Enterprising Investor
10 years ago
Hilltop Holdings Inc. Announces Agreement to Acquire SWS Group, Inc. (4/01/14)
Hilltop Holdings Inc. (NYSE:HTH) and SWS Group, Inc. (NYSE:SWS) today announced that they have entered into a definitive merger agreement providing for the merger of SWS Group (“SWS”) with and into Hilltop Holdings (“Hilltop”).
Under the terms of the agreement, which was recommended by the Special Committee of the SWS Board of Directors to the SWS Board of Directors and has been unanimously approved by the Boards of Directors of both companies, SWS shareholders will receive per share consideration of 0.2496 shares of Hilltop common stock and $1.94 of cash, equating to $7.88 per share based on Hilltop’s closing price on March 31, 2014. The merger is subject to customary closing conditions, including regulatory approvals and approval of the shareholders of SWS, and is expected to be completed prior to the end of 2014.
Gerald J. Ford, Chairman of Hilltop, said, “This transaction creates the leading Texas-based broker/dealer and provides PlainsCapital Bank access to a significant source of additional core deposits. The merger will bolster our market share and scale for many business lines within our broker/dealer, as well as our deposit market share in Dallas/Fort Worth. We believe the integration of our businesses and cultures will benefit our collective shareholders, employees and clients.”
The combined broker/dealer will provide a broad range of investment banking and related financial services to individual, corporate and institutional investors, broker/dealers, government entities and financial intermediaries. The combined bank will have a stable and low cost funding profile and a more efficient operating platform.
James H. Ross, President and CEO of SWS, said, “After a comprehensive review of strategic and financial alternatives, we are pleased to announce a transaction that delivers compelling and immediate cash value for our stockholders, while allowing them to participate in the significant upside potential of a larger, more diversified organization that is strongly capitalized and better positioned to compete in the marketplace. The transaction represents a 28% premium to our pre-announced market price. The Special Committee, with the assistance of its independent financial and legal advisors, contacted numerous potential buyers and unanimously concluded that the transaction with Hilltop is in the best interests of SWS Group’s stockholders.”
Following the acquisition, Hilltop will remain well capitalized with excess cash to deploy on future transactions. Hilltop management has a track record of successfully executing acquisitions and integrating operations and personnel, including its acquisition of PlainsCapital Corporation in November 2012 and the FDIC-assisted acquisition of First National Bank of Edinburg in September 2013.
In 2011, Hilltop invested $50 million in SWS in the form of a senior unsecured loan. Gerald J. Ford joined the Board of Directors of SWS and Hilltop’s President and Chief Executive Officer, Jeremy B. Ford, became a non-voting observer to the SWS Board. In conjunction with Hilltop’s investment in SWS, Hilltop was issued a warrant to purchase 8,695,652 common shares of SWS at an exercise price of $5.75 per share. Hilltop currently beneficially owns 24% of SWS common stock, inclusive of the warrant.
Stephens Inc. acted as financial advisor to Hilltop, and Wachtell, Lipton, Rosen & Katz acted as legal advisor. Sandler O’Neill & Partners, L.P. acted as financial advisor to the Special Committee of the SWS Board of Directors, and Davis Polk & Wardwell LLP acted as legal advisor.
About Hilltop
Hilltop Holdings is a Dallas-based financial holding company. Through its wholly owned subsidiary, PlainsCapital Corporation, a regional commercial banking franchise, it has three operating subsidiaries: PlainsCapital Bank, PrimeLending, and First Southwest. Through Hilltop Holdings’ other wholly owned subsidiary, National Lloyds Corporation, it provides property and casualty insurance through two insurance companies, National Lloyds Insurance Company and American Summit Insurance Company. At December 31, 2013, Hilltop employed approximately 4,550 people and operated approximately 400 locations in 45 states. Hilltop Holdings common stock is listed on the New York Stock Exchange under the symbol "HTH." Find more information at Hilltop-Holdings.com and PlainsCapital.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.
Enterprising Investor
10 years ago
SWS Group Confirms Receipt of Unsolicited Acquisition Proposal from Esposito Global (2/18/14)
DALLAS, Feb. 18, 2014 /PRNewswire/ -- The Special Committee of the Board of Directors of SWS Group, Inc. (NYSE: SWS) today confirmed that it received an unsolicited acquisition proposal from Esposito Global to acquire all the outstanding common shares of SWS Group for $8.00 per share in cash.
As previously announced, on January 10, 2014, SWS Group received an unsolicited acquisition proposal from Hilltop Holdings Inc. (NYSE: HTH) to acquire the outstanding common stock that Hilltop does not already own for $7.00 per share in 50% cash and 50% Hilltop common stock. On February 3, 2014, the Company announced that it had formed a Special Committee, comprised of independent directors not affiliated with Hilltop Holdings or Oak Hill Capital Partners, to review Hilltop's unsolicited acquisition proposal.
Consistent with its fiduciary duties and in consultation with its financial and legal advisors, the Special Committee will review both the Hilltop Holdings and Esposito Global proposals to determine the course of action that it believes is in the best interests of the Company and its stockholders, and make a recommendation to the Company's Board of Directors.
There can be no assurance that a transaction with Esposito Global, Hilltop Holdings or any other party will be approved or consummated. The Company does not intend to disclose developments regarding these matters unless and until a determination is made that disclosure is necessary or appropriate.
Sandler O'Neill + Partners, L.P. is serving as the Special Committee's independent financial advisor and Davis Polk & Wardwell LLP is serving as its independent legal advisor.
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.
http://www.prnewswire.com/news-releases/sws-group-confirms-receipt-of-unsolicited-acquisition-proposal-from-esposito-global-246035691.html
Enterprising Investor
10 years ago
Esposito Global Announces Proposal to acquire SWS Group, Inc. (NYSE: SWS) at $8.00 a Share in Cash (2/18/14)
DALLAS, Feb. 18, 2014 /PRNewswire/ -- Esposito Global notified the Special Committee of Board of Directors of SWS Group, Inc. (NYSE: SWS) on February 12, 2014, that it is prepared to make a proposal, subject to certain conditions, to acquire all the outstanding common shares of SWS in a business combination at a price of $8.00 a share in cash. Esposito Global is a rapidly growing, fast-paced, technology-driven firm whose mission is to provide exemplary products and services to their clients. Esposito Global strives to earn and maintain the trust of clients and employees through dedication to their core values of integrity, commitment, respect, and innovation. Esposito is in the midst of expansion in virtually every segment of the company to accommodate the rapid organic growth of its client base and acquisition strategy.
The proposal from Esposito Global represents a 32% premium above the closing price of SWS common stock of $6.06 on January 9, 2014, the last business day prior to the public announcement that Hilltop Holdings Inc. had made an offer to acquire SWS on January 10, 2014. In addition, Esposito Global's proposal represents a 14.3% premium above the price currently offered by Hilltop, as set forth in its Schedule 13D filed with the Securities and Exchange Commission. Esposito believes its proposal clearly represents an attractive value realization event for the shareholders of SWS. Moreover, the consideration offered under the proposal would be payable entirely in cash at the closing of the business combination.
The proposal from Esposito Global is subject to certain conditions, including completion of customary due diligence, arranging for outside financing, negotiation of definitive agreements and receipt of required governmental and third party approvals.
About Esposito Global
Esposito Global is the corporate brand for the Esposito family of financial services companies. Its affiliates include Esposito Securities, Esposito Partners, and Esposito Private Equity Group. Esposito Securities was founded in 2006 and serves institutional investment clients worldwide. Mr. Mark A. Esposito leads Esposito Global and we believe that the businesses of Esposito and SWS have significant overlap and offer tremendous opportunity for further growth. Mr. Esposito previously served a five-year tenure at SWS and originally came to Dallas to start the SWS portfolio trading business. We believe that he has a deep knowledge of SWS and the industry in which it participates and knowledge would facilitate the structuring and consummation of this transaction and be a catalyst to effect positive change for both companies and their employees. To experience the Esposito commitment to customer service and for further information on our products and services, please contact us at info@espoglobal.com or visit www.espositoglobal.com.
About SWS Group, Inc.
As described in its public filings, SWS Group, Inc. is a publicly traded, Dallas based company that was originally established as a broker-dealer in 1972. Since its inception, SWS has expanded its business segments and currently functions in the areas of retail brokerage, securities clearing, institutional brokerage, and banking and has provided industry leading services for RIAs and other broker-dealers throughout its existence. These subsidiary companies exist as Southwest Securities, Inc., SWS Financial Services, Inc., and Southwest Securities, FSB. Collectively, they make up one of the region's leading securities firms.
http://www.prnewswire.com/news-releases/esposito-global-announces-proposal-to-acquire-sws-group-inc-nyse-sws-at-800-a-share-in-cash-245981881.html
Enterprising Investor
10 years ago
SWS Group, Inc. Reports Financial Results for Second Quarter of Fiscal 2014 (2/05/14)
DALLAS, Feb. 5, 2014 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) ("SWS" or the "Company") today reported net income of $1.7 million, or $0.05 per diluted share, for its second quarter of fiscal 2014 on net revenues of $68.5 million, as compared to net income of $10.4 million, or $0.09 per diluted share, on net revenues of $75.3 million for the second quarter of fiscal 2013. The fiscal 2014 second quarter financial results include a $2.1 million unrealized pre-tax loss from the change in value of the Company's outstanding warrants, as compared to an $11.8 million unrealized pre-tax gain in the second quarter of last fiscal year.
