<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
Commission file number 0-19483
SOUTHWEST SECURITIES GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2040825
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Elm Street, Suite 3500, Dallas, Texas 75270
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 651-1800
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of February 10, 1997, there were 8,783,630 shares of the registrant's
common stock, $.10 par value, outstanding.
<PAGE>
SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
INDEX
Part 1. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
December 31, 1996 and June 28, l996
Consolidated Statements of Income
For the three and six months ended December 31, l996 and December 29, 1995
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and December 29, 1995
Notes to Consolidated Financial Statements
December 31, 1996
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 1. Legal proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, l996 and June 28, l996
(Dollars in thousands, except par values and share amounts)
<TABLE>
<CAPTION>
December June
(Unaudited)
Assets
<S> <C> <C>
Cash $ 9,479 $ 5,284
Assets segregated for regulatory purposes 280,923 204,454
Receivable from brokers, dealers and
clearing organizations 1,900,052 1,455,645
Receivable from clients, net of allowance
for doubtful accounts 479,097 475,195
Securities owned, at market value 36,273 34,593
Other assets 22,188 21,226
$ 2,728,012 $ 2,196,397
Liabilities and Stockholders' equity
Short-term borrowings $ 30,975 $ 104,984
Payable to brokers, dealers and
clearing organizations 1,775,785 1,313,455
Payable to clients 770,235 647,787
Drafts payable 35,411 25,158
Other liabilities 24,140 20,564
2,636,546 2,111,948
Stockholders' equity:
Preferred stock of $1.00 par value.
Authorized 100,000 shares; none issued. --- ---
Common stock of $.10 par value.
Authorized 20,000,000 shares.
Issued 8,792,807 and outstanding 8,783,630 at
December 31, 1996 and June 28, 1996. 879 879
Additional paid-in capital 27,107 27,107
Retained earnings 63,724 56,815
Receivable from employees under the
Employee Stock Purchase Plan (170) (278)
Treasury stock, at cost, 9,177 shares. (74) (74)
Total Stockholders' equity 91,466 84,449
Commitments and contingencies
$ 2,728,012 $ 2,196,397
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the three and six months ended December 31, 1996 and December 29, 1995
(Dollars in thousands, except per share and share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
<S> <C> <C> <C> <C>
Revenues 1996 1995 1996 1995
Net revenues from
clearing operations $ 5,693 $ 3,964 $ 10,418 $ 7,635
Commissions 9,552 8,851 17,800 17,569
Interest 28,159 25,234 53,720 46,107
Investment banking, advisory and
administrative fee 2,931 3,332 6,600 6,337
Net gains on principal transactions 3,209 2,992 6,300 5,496
Other 2,175 1,940 4,585 4,092
51,719 46,313 99,423 87,236
Expenses
Commissions and other
employee compensation 15,072 14,036 29,851 26,925
Interest 19,176 18,517 37,178 33,192
Occupancy, equipment and computer
service costs 3,195 2,296 5,740 4,797
Communications 2,943 2,011 5,116 4,062
Floor brokerage and clearing
organization charges 994 947 1,971 1,948
Other 4,392 3,357 7,606 7,142
45,772 41,164 87,462 78,066
Income before income taxes 5,947 5,149 11,961 9,170
Provision for income taxes 2,088 1,802 4,174 3,199
Net income $ 3,859 $ 3,347 $ 7,787 $ 5,971
Earnings per share $ .44 $ .38 $ .89 $ .68
Weighted average shares outstanding 8,791,234 8,783,630 8,790,546 8,786,782
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and December 29, 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,787 $ 5,971
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,471 1,611
Provision for doubtful accounts 25 692
Deferred income taxes (521) (422)
Decrease (increase) in assets segregated
for regulatory purposes (76,469) 22,135
Net change in broker, dealer and clearing
organization accounts 17,923 (22,719)
Net change in client accounts 118,521 6,781
Increase in securities owned (1,680) (17,474)
Decrease (increase) in other assets 3,756 (350)
Increase (decrease) in drafts payable 10,253 (2,058)
Increase (decrease) in other liabilities 3,488 (1,707)
Net cash provided by (used in)
operating activities 84,554 (7,540)
Cash flows from investing activities:
Purchase of furniture, equipment and
leasehold improvements (5,668) (1,067)
Proceeds from sale of fixed assets --- 481
Net cash used in investing activities (5,668) (586)
Cash flows from financing activities:
Proceeds from (payments on) short-term
borrowings (74,009) 14,521
Purchase of treasury stock --- (74)
Proceeds from employees for
Employee Stock Purchase Plan 108 49
Net proceeds from issuance of common stock --- 250
Payment of cash dividend on common stock (790) (658)
Net cash provided by (used in)
financing activities (74,691) 14,088
Net increase in cash 4,195 5,962
Cash at beginning of period 5,284 3,589
Cash at end of period $ 9,479 $ 9,551
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
General and Basis of Presentation
The accompanying interim consolidated financial statements include the accounts
of Southwest Securities Group, Inc. ("Parent") and its wholly owned
subsidiaries, (collectively, the "Company"), Southwest Securities, Inc.
