013 fourth quarter on Thursday, August 29, 2013, at 10:00 a.m. Eastern Time
(9:00 a.m. Central Time). The conference call will be broadcast live over the
internet http://www.videonewswire.com/event.asp?id=95369 or www.swst.com. An
archive of the webcast will also be posted to the Company's website at
www.swst.com.

About SWS Group
SWS Group, Inc. is a Dallas-based holding company offering 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 Southwest Securities, Inc.,
SWS Financial Services, Inc., and Southwest Securities, FSB.

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
Company's 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 Company's correspondents, trading
counterparties 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 Company's Annual
Report on Form 10-K and in the Company's other reports filed with and
available from the Securities and Exchange Commission.



Segment Results
(In thousands)
              Fiscal 2013       Fiscal 2012       4^th Quarter     4^th Quarter
                                                  2013             2012
                       Pretax            Pretax           Pretax           Pretax
              Net               Net               Net              Net
              Revenue  Income   Revenue  Income   Revenue Income   Revenue Income
                                         (Loss)
                       (Loss)                             (Loss)           (Loss)
Clearing      $        $ (481)  $18,614  $(1,754) $       $ 56    $       $
              18,938                             4,748           4,563  (327)
Retail        110,440  2,498    106,882  (1,906)  28,453  1,343    26,556  (1,927)
Institutional 107,947  20,866   130,077  39,654   16,329  (3,229)  34,112  11,057
Banking       44,101   12,742   49,942   7,316    10,157  7,303    11,563  1,445
Other
consolidated  (9,773)  (42,315) (12,092) (49,250) (4,242) (9,185)  (4,301) (9,610)
entities
Consolidated  $271,653 $        $293,423 $        $55,445 $(3,712) $72,493 $  638
                       (6,690)           (5,940)

Non-GAAP Reconciliation
SWShas includedthe presentation ofAdjusted Net Loss, which is Net Loss,
excluding the impact of the valuation adjustment for the warrants held by
Hilltop and Oak Hill and the valuation allowance for deferred tax assets.
Adjusted Net Loss is a non-GAAP financial measure as defined by Securities and
Exchange Commission rules. SWS believes that the presentation of this
non-GAAP financial measure provides useful information by excluding these
items, which may not be indicative of the Company's core operating results.
While management believes this non-GAAP financial measure is useful in
evaluating SWS, this information should be considered as supplemental in
nature and not as a substitute for, or superior to, the related financial
information prepared in accordance with GAAP.



                                             Three Months Ended
(In Thousands)                               June 30, 2013   June 29, 2012
Net Loss                                     $   (32,452)  $      (303)
Valuation Adjustment for Warrants - after    (2,520)         (2,117)
tax
Allowance for Deferred Tax Asset             30,388          --
Adjusted Net Loss (Non-GAAP)                 $    (4,584) $     (2,420)



SWS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

June 30, 2013 and June 29, 2012

(In thousands, except par values and share amounts)