"Our results this quarter demonstrate our continued progress on the execution of our strategy to improve operating results through a combination of cost-cutting and revenue initiatives," said James H. Ross, Chief Executive Officer of SWS Group, Inc. "While much work remains ahead of us, we are pleased that each of our operating segments reported pre-tax profits in our second quarter, with our Clearing, Retail and Banking segments showing improvement over last year. As we enter our second half of fiscal 2014, we remain focused on continuing this momentum and returning SWS Group to consistent profitability for the benefit of our shareholders."
The $6.9 million decrease in net revenues in the fiscal 2014 second quarter, as compared to the same period last fiscal year, was primarily due to a $3.7 million decline in net gains on principal transactions and a $3.0 million decline in net interest revenue, as well as decreases in commissions revenue and investment banking, advisory and administrative fees. The decline in fiscal 2014 second quarter net gains on principal transactions, as compared to the same quarter last fiscal year, was primarily driven by a $3.5 million decrease in the Other segment which realized a $3.6 million gain on investments from the sale of its shares of U.S. Home Systems common stock in the prior year quarter. The decrease in fiscal 2014 second quarter net interest revenue, as compared to the same quarter last fiscal year, was primarily due to a $2.2 million decrease in net interest revenues in the Banking segment due to a 32 percent decrease in average loan balances and a 70 basis point decrease in net interest yield at the Company's banking subsidiary, Southwest Securities, FSB (the "Bank").
Fiscal 2014 second quarter operating expenses increased 12.5 percent, or $7.5 million, as compared to the same period last fiscal year, primarily due to a $13.8 million increase in the change in value of the Company's outstanding warrants with Hilltop and Oak Hill. The increase was partially offset by a $3.2 million decrease in commissions and other employee compensation expense, a $1.9 million decrease in other expenses and a $1.4 million increase in the Bank's loan loss recapture in the fiscal 2014 second quarter.
For the first half of fiscal 2014, the Company reported net income of $2.0 million, or $0.06 per diluted share, on net revenues of $137.5 million, as compared to net income of $4.7 million, or $0.13 per diluted share, on net revenues of $149.5 million for the first half of fiscal 2013.
Clearing Segment
The Clearing segment reported pre-tax income of $1.3 million on net revenues of $5.3 million in the fiscal 2014 second quarter, as compared to a pre-tax loss of $115,000 on net revenues of $4.7 million in the second quarter of fiscal 2013. The increase in net revenues was driven by a $483,000 increase in other revenues, primarily due to a $502,000 increase in servicing fee income received from a third party administrator in the fiscal 2014 second quarter, as compared to the same period last year. Net interest revenue in the Clearing segment increased 4 percent, while clearing revenue increased 2 percent. Revenue per ticket increased to $12.21 in the fiscal 2014 second quarter from $8.43 in the fiscal 2013 second quarter due to a change in the mix of tickets processed. Tickets processed for high-volume trading firms declined 89 percent for the three months ended December 31, 2013, as compared to the same period last fiscal year, while tickets processed for general securities broker-dealers increased by 9 percent. One half of the decline in high-volume tickets processed was due to the loss of one correspondent through a broker-dealer withdrawal.
Clearing segment operating expenses decreased 18 percent to $4.0 million in the fiscal 2014 second quarter, from $4.8 million in the second quarter of fiscal 2013, primarily due to a 19 percent decrease in operations and information technology expense.
Retail Segment
For the second quarter of fiscal 2014, the Retail segment reported pre-tax income of $3.0 million on net revenues of $28.1 million, as compared to pre-tax income of $528,000 on net revenues of $26.1 million in the second quarter of fiscal 2013. The 7 percent increase in net revenues was driven by the Company's Private Client Group ("PCG"), primarily due to increased retail client activity and success in retaining key producers. Advisory fees increased in all areas of the segment due to a 27 percent increase in assets under management, while total customer assets increased to $14.8 billion at December 31, 2013, from $13.6 billion at December 31, 2012. In addition, other revenues increased $510,000, primarily due to a $403,000 increase in servicing fee income received from a third party administrator.
Institutional Segment
The Institutional segment reported pre-tax income of $5.9 million on net revenues of $27.3 million in the fiscal 2014 second quarter, as compared to pre-tax income of $9.3 million on net revenues of $32.6 million in the fiscal 2013 second quarter. The largest contributors to the decrease in net revenues were a $2.2 million decrease in commission revenues and a $2.2 million decrease in investment banking, advisory and administrative fees. The decrease in commission revenues was driven by a $1.7 million decrease in portfolio trading, which executed fewer shares during the three months ended December 31, 2013, as compared to the three months ended December 31, 2012. The decline in investment banking, advisory and administrative fees in the fiscal 2014 second quarter, as compared to the same period last fiscal year, was primarily due to a $1.5 million decrease in taxable fixed income underwriting fees and a $1.2 million decrease in the corporate finance business, which the Company exited in the fourth quarter of fiscal 2013. These decreases were partially offset by a $552,000 increase in municipal finance fees due to a more favorable mix in public finance deal flow.
Institutional segment operating expenses in the fiscal 2014 second quarter decreased 8 percent to $21.3 million from $23.2 million in the second quarter of fiscal 2013, primarily due to a $2.4 million decrease in compensation expense as a result of weaker segment revenues.
Banking Segment
The Banking segment reported pre-tax income of $5.3 million on net revenues of $10.5 million in the fiscal 2014 second quarter, as compared to net income of $3.0 million on net revenues of $11.8 million in the second quarter of fiscal 2013. The decline in net revenues was primarily due to a $2.2 million decrease in net interest revenues, driven by a 32 percent decrease in average loan balances and a 70 basis point decrease in the net yield on interest earning assets. The decrease in net interest revenues was partially offset by an $898,000 increase in operating revenues, primarily due to a $722,000 increase in net gains on real estate owned (REO) sales, a $703,000 increase in gains on interest rate swap transactions and a $281,000 increase on gains from sales of Small Business Administration loans. These increases were partially offset by a $738,000 decrease in gains recognized on the valuation of the Bank's equity method investments.
The Bank's operating expenses in the fiscal 2014 second quarter decreased $3.7 million, or 42 percent, to $5.1 million from $8.8 million in the fiscal 2013 second quarter. Other operating expenses decreased $1.4 million, primarily due to decreases in REO related expenses, regulatory fees and outside services, while commissions and other employee compensation decreased $797,000. In addition, the Bank's loan loss recapture increased to $2.8 million for the three months ended December 31, 2013, from $1.5 million for the three months ended December 31, 2012.
At December 31, 2013, the Bank's allowance for loan losses was $9.4 million, or 2.29 percent of loans held for investment, excluding purchased mortgage and fair value loans, as compared to $18.6 million, or 4.10 percent of loans held for investment, excluding purchased mortgage and fair value loans, at December 31, 2012.
Non-performing assets decreased 48 percent to $26.9 million at December 31, 2013, from $51.9 million at December 31, 2012. Total classified assets at December 31, 2013, were $48.0 million, or 27.2 percent of capital plus allowance for loan losses, as compared to $81.4 million, or 42.9 percent of capital plus allowance for loan losses, at December 31, 2012.
At December 31, 2013, the Bank's Tier 1 (core) capital ratio was 13.8 percent and total risk-based capital ratio was 27.4 percent, as compared to a Tier 1 (core) capital ratio of 13.0 percent and total risk-based capital ratio of 19.3 percent at December 31, 2012.
Conference Call
SWS Group will hold a conference call to discuss its results for the fiscal 2014 second quarter on Thursday, February 6, 2014, 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=97606. 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.
http://www.prnewswire.com/news-releases/sws-group-inc-reports-financial-results-for-second-quarter-of-fiscal-2014-243768031.html
Enterprising Investor
10 years ago
Hilltop Holdings Inc. Proposes to Acquire SWS Group, Inc. for $7.00 Per Share (1/10/14)
DALLAS--(BUSINESS WIRE)--Hilltop Holdings Inc. (NYSE: HTH) submitted a written proposal to the SWS Group, Inc. Board of Directors to acquire all of the outstanding shares of SWS that it does not already own for $7.00 per share in 50% cash and 50% Hilltop common stock.
In 2011, Hilltop invested $50 million in SWS in the form of a senior unsecured loan. At the time of Hilltop’s investment, Hilltop’s Chairman, Gerald J. Ford, joined the Board of Directors of SWS and Hilltop’s President and Chief Executive Officer, Jeremy B. Ford, became a non-voting observer to the SWS board. In conjunction with Hilltop’s investment in SWS, SWS issued Hilltop a warrant to purchase 8,695,652 common shares of SWS at an exercise price of $5.75 per share. Hilltop currently beneficially owns 24% of SWS common stock, inclusive of the warrant.