("Southwest"), Brokers Transaction Services, Inc. ("BTS"), Southwest Investment
Advisors, Inc. ("Advisors"), Trust Company of Texas ("Trust Company"), Westwood
Management Corporation ("Westwood"), SW Capital Corporation ("Capital"), SWST
Computer Corporation ("Computer Corp") and Sovereign Securities, Inc.
("Sovereign"). Southwest and BTS are registered broker/dealers under the
Securities Exchange Act of 1934 ("1934 Act"). Advisors and Westwood are
registered investment advisors under the Investment Advisors Act of 1940. All
significant intercompany balances and transactions have been eliminated.
The consolidated financial statements as of December 31, 1996, and for the three
and six month periods ended December 31, 1996 and December 29, 1995, are
unaudited; however, in the opinion of management, these interim statements
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position, results of
operations and cash flows. These financial statements should be read in
conjunction with the consolidated financial statements and related notes in the
Company's annual audited report as of June 28, 1996. Amounts included for
June 28, 1996 are from the audited financial statements as filed on Form 10-K.
Cash Flow Reporting
Cash paid for interest was $36,645,000 and $31,279,000 for the six
months ended December 31, 1996 and December 29, 1995, respectively.
Cash paid for income taxes was $5,155,000 and $2,742,000 in 1996 and
1995, respectively.
Securities Purchased Under Agreements to Resell (Reverse Repurchase
Agreements) Southwest, from time to time, enters into reverse
repurchase agreements (collateralized by U.S. Government or U.S.
Government agency securities), for the purpose of segregating assets
for the exclusive benefit of its customers. Under a master
repurchase agreement ("Agreement") with Trust Company, securities
purchased under the reverse repurchase agreement are identified and
segregated by Trust Company on its books and records as subject to
the Agreement. Management regularly monitors the market value of
the underlying securities relating to outstanding reverse repurchase
agreements.
Assets Segregated for Regulatory Purposes
At December 31, 1996, the Company had reverse repurchase agreements of
$165,992,000, U.S. Treasury securities with a market value of $114,650,000 and
cash of $281,000 segregated in a special reserve bank account for the exclusive
benefit of customers under Rule 15c3-3 of the 1934 Act, at Trust Company. The
reverse repurchase agreements were collateralized by U.S. Government securities
with a market value of approximately $166,156,000. At June 28, 1996, the
Company had reverse repurchase agreements of $100,092,000, and U.S. Treasury
securities with a market value of $104,362,000 in this account. The reverse
repurchase agreements were collateralized by U.S. Government securities with a
market value of approximately $101,013,000 at June 28, 1996.