                                            June 30, 2013   June 29, 2012
Assets
Cash and cash equivalents                   $   111,046   $     81,826
Restricted cash and cash equivalents        30,047          30,044
Assets segregated for regulatory purposes   164,737         176,299
Receivable from brokers, dealers and        1,698,474       1,425,697
clearing organizations
Receivable from clients, net of allowances  286,446         256,840
Loans, net                                  608,583         833,640
Securities owned, at fair value             209,633         231,151
Securities held to maturity                 17,423          25,904
Securities purchased under agreements to    51,996          25,186
resell
Goodwill                                    7,552           7,552
Securities available for sale               503,276         307,789
Other assets                                91,160          144,915
 Total assets                           $  3,780,373  $   3,546,843
Liabilities and Stockholders' Equity
Short-term borrowings                       $131,500        $      67,500
Payable to brokers, dealers and clearing    1,532,971       1,349,370
organizations
Payable to clients                          335,655         347,574
Deposits                                    993,719         1,062,233
Securities sold under agreements to         37,012          27,465
repurchase
Securities sold, not yet purchased, at fair 134,735         70,155
value
Drafts payable                              28,889          24,970
Advances from Federal Home Loan Bank        97,565          68,641
Long-term debt, net                         83,102          79,076
Stock purchase warrants                     24,197          27,810
Other liabilities                           65,742          66,347
 Total liabilities                      3,465,087       3,191,141
Commitments and contingencies
Stockholders' equity:
Preferred stock of $1.00 par value.        ---             —
Authorized 100,000 shares; none issued
Common stock of $0.10 par value.
Authorized 60,000,000 shares, issued
33,312,140 and outstanding 32,629,213       3,331           3,331
shares at June 30, 2013; issued 33,312,140
and outstanding 32,576,307 shares at June
29, 2012
 Additional paid-in capital               325,030         324,556
Retained earnings                           (3,361)         30,084
Accumulated other comprehensive income –    (5,334)         2,745
unrealized holding gain, net of tax
 Deferred compensation, net               3,352           3,427
 Treasury stock (682,927 shares at June
30,2013 and 735,833 shares at June 29,      (7,732)         (8,441)
2012, at cost)
 Total stockholders' equity       315,286         355,702
 Total liabilities and stockholders'    $3,780,373      $   3,546,843
equity



SWS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the three and twelve-months ended June 30, 2013 and June 29, 2012

(In thousands, except per share and share amounts)


                          For the Three-Months        For the Twelve-Months

                          Ended                       Ended
                          June 30, 2013 June 29, 2012 June 30,   June 29, 2012
                                                      2013
Revenues:
 Net revenues from    $2,321        $       $8,719     $      
clearing operations                     2,074                   9,385
 Commissions          30,655        32,284        125,620    131,855
 Interest             24,654        27,393        97,350     122,120
 Investment banking,
advisory and
administrative            13,894        13,326        45,255     40,814

 fees
 Net gains on         (7,768)       6,464         17,395     28,049
principal transactions
 Other                4,822         4,550         23,775     21,518
Total revenue             68,578        86,091        318,114    353,741
 Interest expense     13,133        13,598        46,461     60,318
 Net revenues    55,445        72,493        271,653    293,423
Non-interest expenses:
 Commissions and
other employee            48,908        52,123        207,246    208,635
compensation
 Occupancy, equipment
and computer service      8,189         8,009         31,278     31,869
costs
 Communications       3,352         3,164         13,277     12,380
 Floor brokerage and
clearing organization     1,027         1,090         3,940      4,201
charges
 Advertising and      714           817           3,041      3,093
promotional
 (Recapture)          (6,268)                     (7,718)    2,475
provision for loan loss
 Other                7,112         9,909         30,892     33,036
Total non-interest        63,034        75,112        281,956    295,689
expenses
Other gains/(losses):
 Unrealized gain
(loss) on stock purchase
warrants                  3,877         3,257         3,613      (3,674)

 valuation
Income (loss) before
income tax expense        (3,712)       638           (6,690)    (5,940)
(benefit)
Less: Income tax expense 28,740        941           26,755     (1,211)
(benefit)
Net loss                  (32,452)      (303)         (33,445)   (4,729)
Net gain (loss)
recognized in other
comprehensive             (6,819)       762           (8,079)    1,980

 income (loss)
Comprehensive income      $(39,271)     $        $(41,524)  $    
(loss)                                  459                      (2,749)
Loss per share – basic
 Net loss              $(0.99)       $          $(1.02)    $     
                                        (0.01)                  (0.14)
 Weighted average
shares outstanding –      32,896,814    32,825,827    32,870,003 32,649,544
basic
Loss per share – diluted




 Net loss              $(0.99)       $          $(1.02)    $     
                                        (0.01)                  (0.14)
 Weighted average
shares outstanding –      32,896,814    32,825,827    32,870,003 32,649,544
diluted







SOURCE SWS Group, Inc.

Website: http://www.swsgroupinc.com
Website: http://www.swst.com
Contact: Ben Brooks, Corporate Communications, 214.859.6351, bdbrooks@swst.com