Mr. Gerald J. Ford said, “We believe that Hilltop’s and SWS’s businesses are highly complementary, and that the proposed transaction is a compelling opportunity for SWS’s stockholders, as well as its employees and customers. The transaction represents a premium to market for SWS stockholders, while also enabling stockholders to participate in the continued growth of the combined enterprise. In addition, we believe it will create benefits from being part of a larger organization that is strongly capitalized and positioned to compete on an expanded scale.”
Hilltop management has a track record of successfully executing acquisitions and integrating new assets, operations and personnel, including its acquisition of PlainsCapital Corporation completed in December 2012 and the FDIC-assisted acquisition of First National Bank of Edinburg in September 2013. Hilltop currently has over $9 billion in assets, $1.2 billion of equity and approximately 4,750 employees.
Hilltop is prepared to expeditiously negotiate a definitive acquisition agreement with the SWS Board of Directors. Stephens Inc. is serving as financial advisor to Hilltop and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Hilltop.
The letter that Hilltop sent today to the SWS Board of Directors follows:
Dear Jim,
It has been a pleasure to work with SWS Group, Inc. since Hilltop Holdings Inc. made its investment in the company in July 2011. We sincerely appreciate our relationship and have genuine respect for your employees and board. Therefore, we are excited to communicate our interest in merging SWS into Hilltop and outline the significant terms of our proposal. As our businesses are highly complementary, we believe that a combination will generate significant benefits for both of our customers, employees and stockholders.
Hilltop, a public financial holding company, currently has over $9 billion in assets, $1.2 billion of equity, approximately 4,750 employees and significant excess capital. Through our operating companies, we have four business segments—banking, mortgage origination, financial advisory and insurance. Hilltop is led by its Chairman, Gerald J. Ford, who has an established track record of acquiring financial institutions and creating substantial stockholder value. Our 24% beneficial ownership interest in SWS is important to us, as it prompted our desire to build a premier Texas-based bank and prominent diversified financial services company. Since, Hilltop has been very active, completing the acquisition of PlainsCapital Corporation in November 2012 and the FDIC-assisted acquisition of First National Bank of Edinburg in September 2013.
We believe that a combination would provide strategic benefits to both SWS and Hilltop. The merger of First Southwest and Southwest Securities would create the dominant Texas-based broker/dealer with significant strengths in municipal finance and clearing. The combined broker/dealer will be well positioned to compete and grow on an expanded platform. Upon merging the two banks, PlainsCapital Bank would become the 4th largest Texas-based bank by deposits. Hilltop’s capital position would maintain the strength of the combined bank and provide opportunities for loan growth. Additionally, SWS stockholders would benefit from Hilltop’s diversified and profitable operating segments.
Our proposal is to acquire all of the outstanding SWS common stock that Hilltop does not already own for $7.00 per share in 50% cash and 50% stock. We believe that our proposal offers compelling value for SWS stockholders, as it provides a premium to market, immediate and certain value with the cash consideration and the opportunity to participate in the success of the combined company through our stock.
Our proposal is subject to the approval of the SWS board of directors, the execution of a definitive agreement and subsequent approval by SWS stockholders. There will not be a financing contingency or any required approvals by Hilltop stockholders. Our transaction, however, will be further subject to customary and usual closing conditions, including obtaining required approvals from regulators. Due to our existing investment, we do not anticipate significant due diligence or any obstacles in consummating a mutually beneficial transaction promptly.
The proposed transaction also will require the consent of Oak Hill Capital Partners pursuant to existing debt and related agreements with SWS. Accordingly, any transaction will be subject to such consent and the restructuring of the existing debt and related agreements or, in the alternative, the exercise of their warrant. We intend to commence those discussions with Oak Hill immediately.
Consistent with our obligations under the U.S. federal securities laws, this letter will become publicly available when we file it with an amendment to our Schedule 13D.
We look forward to further discussing our proposal with you, and hope to expeditiously enter into a definitive agreement.
ABOUT HILLTOP
Hilltop is a Dallas-based financial holding company. Through its wholly owned subsidiary, PlainsCapital Corporation, a regional commercial banking franchise, it has three operating subsidiaries: PlainsCapital Bank, PrimeLending, and First Southwest Company. Through Hilltop’s other wholly owned subsidiary, National Lloyds Corporation, it provides property and casualty insurance through two insurance companies, National Lloyds Insurance Company and American Summit Insurance Company. At September 30, 2013, Hilltop employed approximately 4,750 people and operated approximately 400 locations in 45 states. Hilltop’s common stock is listed on the New York Stock Exchange under the symbol "HTH." Find more information at hilltop-holdings.com and plainscapital.com.
http://www.businesswire.com/news/home/20140110005099/en/Hilltop-Holdings-Proposes-Acquire-SWS-Group-7.00
Enterprising Investor
11 years ago
SWS Group Appoints J. Michael Edge as Interim Chief Financial Officer (10/01/13)
DALLAS, Oct. 1, 2013 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) (the "Company" or "SWS Group") announced today that Senior Vice President of Finance and Investor Relations, J. Michael Edge, has been appointed as the Company's interim Chief Financial Officer and Treasurer.
Mr. Edge joined SWS Group in 2000 and brings substantial finance and accounting experience to his new role. He succeeds Stacy M. Hodges, whose previously announced resignation became effective on September 30, 2013. SWS Group has initiated a search process to fill the Chief Financial Officer position on a permanent basis.
"Mike has been an important member of SWS Group for more than a decade and has played an integral role in leading the Company's finance and investor relations functions," said James H. Ross, President and Chief Executive Officer of SWS Group. "He is a talented financial professional whose extensive knowledge of our business and close working relationship with our management team ensured a smooth transition into the position. We look forward to the continued benefit of his talents and leadership in this new capacity."
During his 13 years with SWS Group, Mr. Edge held the positions of internal auditor and financial analyst before being named Director of Finance and Investor Relations in 2009 and Senior Vice President of Finance and Investor Relations in 2011. He began his career in the financial industry with Bank One as an Assistant Vice President, Senior Risk Analyst. Mr. Edge earned a Bachelor of Business Administration in finance from Texas A&M University, and a Master of Business Administration from Southern Methodist University, where he was a member of the international honor society Beta Gamma Sigma. He is a Certified Public Accountant, holds Series 7 and Series 27 securities licenses, and is a graduate of the Securities Industry Institute at the University of Pennsylvania's Wharton School of Business.
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.
SOURCE SWS Group, Inc.
http://www.prnewswire.com/news-releases/sws-group-appoints-j-michael-edge-as-interim-chief-financial-officer-225948871.html
Enterprising Investor
11 years ago
SWS Group Announces Resignation of Chief Financial Officer (9/17/13)
Stacy M. Hodges to Depart September 30th to Accept New Position
DALLAS, Sept. 17, 2013 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) (the "Company") announced today that Executive Vice President, Chief Financial Officer and Treasurer Stacy M. Hodges has submitted her resignation effective September 30, 2013, to accept an executive position with a North Texas financial services company. The Company plans to immediately commence a search process to fill the position on a permanent basis and expects to name an interim Chief Financial Officer by September 30, 2013.
"We are extremely grateful for Stacy's dedicated service and leadership throughout her 19-year career with SWS Group," said James H. Ross, President and Chief Executive Officer of SWS Group. "While we regret seeing her leave the Company, we recognize the personal and professional opportunity this move represents for her and her family and we wish Stacy the best as she begins this new chapter."
"It has been a privilege to be part of an institution of SWS's caliber for nearly 20 years and I am proud of the achievements realized during my time here," Ms. Hodges said. "I have great confidence in SWS's leadership and future success, and intend to work with the finance team to ensure a smooth transition."
The Company noted that there were no disagreements between Ms. Hodges and SWS Group's Board of Directors or management and that her departure is not related to the Company's operations, policies, practices or any issues regarding the integrity of SWS Group's financial statements or accounting policies and practices.
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.
SOURCE SWS Group, Inc.
http://www.prnewswire.com/news-releases/sws-group-announces-resignation-of-chief-financial-officer-224121881.html
Enterprising Investor
11 years ago
SWS Announces Termination of Cease and Desist Order at Southwest Securities, FSB (1/15/13)
DALLAS, Jan. 15, 2013 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) (the "Company") announced today that the Office of the Comptroller of the Currency (the "OCC") has lifted the Cease and Desist Order (the "Order") under which the Company's banking subsidiary, Southwest Securities, FSB (the "Bank"), has been operating since February 2011.
"We are very pleased that the OCC has recognized the hard work our Bank team has done to reduce classified assets and improve the credit quality of our loan book while maintaining profitability," said James H. Ross , President and Chief Executive Officer of SWS Group. "This important milestone demonstrates the effectiveness of our efforts to build Southwest Securities, FSB into a stronger, more diversified bank. We remain focused on implementing our plans to expand the Bank's role as a leading lender throughout the markets we serve."