<PAGE>
Receivable from and Payable to Brokers, Dealers and Clearing Organizations
At December 31, l996 and June 28, l996, the Company had receivables from and
payables to brokers, dealers and clearing organizations relating to the
following (000's omitted):
<TABLE>
<CAPTION>
December June
<S> <C> <C>
Receivables:
Securities failed to deliver $ 7,094 $ 22,013
Securities borrowed 1,785,018 1,341,788
Correspondent broker/dealers 67,109 72,207
Clearing organizations 557 547
Other 40,274 19,090
$ 1,900,052 $ 1,455,645
December June
Payables:
Securities failed to receive $ 9,492 $ 15,138
Securities loaned 1,751,925 1,286,199
Correspondent broker/dealers 6,755 7,293
Other 7,613 4,825
$ 1,775,785 $ 1,313,455
</TABLE>
Short-term Borrowings
Southwest has credit arrangements with commercial banks, which include broker
loan lines up to $187,000,000 to finance securities owned, securities held for
correspondent broker/dealer accounts, and receivables in clients' margin
accounts. These lines may also be used to release pledged collateral against
day loans. These credit arrangements are provided on an "as offered" basis and
are not committed lines of credit. These arrangements can be terminated at any
time by the lender. Any outstanding balance under these credit arrangements is
due on demand and bears interest at rates indexed to the federal funds rate.
The amount outstanding under these credit facilities at December 31, 1996 was
$30,975,000 and was collateralized by marketable securities owned valued at
approximately $16,306,000, securities held for correspondent broker/dealer
accounts valued at approximately $84,053,000 and clients' securities valued at
approximately $30,742,000. Additionally, Southwest had an irrevocable letter of
credit agreement at December 31, 1996 aggregating $16,000,000, pledged to
support its open positions with an options clearing corporation. The letter of
credit bears interest at the brokers' call rate, if drawn, and is renewable
annually. This letter of credit is fully collateralized by marketable
securities held in clients and non-clients margin accounts with a value of
$20,989,000. The amount outstanding under these credit arrangements was
$94,995,000 at June 28, 1996 and was collateralized by marketable securities
owned valued at approximately $17,772,000, securities held for correspondent
broker/dealer accounts valued at approximately $68,193,000 and clients'
securities valued at approximately $57,436,000. At June 28,1996 Southwest had
securities sold under agreements to repurchase for $9,989,000, maturing July 3,
1996.
Net Capital Requirements
The broker/dealer subsidiaries are subject to the Securities and Exchange
Commission's Uniform Net Capital Rule, which requires the maintenance of
minimum net capital. Southwest has elected to use the alternative method,
permitted by the rule, which requires that it maintain minimum net capital, as
defined in Rule 15c3-1 under the 1934 Act, equal to the greater of $l,500,000
or 2% of aggregate debit balances, as defined in Rule 15c3-1 under the l934 Act.
At December 31, 1996, Southwest had net capital of $59,292,000, or approximately
10% of aggregate debit balances, which is $47,747,000 in excess of its minimum
net capital requirement of $11,546,000 at that date. Additionally, the net
capital rule of the New York Stock Exchange, Inc. provides that equity capital
may not be withdrawn or cash dividends paid if resulting net capital would be
less than 5% of aggregate debit items. At December 31, l996, Southwest had net
capital of $30,429,000 in excess of 5% of aggregate debit items.
<PAGE>
BTS follows the primary (aggregate indebtedness) method under Rule
15c3-3, which requires it to maintain minimum net capital of
$100,000 at December 31, 1996. At that date, BTS had net capital of
$154,000 which is $54,000 in excess of its minimum net capital
requirement at that date.
Trust Company is subject to the capital requirements of the Texas
Department of Banking, and has a minimum capital requirement of
$1,000,000. At December 31, 1996, Trust Company had total
stockholder's equity of $4,683,000 which is $3,683,000 in excess of
its minimum capital requirement at that time.
Employee Stock Purchase Plan
The Company adopted an Employee Stock Purchase Plan ("Plan") as of August 30,
1994 to enable employees of the Company to purchase up to 468,227 shares of
common stock of the Company. Substantially all full-time employees were
eligible to purchase a minimum of $2,500 up to a maximum of $50,000 of the
common stock, subject to certain limitations, at a price of $6.89 per share.
The terms of the Plan provide that the Company will loan the full purchase
price of the stock to the employee under a promissory note due in monthly
installments over a five year period bearing interest at the Applicable Federal
Rate (6.40% at December 31, 1996). A total of 61,122 shares were sold under the
terms of the Plan, resulting in loans to employees of $421,000. The amount
outstanding under these notes at December 31, 1996 was $170,000.
