SWS Group Inc. (SWS, Financial) filed Quarterly Report for the period ended 2010-09-24.
Sws Group Inc. has a market cap of $224.6 million; its shares were traded at around $6.89 with and P/S ratio of 0.5. The dividend yield of Sws Group Inc. stocks is 5.2%.SWS is in the portfolios of John Keeley of Keeley Fund Management, Mario Gabelli of GAMCO Investors, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Classified assets increased from $191.8 million at June 30, 2010 to $251.5 million at September 30, 2010, an increase of 31.1%. Included in the classified assets are non-performing assets which increased from $93.7 million, or 5.3% of assets at June 30, 2010, to $127.1 million, or 7.3% of assets at September 30, 2010. Classified assets as a percentage of total capital plus the allowance for loan losses increased to 127% at September 30, 2010 from 101% at June 30, 2010. Net charge-offs totaled $29.3 million for the three-months ended September 30, 2010, as compared to $6.0 million for the three-months ended June 30, 2010 and $2.6 million for the three-months ended September 30, 2009.
The impact of the asset quality deterioration is also evident in the allowance for loan loss as loan loss provision expense increased to $39.5 million in the first quarter of fiscal 2011 as compared to $10.7 million in the fourth quarter of fiscal 2010 and $4.8 million in the first quarter of fiscal 2010. The allowance at September 30, 2010, was $45.4 million, or 4.12% of loans held for investment, as compared to $35.1 million, or 3.0% of loans held for investment at June 30, 2010.
Net loss for the three-month period ended September 24, 2010 was $20.7 million, a decrease of $23.8 million from net income of $3.1 million for the three-month period ended September 25, 2009. The three-month periods ended September 24, 2010 and September 25, 2009 both contained 63 trading days.
Net revenues decreased for the first quarter of fiscal 2011 by $1.8 million as compared to the same period of fiscal 2010. The largest components of the decrease were in commissions and net gains on principal transactions. The $3.8 million decrease in commissions was due primarily to a $5.8 million decrease in commissions in the institutional segment, primarily in the taxable fixed income business, as a result of tighter spreads and reduced market volatility. This decrease was offset by an increase in commissions of $1.7 million in the retail segment, primarily at SWS Financial Services, Inc. (SWS Financial), due to an increase in production and the addition of six new advisors. The decrease in net gains on principal transactions was driven primarily by a decrease in taxable fixed income gains due to a reduction in market volatility from the same quarter of the prior fiscal year. These revenue declines were partially offset by a $3.1 million increase in net interest revenue and a $1.5 million increase in investment banking and advisory fees. The increase in net interest revenue was due primarily to an increase in the Banks average balance of loans in the mortgage warehouse business. The increase in investment banking and advisory fees was due to an increase the number of deals closed in our corporate finance business unit as well as in increase in Unit Investment Trust (UIT) underwritings in the taxable fixed income business.
Operating expenses increased $33.4 million for the three-months ended September 24, 2010 as compared to the same period of fiscal 2009. The largest increase was the provision for loan loss of $34.8 million and other expenses of $1.9 million. The increase for the Banks loan loss provision is discussed in OverviewBusiness EnvironmentImpact of Credit MarketsBank. The increase in other expenses was due to: (i) an increase in the Banks REO provision of $5.9 million; (ii) a $969,000 increase in legal expenses; (iii) an $850,000 increase in outside services related to the review of the Banks loan files; (iv) a $138,000 increase in assessments from the OTS and Federal Deposit Insurance Fund (DIF); and (v) a $788,000 increase in real estate related expenses. These increases were offset by decreases in professional services of $354,000 and a $6.3 million loss incurred in the first quarter of fiscal 2010 on a correspondents short sale of securities.