The Bank entered into the Order with the Office of Thrift Supervision (the "OTS") on February 4, 2011. Since that time, SWS Group has remained in full compliance with the terms of the Order and has made significant progress in its efforts to strengthen the Bank and position it for long-term success. Notably, the Bank has reduced classified assets by more than 60 percent, from their peak of $273.4 million at December 31, 2010, to $100.7 million at September 30, 2012, and improved its Tier 1 core capital ratio to 12.7 percent and total-risk based capital ratio to 19.2 percent, as of September 30, 2012, increases from 9.4 percent and 14.0 percent, respectively, as of December 31, 2010. The Order had been enforced by the OCC, as the successor to the OTS, since July 2011.
About SWS Group
SWS Group, Inc. is a Dallas-based 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., a national clearing firm, registered investment adviser and registered broker-dealer; SWS Financial Services, Inc., a registered investment adviser and a registered broker-dealer serving independent securities brokers and their clients; and Southwest Securities, FSB, one of the largest banks headquartered in the Dallas-Fort Worth metropolitan area.
SOURCE SWS Group, Inc.
http://www.prnewswire.com/news-releases/sws-group-announces-termination-of-cease-and-desist-order-at-southwest-securities-fsb-187007911.html
Enterprising Investor
11 years ago
SWS Reports Fiscal 2013 First Quarter Results (11/06/12)
Broker-dealer and Banking Segments Post Pre-tax Profits; Bank Reduces Classified Assets by 51 Percent from Last Year
DALLAS, Nov. 6, 2012 /PRNewswire/ -- 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.
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.
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 year's first quarter, primarily due to a decline in commission and other employee compensation expense.
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 Company's 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 Bank's 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 Bank's 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 Bank's 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 Company's website at www.swst.com.
http://www.prnewswire.com/news-releases/sws-group-inc-reports-fiscal-2013-first-quarter-results-177525071.html
Enterprising Investor
12 years ago
SWS Reports Fiscal 2012 Second Quarter Financial Results (2/07/12)
Bank Reduces Classified Assets 18 Percent From First Quarter
DALLAS, Feb. 7, 2012 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) (the "Company") today reported a net loss of $14.3 million for its fiscal 2012 second quarter, or $0.44 per diluted share, on net revenues of $68.4 million, as compared to a net loss of $330,000, or $0.01 per diluted share, on net revenues of $90.3 million in the second quarter of fiscal 2011.
The Company's adjusted pre-tax income, a non-GAAP measure, was $1.7 million for the fiscal 2012 second quarter, as compared to adjusted pre-tax income of $6.0 million for the second quarter of the prior year. The results for the second quarter of fiscal 2012 include a $19.3 million pre-tax unrealized loss for the increase in the value of warrants issued to Hilltop Holdings Inc. ("Hilltop") and Oak Hill Capital Partners ("Oak Hill") as part of the Company's capital raise completed in July 2011.
"Although economic conditions remain challenging, we continued to make important progress during the second quarter," said James H. Ross, Chief Executive Officer of SWS Group, Inc. "Notably, we continued to reduce the level of non-performing and total classified assets at our banking subsidiary. Moving forward, we are focused on continuing this progress and pursuing opportunities to enhance our broker-dealer business lines and strengthen the bank."
Net revenues (total revenues less interest expense) in the fiscal 2012 second quarter were $68.4 million, a decrease of $21.9 million from $90.3 million in the same quarter of fiscal 2011. Operating expenses were $91.5 million, an increase of $396,000 compared to $91.1 million in the second quarter of the prior fiscal year.
The $21.9 million decline in net revenues for the fiscal 2012 second quarter as compared to the second quarter of fiscal 2011 was due in part to an $8.8 million decrease in net interest revenue resulting from a 27 percent decline in the average loan balance at the Company's banking subsidiary, Southwest Securities, FSB (the "Bank"), as well as incurring $3.0 million of interest expense on the $100 million loan from Hilltop and Oak Hill. Commission revenue also declined by $8.8 million as both the retail and institutional segments experienced less customer activity, partially due to five fewer trading days in the fiscal 2012 second quarter as compared to the fiscal 2011 second quarter. Investment banking revenue from the institutional segment was also down $5.0 million in the quarter from reduced transactions in both the corporate and municipal finance businesses.
For the first half of fiscal 2012, the Company posted a net loss of $12.7 million, or $0.39 per diluted share, on net revenues of $145.2 million as compared to a net loss of $21.1 million, or $0.65 per diluted share, on net revenues of $188.0 million for the first six months of fiscal 2011.
Valuation of Warrants
The largest contributor to the increase in operating expenses in the second quarter of fiscal 2012 was the $19.3 million unrealized loss recorded on the increase in the value of the warrants issued to Hilltop and Oak Hill as part of the capital raise the Company completed on July 29, 2011. The valuation increase recorded in the second quarter of fiscal 2012 was primarily due to the increase in the Company's common stock price from $4.69 at September 30, 2011, to $6.87 at December 30, 2011. The warrants allow Hilltop and Oak Hill to each purchase approximately 8.7 million shares of SWS Group common stock at an exercise price of $5.75 per share. The warrants are presented as a liability on the Company's Consolidated Statements of Financial Condition and are carried at fair value.
This increase in expenses was offset by substantial reductions in other operating expenses including a $7.8 million reduction in commissions and other employee compensation expense in the fiscal 2012 second quarter, as compared to the same period last fiscal year. Bank-related expenses were also down significantly with a $4.3 million decrease in the Bank's loan loss provision, a $3.9 million decline in the REO loss provision and a $1.0 million decrease in legal fees.
Clearing Segment
In the second quarter of fiscal 2012, the clearing segment recorded a pre-tax loss of $814,000 on net revenues of $4.3 million, as compared to pre-tax income of $339,000 on net revenues of $5.5 million in the same period last fiscal year. Total correspondent clearing customer assets under custody increased to $14.6 billion at December 30, 2011, from $14.2 billion at December 31, 2010, while revenue per ticket increased to $5.11 in the fiscal 2012 second quarter from $4.37 in the second quarter of fiscal 2011. For the three months ended December 30, 2011 as compared to the three months ended December 31, 2010, tickets processed for high-volume trading firms decreased 38 percent, while tickets processed for general securities broker-dealers decreased 17 percent.
Operating expenses in the segment remained flat for the second quarter of fiscal 2012, as compared to the same quarter last fiscal year.
Retail Segment
The retail segment posted a pre-tax loss of $219,000 in the second quarter of fiscal 2012, as compared to pre-tax income of $1.5 million in the same period last fiscal year. Net revenues in the segment decreased 15 percent to $25.2 million from $29.6 million in the prior year period. The primary contributor to the decrease in net revenues was a $4.4 million decline in commissions due to reduced representative headcount in the Private Client Group and SWS Financial Services, as well as five fewer trading days in the December 2011 quarter. Total customer assets at December 30, 2011 were $13.0 billion, as compared to $12.6 billion at December 31, 2010, and assets under management increased to $662 million at December 30, 2011, from $615 million at December 31, 2010.
Retail segment operating expenses decreased 9 percent to $25.4 million for the fiscal 2012 second quarter from $28.0 million for the second quarter of fiscal 2011. The decrease was primarily due to a $2.5 million decline in commissions and other employee compensation expense.
Institutional Segment
The institutional segment posted pre-tax income of $8.4 million on net revenues of $28.9 million for the second quarter of fiscal 2012, as compared to pre-tax income of $12.8 million on net revenues of $38.3 million for the second quarter of the last fiscal year. Reduced customer activity, primarily in the taxable fixed income business, led to a $4.4 million decrease in commissions for the second quarter compared to the same quarter last fiscal year. Municipal finance revenues were also lower due to a decrease in new issues for the fiscal 2012 second quarter as compared to the second quarter of fiscal 2011.
Investment banking fees were down 46 percent to $5.7 million for the three-month period ended December 30, 2011, from $10.7 million in the same period last fiscal year. The decline was primarily due to a $2.4 million decrease in municipal finance fees and a $2.0 million decrease in corporate finance fees.
Operating expenses in the institutional segment decreased 20 percent to $20.4 million for the second quarter, from $25.4 million in the same quarter last fiscal year, due to a decrease in commissions and other employee compensation expense.
Banking Segment
The banking segment recorded pre-tax income of $511,000 on net revenues of $12.7 million in the second quarter of fiscal 2012, as compared to a pre-tax loss of $5.8 million on net revenues of $16.0 million in the same period last fiscal year. A 27 percent decrease in the Bank's average loan balances at December 31, 2011, and a decrease in the net yield on interest-earning assets led to a 28 percent decrease in net interest revenue for the fiscal 2012 second quarter, as compared to the second quarter of fiscal 2011.
The Bank's operating expenses decreased 44 percent to $12.2 million for the second quarter of fiscal 2012, from $21.7 million for the same period last fiscal year. The Bank recorded a loan loss provision of $2.5 million and net charge-offs of $9.1 million in the second quarter, compared to a provision of $6.7 million and charge-offs of $5.1 million in the last fiscal year's second quarter. At December 31, 2011, the Bank's allowance for loan losses was $33.1 million, or 4.55 percent of loans held for investment, excluding purchased mortgage loans, as compared to $47.0 million, or 4.58 percent of loans held for investment, excluding purchased mortgage loans, at December 31, 2010.