Stock Option Plan
On November 6, 1996, the shareholders of the Company approved the Stock Option
Plan adopted by the Board of Directors on September 17, 1996, pursuant to which
options may be granted to eligible employees of the Company or its
subsidiaries for the purchase of an aggregate of 1,000,000 shares of Common
Stock of the Company. As of December 31, 1996, no options had been issued
under this plan.
Phantom Stock Plan
On November 6, 1996, the shareholders of the Company approved the Phantom
Stock Plan adopted by the Board of Directors on September 17, 1996. This plan
allows non-employee directors to receive directors fees in the form of common
stock equivalent units. As of December 31, 1996, no units had been issued
under this plan.
Authorized Common Stock
On November 6, 1996, the shareholders of the Company approved the authorization
of an additional 10,000,000 shares of common stock. This brings the total
common shares authorized to 20,000,000 shares.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Securities Group, Inc. (The "Company"), through its
principal subsidiary, Southwest Securities, Inc. ("Southwest"),
provides securities transaction processing and other related
services and operates a full-service brokerage, investment banking
and asset management firm. Its primary business is delivering a
broad range of securities transaction processing services to
broker/dealers. Transaction processing services include cost-
effective integrated trade execution, clearing, client account
processing and other customized services ("Transaction Processing").
Southwest also provides services that are directly related to
Transaction Processing including margin lending and stock loan
services. The Company also provides securities brokerage and
investment services primarily to individuals, provides investment
banking services to municipal and corporate clients and trades fixed
income and equity securities. Brokers Transaction Services, Inc.,
("BTS") a wholly owned subsidiary of the Company, and a National
Association of Securities Dealers ("NASD") registered broker/dealer,
contracts with independent registered representatives for the
administration of their securities business. Southwest Investment
Advisors, Inc., a wholly owned subsidiary of the Company is a
registered investment advisor and currently inactive. SW Capital
Corporation, a wholly owned subsidiary of the Company, administers
the Local Government Investment Cooperative ("LOGIC") program. The
LOGIC program allows participants to pool their available funds,
resulting in increased economies of scale, which allow higher
returns while maintaining a high degree of safety and liquidity. In
addition, the Company offers asset management and trust services
through its wholly owned subsidiaries, Westwood Management
Corporation and The Trust Company of Texas.
In August of 1996, the Company formed SWST Computer Corporation
("Computer Corp") which will sell data processing services. In October of 1996,
the Company formed Sovereign Securities, Inc. which is in the process of
registering to become a NASD broker/dealer. These companies are not expected
to contribute significantly to the earnings of the Company during fiscal 1997.
One of the most important facets of the Company's operations is
Transaction Processing and related services. Substantially all of
the revenues from Transaction Processing are shown on the Company's
Consolidated Statements of Income as net revenues from clearing
operations. Increased Transaction Processing and related services
have resulted in increases in certain revenues, including net
revenues from clearing operations, interest revenue from margin
loans to clients of Southwest's Correspondents and to Correspondents
for their own security inventory positions and money market
administrative fees. The resultant increases in retained earnings
have increased the capital of the Company which in turn has
permitted the Company to expand all areas of its operations.
Other major sources of revenues are commissions from Southwest's
client transactions and interest revenue from margin loans to its
own clients, stock loan transactions and other interest-bearing
assets. Investment banking, advisory and administrative fees
include revenues derived from the underwriting and distribution of
corporate and municipal securities, unit trusts and money market and
other mutual funds. The major expenses incurred by the Company
relate to payment of commissions, overall compensation and benefits
for both sales and administrative personnel and the costs of funds
to finance the Company's securities operations, including short-term
borrowings, stock loan transactions and other interest-bearing
obligations.
In August 1994, the Company authorized an employee stock purchase
plan available to eligible employees. The shares available for
purchase were those purchased in the Company's series of treasury
stock acquisitions. At December 31, 1996, the amount receivable
from employees under the Employee Stock Purchase Plan was $170,000.
On November 6, 1996, the shareholders of the Company approved the Stock Option
Plan adopted by the Board of Directors on September 17, 1996, pursuant to which
options may be granted to eligible employees of the Company or its
subsidiaries for the purchase of an aggregate of 1,000,000 shares of Common
Stock of the Company. As of December 31, 1996, no options had been issued
under this plan.