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Sws Group Inc. has a market cap of $224.6 million; its shares were traded at around $6.89 with and P/S ratio of 0.5. The dividend yield of Sws Group Inc. stocks is 5.2%.SWS is in the portfolios of John Keeley of Keeley Fund Management, Mario Gabelli of GAMCO Investors, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Dislocation in the credit markets has led to increased liquidity risk. All but $50.0 million of our borrowing arrangements are uncommitted lines of credit and, as such, can be reduced or eliminated at any time by the banks extending the credit. While we have not experienced reductions in our borrowing capacity, our lenders have taken actions that indicate their concerns regarding liquidity in the marketplace. These actions have included reduced advance rates for certain security types, more stringent requirements for collateral eligibility and higher interest rates. All of these actions have had a negative impact on our liquidity. Should our lenders take additional similar actions, the cost of conducting our business will increase and our volume of business could be limited. To address this liquidity risk, on January 29, 2010, we entered into a $50.0 million committed credit facility with a national bank, with unsecured borrowing capability of $15.0 million. As of September 24, 2010, we have borrowed $44.0 million under this facility.Classified assets increased from $191.8 million at June 30, 2010 to $251.5 million at September 30, 2010, an increase of 31.1%. Included in the classified assets are non-performing assets which increased from $93.7 million, or 5.3% of assets at June 30, 2010, to $127.1 million, or 7.3% of assets at September 30, 2010. Classified assets as a percentage of total capital plus the allowance for loan losses increased to 127% at September 30, 2010 from 101% at June 30, 2010. Net charge-offs totaled $29.3 million for the three-months ended September 30, 2010, as compared to $6.0 million for the three-months ended June 30, 2010 and $2.6 million for the three-months ended September 30, 2009.
The impact of the asset quality deterioration is also evident in the allowance for loan loss as loan loss provision expense increased to $39.5 million in the first quarter of fiscal 2011 as compared to $10.7 million in the fourth quarter of fiscal 2010 and $4.8 million in the first quarter of fiscal 2010. The allowance at September 30, 2010, was $45.4 million, or 4.12% of loans held for investment, as compared to $35.1 million, or 3.0% of loans held for investment at June 30, 2010.
Net loss for the three-month period ended September 24, 2010 was $20.7 million, a decrease of $23.8 million from net income of $3.1 million for the three-month period ended September 25, 2009. The three-month periods ended September 24, 2010 and September 25, 2009 both contained 63 trading days.
Net revenues decreased for the first quarter of fiscal 2011 by $1.8 million as compared to the same period of fiscal 2010. The largest components of the decrease were in commissions and net gains on principal transactions. The $3.8 million decrease in commissions was due primarily to a $5.8 million decrease in commissions in the institutional segment, primarily in the taxable fixed income business, as a result of tighter spreads and reduced market volatility. This decrease was offset by an increase in commissions of $1.7 million in the retail segment, primarily at SWS Financial Services, Inc. (SWS Financial), due to an increase in production and the addition of six new advisors. The decrease in net gains on principal transactions was driven primarily by a decrease in taxable fixed income gains due to a reduction in market volatility from the same quarter of the prior fiscal year. These revenue declines were partially offset by a $3.1 million increase in net interest revenue and a $1.5 million increase in investment banking and advisory fees. The increase in net interest revenue was due primarily to an increase in the Banks average balance of loans in the mortgage warehouse business. The increase in investment banking and advisory fees was due to an increase the number of deals closed in our corporate finance business unit as well as in increase in Unit Investment Trust (UIT) underwritings in the taxable fixed income business.
Operating expenses increased $33.4 million for the three-months ended September 24, 2010 as compared to the same period of fiscal 2009. The largest increase was the provision for loan loss of $34.8 million and other expenses of $1.9 million. The increase for the Banks loan loss provision is discussed in OverviewBusiness EnvironmentImpact of Credit MarketsBank. The increase in other expenses was due to: (i) an increase in the Banks REO provision of $5.9 million; (ii) a $969,000 increase in legal expenses; (iii) an $850,000 increase in outside services related to the review of the Banks loan files; (iv) a $138,000 increase in assessments from the OTS and Federal Deposit Insurance Fund (DIF); and (v) a $788,000 increase in real estate related expenses. These increases were offset by decreases in professional services of $354,000 and a $6.3 million loss incurred in the first quarter of fiscal 2010 on a correspondents short sale of securities.
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