Non-performing assets decreased to $67.1 million at December 31, 2011, from $103.0 million at December 31, 2010. Total classified assets at December 31, 2011 were $169.6 million, or 85.0 percent of capital plus allowance for loan losses, as compared to $273.4 million, or 140.0 percent of capital plus allowance for loan losses, at December 31, 2010.
In the fiscal 2012 second quarter, SWS Group contributed $20 million to the Bank from the capital raise completed in July 2011. Following this capital contribution, at December 31, 2011, the Bank had a Tier 1 core capital ratio of 12.1 percent and a total risk-based capital ratio of 16.9 percent. At December 31, 2010, the Tier 1 core capital ratio was 9.4 percent and the total risk-based capital ratio was 14.0 percent.
Conference Call
SWS Group will hold a conference call to discuss its results for the fiscal 2012 second quarter on Wednesday, February 8, 2012, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The conference call will be broadcast live over the internet at http://www.videonewswire.com/event.asp?id=84498 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.
http://www.prnewswire.com/news-releases/sws-group-inc-reports-fiscal-2012-second-quarter-financial-results-138877474.html
Enterprising Investor
13 years ago
SWS Announces Fourth Quarter and Fiscal 2011 Results (8/29/11)
Broker-Dealer Business Lines Report Pretax Profits for Fiscal Year
Bank Shows Improvement in Fourth Quarter
DALLAS, Aug. 29, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) (the Company) today reported net income of $22,000 for its fiscal 2011 fourth quarter, or diluted earnings per share of less than $0.01, on net revenues of $76.2 million, compared with a net loss of $305,000, or $0.01 per diluted share, on net revenues of $89.3 million in the fourth quarter of fiscal 2010.
For the 2011 fiscal year, the Company posted a net loss of $23.2 million, or $0.71 per diluted share, on net revenues of $342.1 million, compared with a net loss of $2.9 million, or $0.10 per diluted share, on net revenues of $367.0 million for fiscal 2010.
"During the quarter, we continued to work diligently to ensure that SWS Group is well positioned for the future, and we believe our results demonstrate the substantial progress we are making," said James H. Ross, chief executive officer of SWS Group, Inc. "Each of our broker-dealer business segments – clearing, retail and institutional – showed strength over the past year and recorded pretax profits for fiscal 2011. We also continued to address the issues at our banking subsidiary and successfully reduced the level of classified assets during the quarter. As a result of these efforts, our banking segment recorded a pretax quarterly profit for the first time in more than a year, while continuing to maintain capital levels above regulatory requirements."
Net revenues were $76.2 million in the fourth quarter of fiscal 2011, a decrease of $13.2 million from $89.3 million in the fourth quarter of fiscal 2010. Contributing to the decline was a $7.3 million decrease in net interest revenue, primarily in the banking segment; a $4.8 million decrease in commissions split evenly between the retail and institutional segments; and a $1.4 million decrease in investment banking, advisory and administrative fees in the institutional segment.
Operating expenses were $75.2 million in the fourth quarter of fiscal 2011, a decline of $14.3 million from $89.5 million in the same quarter of last fiscal year. The decline was primarily due to a $10.7 million decrease in the loan loss provision at Southwest Securities, FSB (the "Bank") and a $3.0 million decrease in commissions and other employee compensation.
For the 2011 fiscal year, net revenues were $342.1 million, a decrease of $24.9 million from fiscal 2010, driven largely by decreases in commissions, net gains on principal transactions and net interest. The decreases in commissions and net gains on principal transactions were primarily the result of tighter spreads and reduced volatility in the taxable fixed income business. The decrease in net interest revenue in fiscal 2011 versus the prior fiscal year was driven by a reduction in the average balance of loans held for investment at the Bank.
These revenue decreases were partially offset by a $3.9 million increase in investment banking and advisory fees due to an increase in underwritings in the taxable fixed income business, as well as increased advisory fees in the corporate finance business during fiscal 2011.
Fiscal 2011 operating expenses were $375.5 million, an increase of $4.0 million compared to the previous fiscal year. The increase was primarily due to a $5.8 million increase in the Bank's loan loss provision and an $8.5 million increase in other expenses. The increase in other expenses was driven by an $8.7 million increase in the Bank's real estate owned (REO) write-downs, a $2.4 million increase in professional services and fees at the Bank, and a $3.2 million increase in legal expenses in fiscal 2011 versus fiscal 2010. These increases in expenses were partially offset by decreases in commissions and other employee compensation, and a decrease in advertising and promotional expenses compared to the prior fiscal year.
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http://www.prnewswire.com/news-releases/sws-group-inc-announces-fourth-quarter-and-fiscal-2011-results-128618188.html
Enterprising Investor
13 years ago
SWS Group Completes $100 Million Capital Raise (8/01/11)
Gerald J. Ford and J. Taylor Crandall Join SWS Group Board of Directors
DALLAS, Aug. 1, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) today announced the completion of its $100 million capital raise with Hilltop Holdings Inc. (NYSE: HTH) and Oak Hill Capital Partners. The capital will be used to address asset quality issues at its banking subsidiary, Southwest Securities, FSB, ("the Bank") and for other corporate purposes, including growth opportunities for its broker-dealer.
Pursuant to the transaction, Hilltop and Oak Hill Capital (the "Investors") each made a $50 million loan to SWS Group, and SWS Group issued each of Hilltop and Oak Hill Capital a warrant to purchase shares of common stock of SWS Group at an exercise price of $5.75 per share. Upon full exercise of the warrants, Hilltop and Oak Hill Capital would each own approximately 17 percent of the Company.
In connection with the closing of the transaction, the Company also announced that Gerald J. Ford, Chairman of the Board of Hilltop, and J. Taylor Crandall, Managing Partner of Oak Hill Capital, have joined the Board of Directors of SWS Group, effective immediately. In addition to the board seats held by Mr. Ford and Mr. Crandall, Hilltop and Oak Hill Capital will each appoint a non-voting observer to the Board of Directors.
"We are pleased to announce the successful completion of this important transaction, and I would like to thank the many shareholders, employees and customers who have been supportive throughout this process," said James H. Ross, Chief Executive Officer of SWS Group. "This investment represents a significant opportunity for SWS Group as we chart a course for future growth and success. We welcome Mr. Ford and Mr. Crandall to the Board of Directors and look forward to the benefit of their unique expertise and insight."
Mr. Ford has served as Chairman of the Board of Hilltop since August 2007 and has served as a director of Hilltop since June 2005. Mr. Ford is a banking and financial institutions entrepreneur who has been involved in numerous mergers and acquisitions of private and public sector financial institutions, primarily in the Southwestern United States, over the past 35 years.
Mr. Crandall is a Managing Partner of Oak Hill Capital and has been a member of the firm since 1986. He has senior responsibility for originating, structuring and managing investments for the firm's Media and Telecom and Technology industry groups. Prior to joining Oak Hill Capital, Mr. Crandall was a Vice President with the First National Bank of Boston, where he managed a leveraged buyout group and the bank's Dallas energy office. Mr. Crandall earned a B.A. degree, magna cum laude, from Bowdoin College, where he has served on the Board of Overseers. Mr. Crandall also received an honorary doctorate in humane letters from Bowdoin College in 2010.
Stephens Inc. acted as financial advisor to each of Hilltop and Oak Hill Capital, and Sandler O'Neill + Partners acted as financial advisor to SWS Group. Andrews Kurth LLP and Richards, Layton & Finger, P.A. served as legal advisors to SWS Group. Wachtell, Lipton, Rosen & Katz LLP served as legal advisor to Hilltop. Simpson Thacher & Bartlett LLP served as legal advisor to Oak Hill Capital.
About SWS Group
SWS Group, Inc. is a Dallas-based 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., a national clearing firm, registered investment adviser and registered broker-dealer; SWS Financial Services, Inc., a registered investment adviser and a registered broker-dealer serving independent securities brokers and their clients; and Southwest Securities, FSB, one of the largest banks headquartered in the Dallas-Fort Worth metropolitan area.
About Hilltop Holdings Inc.
Hilltop Holdings Inc. is a public holding company that has substantial cash to pursue transactions. Its Chairman, Gerald J. Ford, is one of the nation's most accomplished financial services executives. Hilltop also owns NLASCO, a company that specializes in providing fire and homeowners insurance to low value dwellings and manufactured homes primarily in Texas and other southern states. NLASCO operates through its wholly-owned subsidiaries, National Lloyds Insurance Company and American Summit Insurance Company.