On November 6, 1996, the shareholders of the Company approved the Phantom Stock
Plan adopted by the Board of Directors on September 17, 1996. This plan allows
non-employee directors to receive directors fees in the form of common stock
equivalent units. As of December 31, 1996, no units had been issued under this
plan.
On November 6, 1996, the shareholders of the Company approved the authorization
of an additional 10,000,000 shares of common stock. This brings the total
common shares authorized to 20,000,000 shares.
<PAGE>
Three Months Ended December 31, l996 Compared With the Three Months Ended
December 29, l995
Total revenues increased by $5,406,000, or 12%, in the second
quarter of fiscal 1997 to $51,719,000 compared to $46,313,000 in the
second quarter of fiscal 1996. Improved market conditions as well
as an increase in the number of correspondents resulted in increased
revenues from Transaction Processing of $1,729,000, an increase of
44%. Commissions increased $701,000 to $9,552,000, an increase of
8% when compared with revenues in the second quarter of fiscal 1996
of $8,851,000. Interest income increased to $28,159,000, an increase of
$2,925,000, or 12%, while interest expense increased 4%, or $659,000
to $19,176,000. This resulted in an increase in net interest
revenue of $2,266,000 or 34% due to increased balances in securities
lending accounts and a continuing favorable interest rate
environment. The amounts receivable and payable relating to open
positions for securities borrowed and loaned as of December 31,
1996, were $1,785,018,000 and $1,751,925,000, respectively. As of
December 29, 1995, these amounts were $1,339,290,000 and
$1,299,262,000. Investment banking, advisory and administrative
fees decreased $401,000 or 12% to $2,931,000 when compared to
$3,332,000 in the second quarter of fiscal 1996. Net gains on
principal transactions increased 7% or $217,000 to $3,209,000,
principally due to an increase in trading income. Other income
increased $235,000 or 12% to $2,175,000 when compared to $1,940,000
in the second quarter of fiscal 1996.
Total expenses increased $4,608,000 or 11% to $45,772,000 when
compared to the quarter ended December 29, 1995 primarily as the
result of increased occupancy and communications expenses and
increased commission and employee compensation expense. Commissions
and other employee compensation increased $1,036,000 or 7% compared
to the same period last year as a result of increased commissions
generated by Southwest and BTS registered representatives and an
increase in the number of employees to 639 at December 31, 1996
compared to 577 at December 29, 1995. Occupancy, equipment and
computer service expenses increased $899,000 or 39% primarily due to
an upgrade in computer processing equipment. Communications expense
increased $932,000 or 46% to $2,943,000 when compared
to $2,011,000 in the second quarter of fiscal 1996. Other expenses
increased $1,035,000 or 31% to $4,392,000, primarily due to
increases in expenses associated with trading and underwriting fixed
income securities.
Six Months Ended December 31, 1996 Compared with the Six Months Ended
December 29, 1995
Total revenues for the six months ended December 31, 1996 increased
$12,187,000, or 14% when compared to the same period last year. As
discussed above, improved market conditions as well as an increase
in the number of correspondents resulted in increased revenues from
Transaction Processing. Net revenues from clearing operations
increased to $10,418,000 an increase of $2,783,000 or 36% from a
year ago. Interest income increased to $53,720,000, an increase of
$7,613,000, or 17%, while interest expense increased 12%, or
$3,986,000 to $37,178,000. This resulted in an increase in net
interest revenue of $3,627,000 or 28% due to increased balances in
securities lending accounts and a continuing favorable interest rate
environment. Net gains on principal transactions and other income
increased due to the reasons discussed above.
Total expenses increased $9,396,000 or 12% to $87,462,000 when
compared to the six months ended December 29, 1995 primarily as the
result of increased interest expense, as discussed above, and
increased commission and employee compensation expense. Commissions
and other employee compensation increased $2,926,000 or 11% compared
to the same period last year as a result of increased commissions
generated by Southwest and BTS registered representatives and an
increase in the number of employees. Occupancy, equipment and
computer service expenses increased $943,000 or 20% primarily due to
an upgrade in computer processing equipment. Communications expense
increased $1,054,000, or 26%, to $5,116,000 from $4,062,000 when
compared to the period ended
December 29, 1995.