About Oak Hill Capital Partners
Oak Hill Capital Partners is a private equity firm managing more than $8 billion of committed capital from leading entrepreneurs, endowments, foundations, corporations, pension funds and global financial institutions. Robert M. Bass is the lead investor. Over a period of more than 25 years, the professionals at Oak Hill Capital Partners and its predecessors have invested in more than 70 significant private equity transactions. Oak Hill Capital invests across broad segments of the U.S. and global economies with an industry-focused, theme-based approach. Oak Hill Capital Partners is one of several independently managed firms operating with the Oak Hill name and investing in various asset classes. For more information about Oak Hill Capital Partners, please visit www.oakhillcapital.com.
http://www.prnewswire.com/news-releases/sws-group-completes-100-million-capital-raise-with-hilltop-holdings-and-oak-hill-capital-partners-126507873.html
Enterprising Investor
13 years ago
SWS Group Stockholders Approve $100 Million Capital Raise (5/18/11)
DALLAS, May 18, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) announced that at the Company's special meeting of stockholders held today, SWS Group's stockholders voted to approve the proposed $100 million capital raise with Hilltop Holdings Inc. (NYSE: HTH) and Oak Hill Capital Partners.
"We are pleased that today's vote overwhelmingly reaffirmed the unanimous recommendation of the Board of Directors and confirmed the Board's view that this investment is in the best interest of stockholders and the future of SWS Group," said James H. Ross, Chief Executive Officer of SWS Group. "On behalf of the Board of Directors and management team, I want to thank our stockholders, customers and dedicated employees for their support throughout this process. We look forward to completing this transaction as soon as possible and continuing to meet the needs of our customers for many years to come."
As previously announced, Hilltop and Oak Hill Capital have each agreed to make a $50 million loan to SWS Group, and SWS Group agreed to issue each of Hilltop and Oak Hill Capital a warrant to purchase shares of common stock of SWS Group. Upon exercise of the warrants, Hilltop Holdings and Oak Hill Capital would each own approximately 17 percent of the Company.
The capital raise is conditioned on requisite regulatory approvals or consents and satisfaction of customary conditions. The transaction is expected to close as soon as practicable following receipt of regulatory approval.
Sandler O'Neill + Partners, L.P., is serving as financial advisor to SWS Group, and Andrews Kurth LLP is serving as its legal advisor.
About SWS Group
SWS Group, Inc. is a Dallas-based 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., a national clearing firm, registered investment adviser and registered broker-dealer; SWS Financial Services, Inc., a registered investment adviser and a registered broker-dealer serving independent securities brokers and their clients, and Southwest Securities, FSB, one of the largest banks headquartered in the Dallas-Fort Worth metropolitan area.
http://www.prnewswire.com/news-releases/sws-group-stockholders-approve-100-million-capital-raise-with-hilltop-holdings-and-oak-hill-capital-partners-122153454.html
Enterprising Investor
13 years ago
SWS Board Unanimously Rejects Revised Proposal From Sterne Agee (5/03/11)
Reaffirms $100 Million Capital Raise as Best Means to Ensure Long-Term Strength
DALLAS, May 3, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS), today announced that in a private letter sent on April 28, 2011, Sterne Agee revised its previous unsolicited proposal to acquire all outstanding common shares of SWS Group at a price of $7.50 per share in cash.
Consistent with its fiduciary duties and after careful and thorough review with the assistance of its financial and legal advisors, the SWS Group Board of Directors has unanimously rejected the unsolicited proposal as highly conditional and opportunistic. Furthermore, the Board unanimously determined that the Sterne Agee proposal is speculative, illusory, subject to numerous contingencies and uncertainties, and is clearly not in the best interests of SWS Group stockholders.
Importantly, the Board of Directors also unanimously determined that the proposed $100 million capital raise transaction with Hilltop Holdings Inc. and Oak Hill Capital Partners (collectively, the "Investors"), announced in March 2011, remains in the best interests of SWS Group's stockholders and unanimously reaffirmed its recommendation that stockholders vote to approve the transactions as described in SWS Group's proxy materials on file with the Securities and Exchange Commission.
The proposed investment by Hilltop and Oak Hill Capital not only provides capital required to address asset quality issues and regulatory concerns at SWS Group's banking subsidiary, the investment also supports continued growth at the broker-dealer and clearly aligns the investors' and stockholders' interests. The transaction is fully negotiated and documented and preserves the upside for SWS stockholders.
In reaching its conclusion to reject Sterne Agee's proposal, the Board noted, among other considerations, the following:
Highly Conditional: The proposal is subject to broad and considerable conditions, including unspecified due diligence and regulatory approvals, among other things.
Lack of Identified Financing Sources: The proposal does not identify Sterne Agee's "financial partners," nor does it identify financing commitments (binding or otherwise) or the amounts, terms or conditions of such financing. In addition, any transaction would also be subject to the due diligence review of the "financial partners."
Considerable Regulatory Uncertainty: In order to consummate the proposal, Sterne Agee would need to register as a savings and loan holding company. Neither Sterne Agee nor its principals have previously operated a savings and loan, and they have made no visible progress in their announced intention to become a bank or thrift holding company. Based on these facts, as well as the indefinite terms of Sterne Agee's financing and the financial condition of the bank, SWS believes it is highly unlikely that Sterne Agee could obtain the necessary regulatory approvals to acquire the Company's bank.
Significant Business Risk: Assuming the transaction could ever be consummated, there remains substantial uncertainty as to the required time to consummate the proposed transaction, including an unspecified due diligence review, entering into binding financing agreements and obtaining regulatory approvals. SWS Group and the transaction would therefore be subject to substantial financial and business risks for a prolonged period of time. In contrast, if SWS Group stockholders approve the transactions with the Investors, the Company will receive needed funds in the short-term that will allow it to proceed with its long-term plan and meet its obligations with respect to increasing the capitalization of its bank subsidiary, Southwest Securities, FSB.
Limits Potential Upside for Stockholders: The proposal deprives stockholders of the long term value of their shares. The proposed price is a substantial discount to SWS's book value, both before and after the transaction with Hilltop and Oak Hill Capital.
Opportunistic Timing: Despite the fact that the capital raise transaction was announced in March 2011, the most recent proposal from Sterne Agee was delivered only two weeks before SWS Group is scheduled to conduct a special meeting of stockholders to vote on the transaction.
Finally, Sterne Agee has delivered several proposals to SWS Group since last fall, each of which the Board determined to be highly conditional, lacked tangible evidence of financing and failed to address important regulatory issues. The SWS Group Board of Directors does not believe that this most recent letter addresses any of the significant concerns the Board has had with Sterne Agee's prior proposals and it questions Sterne Agee's ability to complete a transaction on a timely basis.
http://www.prnewswire.com/news-releases/sws-group-board-unanimously-rejects-revised-unsolicited-conditional-proposal-from-sterne-agee-121184264.html
Enterprising Investor
13 years ago
SWS Reports Q3 Fiscal 2011 Results (5/03/11)
Planned Capital Raise Will Address Asset Quality Issues
DALLAS, May 3, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) today announced a net loss of $2.1 million, or $0.07 per diluted share, on net revenues of $77.9 million for its fiscal 2011 third quarter ended March 25, 2011, compared with a net loss of $11.5 million, or $0.35 per diluted share, for the prior-year period.
In March 2011, SWS Group announced a $100 million capital raise, $80 million of which would be allocated to its banking subsidiary, Southwest Securities, FSB. As part of this transaction, SWS Group entered into a definitive funding agreement with Hilltop Holdings Inc. and Oak Hill Capital Partners under which each would invest in the Company through a $50 million loan and SWS would issue each a warrant to purchase common shares of SWS Group. Upon exercise of the warrants, Hilltop Holdings and Oak Hill Capital would each own approximately 17 percent of the Company. The transaction is subject to stockholder and regulatory approvals. A special meeting of SWS Group stockholders to consider and vote on the transaction will be held on May 18, 2011.
"We continue to address elevated levels of classified and non-performing assets at our banking subsidiary, while adhering to the requirements of the Cease and Desist Order of the Office of Thrift Supervision. We believe that the capital raise we announced during the quarter will address these challenges and help ensure the Company's long-term strength," said James H. Ross, Chief Executive Officer of SWS Group. "Our third quarter results do not reflect the type of performance we believe we can demonstrate over the long term once we close this transaction and eliminate the uncertainty surrounding our Company."
Net revenues for the third quarter of fiscal 2011 decreased by $5.1 million, compared with the prior year, driven primarily by decreases in net interest revenue, other revenue and commission revenue in the firm's institutional and retail business segments. These decreases were partially offset by a $2.8 million increase in net gains on principal transactions, primarily due to increased trading profits in the institutional segment for the third quarter, compared to the same period of fiscal 2010.
Operating expenses for the third quarter of fiscal 2011 decreased by $20.0 million, compared with the prior year period. The primary cause for the decrease was attributable to a year-over-year decline in the bank's provision for loan losses.
In the first nine months of fiscal 2011, SWS recorded a net loss of $23.2 million, or $0.71 per diluted share, on net revenues of $265.9 million, compared with a net loss of $2.6 million, or $0.09 per diluted share, on net revenues of $277.6 million in the same period of fiscal 2010.
Clearing segment
The clearing segment recorded a pre-tax loss of $44,000 for the third quarter of fiscal 2011, compared with pre-tax income of $96,000 in the comparable period of fiscal 2010. Net revenues for the segment increased 7 percent to $5.3 million for the third quarter, compared to $4.9 million for the same period of fiscal 2010. Tickets processed increased to 628,000 for the three months ended March 25, 2011, from 478,000 for the three months ended March 26, 2010. Revenue per ticket was $4.47 for the third quarter of fiscal 2011 and $5.18 for third quarter of fiscal 2010.
Operating expenses in the clearing segment increased $494,000 to $5.3 million for the third quarter, compared to $4.8 million for the same period of fiscal 2010, primarily led by increased occupancy, equipment and computer service costs, as well as an increase in other expenses.
Retail segment
The retail segment posted a pre-tax loss of $650,000 on net revenues of $25.6 million for the third quarter of fiscal 2011, compared to a pre-tax loss of $966,000 on net revenues of $27.3 million for the same quarter of fiscal 2010. The 6 percent decrease in retail segment revenues was primarily driven by a decrease in commission revenue following the closure of one Private Client Group (PCG) office in December 2010, and a 15 percent decrease in the number of PCG representatives. The decrease in net revenues was partially offset by an 11 percent increase in commission revenue in SWS Financial Services' independent registered representative sales force.
Operating expenses in the retail segment decreased by $2.0 million, or 7 percent, to $26.2 million for the third quarter of fiscal 2011, compared to $28.2 million for the prior year period. The decrease was primarily due to an 8 percent decrease in commission and other employee compensation expense.
Institutional segment
The institutional segment recorded pre-tax income of $9.5 million on net revenues of $32.8 million for the fiscal 2011 third quarter, compared to pre-tax income of $9.5 million on net revenues of $32.6 million for the prior year period. Investment banking fees in the segment decreased 12 percent to $4.8 million for the third quarter, compared to $5.4 million for the prior year period. Corporate finance represented $1.1 million of the decrease, while public finance represented $265,000 on fewer transactions in the third quarter, compared to the prior year period. These decreases were partially offset by a $765,000 increase in taxable fixed income business due to increased underwriting activity, compared to the same quarter of fiscal 2010. Net gains on principal transactions increased 29 percent to $10.8 million for the fiscal 2011 third quarter, compared to $8.3 million for the same period in fiscal 2010. Municipal distribution accounted for $1.4 million of this increase, while taxable fixed income accounted for $1.1 million.
Fiscal 2011 third quarter operating expenses in the institutional segment were $23.3 million, compared with $23.1 million in the third quarter of fiscal 2010.
Banking segment
The banking segment posted a pre-tax loss of $3.8 million on net revenues of $13.9 million in the fiscal 2011 third quarter, as compared to a pre-tax loss of $20.1 million on net revenues of $17.7 million in the third quarter of fiscal 2010. Net interest revenue at the bank decreased to $14.2 million for the third quarter, compared to $18.2 million in the prior year period. The decline in net interest revenue was due to a 22 percent decrease in the average balance of loans held for investment and sale from March 31, 2011, to March 31, 2010, and a 40-basis point decrease in the net yield on earning assets for the same period.
Operating expenses in the banking segment decreased 53 percent for the fiscal 2011 third quarter, compared to the same quarter of fiscal 2010. The decrease was driven by a $20.3 million decline in the bank's loan loss provision due to a reduction of the bank's loan portfolio, compared with the prior year period.
Non-performing assets increased to $104.6 million at March 31, 2011, compared to $103.0 million at December 31, 2010, and $77.2 million at March 31, 2010. Total classified assets were $255.3 million at March 31, 2011, compared to $273.4 million at December 31, 2010, and $124.4 million at March 31, 2010.
The bank's loan loss allowance increased to $47.3 million, or 4.93 percent of loans held for investment, at March 31, 2011, as compared to $47.0 million, or 4.58 percent of loans held for investment, at December 31, 2010. The allowance for loan losses was $30.4 million, or 2.57 percent of loans held for investment, at March 31, 2010.
The fiscal 2011 third quarter provision for loan losses was $4.7 million, compared to $6.7 million in the second quarter of fiscal 2011 and $25.0 million in the third quarter of fiscal 2010. Third quarter net charge-offs were $4.5 million, compared to $5.1 million in the fiscal 2011 second quarter and $12.2 million in the prior year period.
At March 31, 2011, the bank had total assets of $1.4 billion, compared to $1.5 billion at December 31, 2010, and $1.7 billion at March 31, 2010. The bank's total deposits were $1.1 billion at March 31, 2011, compared to $1.3 billion at December 31, 2010, and $1.4 billion at March 31, 2010. These decreases are primarily due to management's efforts to reduce the balance sheet.
As of March 31, 2011, the bank had a Tier 1 core capital ratio of 9.6 percent and a total risk-based capital ratio of 14.5 percent, compared to a Tier 1 core capital ratio of 9.4 percent and a total risk-based capital ratio of 14.0 percent at December 31, 2010. As of March 31, 2010, the bank had a Tier 1 core capital ratio of 8.8 percent and a total risk-based capital ratio of 12.4 percent.
http://www.prnewswire.com/news-releases/sws-group-inc-reports-third-quarter-fiscal-2011-results-121183049.html
Enterprising Investor
13 years ago
SWS Commences Mailing of Definitive Proxy Statement In Connection With Proposed $100 Million Capital Raise (4/12/11)
Special Meeting of Stockholders Scheduled for May 18, 2011
DALLAS, April 12, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) today announced it has filed with the Securities and Exchange Commission definitive proxy materials in connection with its definitive Funding Agreement with Hilltop Holdings Inc. (NYSE: HTH) and Oak Hill Capital Partners (the "Investors"). The company expects to commence mailing of the definitive proxy materials to SWS Group stockholders today. As previously announced on March 21, 2011, pursuant to the Funding Agreement, Hilltop and Oak Hill Capital each agreed to invest in SWS Group through a $50 million loan, and SWS Group agreed to issue each of Hilltop and Oak Hill Capital a warrant to purchase common shares of SWS Group.
A special meeting of SWS Group stockholders to consider and vote upon the proposed transaction will be held at Renaissance Tower, 1201 Elm Street, Suite 4200, Dallas, Texas 75270, at 9:00 a.m., local time, on May 18, 2011. All SWS Group stockholders of record at the close of business on April 7, 2011, are entitled to vote on the matters presented at the special meeting.
SWS Group's Board of Directors has unanimously approved the transaction and recommends that all SWS Group stockholders vote "FOR" the proposed issuance of the warrants and the securities issuable upon the exercise of the warrants.
The extension of the loan and issuance of the warrants are conditioned on, among other things, receipt of requisite regulatory approvals and consents, approval by the stockholders of SWS Group of the issuance of the warrants and the securities issuable upon the exercise of the warrants, maintenance by SWS Group of specified levels of deposits and other customary conditions. Closing of these transactions is expected in the third calendar quarter of 2011.
SWS Group stockholders are encouraged to read the company's definitive proxy materials in their entirety as they provide, among other things, a detailed discussion of the process that led to the proposed transaction and the reasons behind the Board of Directors' unanimous recommendation that stockholders vote "FOR" the approval of the transaction.
SWS stockholders who have questions about the transaction or need assistance in submitting their proxy or voting their shares should contact the company's proxy solicitor, MacKenzie Partners, located at 105 Madison Avenue, New York, NY 10016 at (212) 929-5500 (call collect) or (800) 322-2885 (toll-free).
Sandler O'Neill + Partners, L.P. is serving as financial advisor to SWS Group and Andrews Kurth LLP is serving as its legal advisor.
http://www.prnewswire.com/news-releases/sws-group-to-commence-mailing-of-definitive-proxy-statement-in-connection-with-proposed-100-million-capital-raise-119722339.html
Enterprising Investor
13 years ago
SWS Board Unanimously Rejects Unsolicited Conditional Offer (3/18/11)
DALLAS - March 18, 2011- SWS Group, Inc. (NYSE: SWS) today announced that its Board of Directors has unanimously rejected the unsolicited, highly conditional and opportunistic proposal from Sterne Agee to acquire the Company. The Board, after a careful and thorough review of the proposal with the assistance of its financial and legal advisors, unanimously determined that the proposal substantially undervalues the future potential of SWS Group, and is not in the best interests of SWS Group stockholders.
The following is the text of the letter that was sent on March 18, 2011, to James Holbrook, Chairman and Chief Executive Officer of Sterne Agee:
March 18, 2011
James S. Holbrook
Chairman and Chief Executive Officer
Sterne Agee Group, Inc.
800 Shades Creek Parkway
Suite 700
Birmingham, AL 35209
Dear Mr. Holbrook:
The Board of Directors of SWS Group has received your letter dated March 15, 2011, proposing that Sterne Agee acquire 100% of the outstanding common stock of SWS Group for $6.25 per share in cash. The SWS Group Board of Directors has carefully and thoroughly reviewed your company’s latest unsolicited proposal with the assistance of its financial and legal advisors and has unanimously concluded that it significantly undervalues the future potential of SWS Group. In addition, your highly conditional proposal fails to even mention any evidence of meeting the regulatory requirements and financing commitments necessary to complete such a transaction. Accordingly, the SWS Group Board unanimously rejects Sterne Agee’s proposal.