Liquidity and Capital Resources
Approximately 99% of the Company's assets consist of cash, assets
segregated for regulatory purposes, marketable securities and
receivables from clients (representing borrowings from Southwest by
clients to finance the purchase of securities on margin, which are
secured by marketable securities) and from brokers, dealers, and
clearing organizations. All assets are financed by the Company's
equity capital, short-term bank borrowings, interest bearing and non-
interest bearing client credit balances, correspondent deposits, and
other payables. Southwest maintains an allowance for doubtful
accounts which represents amounts, in the judgment of management, that are
necessary to absorb losses from the inherent risks in receivables
from clients, clients of correspondents and correspondents
themselves. As of December 31, 1996, the allowance was
approximately $4,800,000.
<PAGE>
Southwest has credit arrangements with several commercial banks,
which include broker loan lines up to $187,000,000 to finance
securities owned, securities held for correspondent accounts and
receivables in client margin accounts. These credit arrangements
are provided on an "as offered" basis and are not committed lines of
credit. As of December 31, l996, the Company had $30,975,000
outstanding as loans under these arrangements. Outstanding balances
under these credit arrangements are due on demand, bear interest at
rates indexed to the federal funds rate, and are collateralized by
securities of Southwest and its clients. In the opinion of
management, these credit arrangements are adequate to meet the short-
term operating capital needs of Southwest.
Southwest is subject to the requirements of the Securities and
Exchange Commission and the New York Stock Exchange relating to
liquidity, capital standards and the use of client funds and
securities. The Company has historically operated in excess of the
minimum net capital requirements.
Effects of Recently Issued Accounting Standards
On July 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123"). FAS 123 will not have a material impact
on the Company's financial position or results of operations, as the
Company does not intend to adopt the value based measurement
concept, but will require extensive disclosures regarding the
Company's stock option plan.
Effects of Inflation
Management does not believe that changes in replacement costs of
fixed assets will materially affect the Company's operations. The
rate of inflation, however, affects the Company's expenses, such as
employee compensation, rent and communications. Increases in these
expenses may not be readily recoverable in the price the Company
charges for its services. Inflation can have significant effects on
interest rates which in turn can affect prices and activities in the
securities markets. These fluctuations may have an adverse impact
on the Company's operations.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None Reportable (229.103)
Item 2. Changes in Securities
None Reportable (Per Instructions to Form 10-Q)
Item 3. Defaults upon Senior Securities
None Reportable (Per Instructions to Form 10-Q)
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on November 6, 1996.
The following directors were elected at the meeting:
[S] [C] [C]
Nominees For Withheld
Don A. Buchholz 7,737,488 132,450
Raymond E. Wooldridge 7,735,588 134,350
David Glatstein 7,729,316 140,622
Susan M. Byrne 7,735,588 134,350
Allen B. Cobb 7,735,988 133,950
J. Jan Collmer 7,734,938 135,000
Frederick R. Meyer 7,736,313 133,625
Jon L. Mosle, Jr. 7,734,138 135,800
There were no abstentions.
Other matters that were voted on:
[S] [C] [C]
For Against
Adoption of the Southwest Securities Group,
Inc. Stock Option Plan 5,459,392 885,110
Adoption of the Southwest Securities Group,
Inc. Phantom Stock Plan 6,179,032 140,401
Amendment of the Company's Certificate of
Incorporation to increase the authorized number
of shares of common stock from 10,000,000 to
20,000,000 7,685,097 128,951
Item 5. Other Information
None Reportable (Per Instructions to Form 10-Q)
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
10.1 Executive Compensation
The information required by this item regarding Executive
compensation is incorporated by reference to pages 8 through 10 of
the Company's Proxy Statement dated September 26, 1996 which was
filed with the Commission pursuant to Regulation 240.14a (6) (c)
prior to October 26, 1996.
REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Southwest Securities Group, Inc
(Registrant)
February 10, 1997 /S/ David Glatstein
Date (Signature)
David Glatstein
President
February 10, 1997 /S/ Kenneth R. Hanks
Date (Signature)
Kenneth R. Hanks
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1,000
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