As you know, our Board, after careful consideration and with the assistance of its advisors, has responded similarly to Sterne Agee’s previous proposals, determining that they were also not in the best interests of SWS Group or its stockholders. Furthermore, we do not appreciate the distracting, interfering and unprofessional communications from Sterne Agee employees to SWS Group employees regarding this proposal, and respectfully request that those communications cease immediately.
Our Board and management team are extremely enthusiastic about SWS Group’s prospects and are confident of achieving stockholder returns in excess of what can be derived from Sterne Agee’s unsolicited proposal. Indeed, we believe SWS Group’s stockholders should not be asked to transfer the future value of the Company to Sterne Agee on such opportunistic terms.
We take very seriously our responsibility to protect and enhance value for all SWS Group stockholders and this includes taking the necessary steps to defend their Company from such specious proposals. Our Board of Directors, management team and more than 1,100 employees are dedicated to creating value for all of our stockholders. We intend to achieve that objective by continuing the execution of our long-term strategic plan.
Regards,
/s/ Don Buchholz
Chairman
Sandler O’Neill + Partners, L.P., is serving as financial advisor to SWS Group, and Andrews Kurth LLP and Richards, Layton & Finger, P.A., are serving as its legal advisors.
http://sec.gov/Archives/edgar/data/878520/000119312511071264/dex992.htm
Enterprising Investor
13 years ago
SWS Group Inc Announces $100 Million Capital Raise (3/21/11)
Hilltop Holdings and Oak Hill Capital Partners Each to Invest $50 Million
Investment to Address Asset Quality Issues at Bank and Provide Growth Opportunities for Broker-Dealer
DALLAS, March 21, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) today announced that it has entered into a definitive Funding Agreement with Hilltop Holdings Inc. (NYSE: HTH) and Oak Hill Capital Partners. Pursuant to the Agreement, Hilltop and Oak Hill Capital each agreed to invest in the Company through a $50 million loan, and SWS Group agreed to issue each of Hilltop and Oak Hill Capital a warrant to purchase common shares of SWS Group.
Upon satisfaction of the conditions of the Funding Agreement, Hilltop and Oak Hill Capital will extend a senior unsecured loan to SWS Group in aggregate principal amount of $100 million pursuant to a Credit Agreement. The loans will bear interest of 8.0% per annum, have a maturity of five years and will be prepayable by SWS Group under certain conditions after three years. Simultaneously with the making of the loan, SWS Group will issue a warrant to each of Hilltop and Oak Hill Capital to purchase 8,695,652 shares of common stock of SWS Group at an exercise price of $5.75, subject to anti-dilution adjustments. Upon exercise, Hilltop Holdings and Oak Hill Capital will each own approximately 17% of the Company. SWS Group will also appoint one representative from Hilltop and one from Oak Hill Capital to its Board of Directors at the time that the loan is extended. Gerald J. Ford is the Hilltop representative expected to join the Board, and J. Taylor Crandall is the Oak Hill Capital representative expected to join the Board.
Deterioration in the commercial real estate loan portfolio at SWS Group's bank, Southwest Securities, FSB, has led to increased credit costs and classified asset levels. The bank entered into an Order to Cease and Desist (C&D) with the Office of Thrift Supervision on February 4, 2011. As previously reported, the Company has been actively exploring various capital raising alternatives for several months. SWS Group believes that the $100 million capital raise will address the asset quality issues at the bank while adhering to the increased capital requirements imposed by the C&D. SWS Group also believes that the financial services expertise of Hilltop and Oak Hill Capital will allow the Company to focus on the opportunities to enhance all areas of its business.
"This transaction will provide the Company with the capital necessary to address the challenges at the bank and help ensure its long-term strength," said James H. Ross, Chief Executive Officer of SWS Group. "In addition, we believe this strategic partnership will enable us to grow other parts of our business and is an excellent opportunity for all shareholders to participate in the Company's upside potential.
"Both Hilltop and Oak Hill Capital are ideal partners that bring extensive experience and a track record of success as a strategic investor in the financial services sector." Ross added, "I would also like to thank our many shareholders, customers and employees for their support. We look forward to continuing to meet our customers' needs for many years to come."
"We are excited about this partnership and, based upon our comprehensive diligence, believe that SWS Group will be well positioned for future growth and success once the bank issues are addressed," said Gerald J. Ford, Chairman of Hilltop Holdings.
"We are pleased to be part of SWS Group's capital raise," said J. Taylor Crandall, Managing Partner of Oak Hill Capital. "After months spent reviewing all aspects of the Company's business, we believe the new capital will assist substantially in strengthening the bank and we are confident in the Company's long-term growth potential."
The extension of the loan and issuance of the warrants are conditioned on, among other things, receipt of requisite regulatory approvals, approval by the stockholders of SWS Group of the issuance of the warrants, maintenance by SWS Group of specified levels of deposits and other customary conditions. Closing of these transactions is expected in the third calendar quarter of 2011.
Stephens Inc. acted as financial advisor to each of Hilltop and Oak Hill Capital, and Sandler O'Neill + Partners acted as financial advisor to SWS Group. Andrews Kurth LLP and Richards, Layton & Finger, P.A. served as legal advisors to SWS Group. Wachtell, Lipton, Rosen & Katz served as legal advisor to Hilltop. Simpson Thacher & Bartlett LLP served as legal advisor to Oak Hill Capital.
About SWS Group
SWS Group, Inc. is a Dallas-based 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., a national clearing firm, registered investment adviser and registered broker-dealer, SWS Financial Services, Inc., a registered investment adviser and a registered broker-dealer serving independent securities brokers and their clients, and Southwest Securities, FSB, one of the largest banks headquartered in the Dallas-Fort Worth metropolitan area.
About Hilltop Holdings Inc.
Hilltop Holdings Inc. is a public holding company that has substantial cash to pursue transactions. Its Chairman, Gerald J. Ford, is one of the nation's most accomplished financial services executives. Hilltop also owns NLASCO, a company that specializes in providing fire and homeowners insurance to low value dwellings and manufactured homes primarily in Texas and other areas of the south, southeastern and southwestern United States. NLASCO operates through its wholly-owned subsidiaries, National Lloyds Insurance Company and American Summit Insurance Company.
About Oak Hill Capital Partners
Oak Hill Capital Partners is a private equity firm with more than $8.2 billion of committed capital from leading entrepreneurs, endowments, foundations, corporations, pension funds and global financial institutions. Robert M. Bass is the lead investor. Over a period of more than 24 years, the professionals at Oak Hill Capital Partners and its predecessors have invested in more than 60 significant private equity transactions. Oak Hill Capital Partners is one of several Oak Hill partnerships, each of which has a dedicated and independent management team. These Oak Hill partnerships comprise over $30 billion of investment capital across multiple asset classes. For more information about Oak Hill Capital Partners, please visit www.oakhillcapital.com.
Forward Looking Statements
Certain information contained in the press release may include "forward-looking statements." These forward-looking statements relate to the Company's plans for raising capital, including the closing of the transaction described in the press release. Such statements also relate to the potential success of the Company's future plans to strengthen its balance sheet. There can be no assurance that the Company will be able to achieve its goals, close on the transaction with investors and obtain required capital, or that other actual results, performance or achievements of the Company will not differ materially from those expressed or implied by the forward-looking statements. Factors that could cause actual events or results to differ significantly from those described in or implied by the forward-looking statements include, but are not limited to, (1) our ability to complete the transaction announced today, (2) our ability to attract new deposits and loans; (3) local, regional, and national economic conditions and events and the impact they may have on us and our customers; (4) increasing levels of classified assets, including nonperforming assets, which could adversely affect our earnings and liquidity; (5) market interest rate volatility; (6) changes in legal or regulatory requirements or the results of regulatory examinations that could restrict growth and constrain our activities, including the terms of our Order to Cease and Desist entered into with the Office of Thrift Supervision; and (7) changes in accounting standards and interpretations. For details on these and other factors that could affect expectations, see the cautionary language included under the headings "Risk Factors" and "Forward- Looking Statements" in the Company's Annual Report on Form 10-K for the year ended June 25, 2010 and other filings with the Securities and Exchange Commission (the "SEC").
Additional Information
SWS Group will be filing a proxy statement with the SEC with respect to the issuance of the warrant in the proposed transaction. Shareholders of SWS Group are urged to read the proxy statement when it becomes available, as well as other documents filed with the SEC, because they will contain important information. The final proxy statement will be mailed to stockholders of SWS Group. Investors and security holders may obtain free copies of these documents (when they are available) and other documents filed with the SEC at the SEC's web site at www.sec.gov, or by contacting SWS Group at (214) 859-1800.
Participants
SWS Group and its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the transaction. Information concerning SWS Group's executive officers and directors is set forth in its definitive proxy statement filed with the SEC on October 8, 2010. Additional information regarding the interests of participants of SWS Group in the solicitation of proxies in respect of the transaction will be included in the above-referenced proxy statement when it becomes available. You can obtain free copies of these documents from SWS Group using the contact information above.
SOURCE SWS Group, Inc.
http://www.prnewswire.com/news-releases/sws-group-inc-announces-100-million-capital-raise-118354409.html
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