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EXHIBIT 99.2
Index to Unaudited Pro Forma Condensed Combined Financial Statements
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Introduction to unaudited pro forma condensed combined financial statements.......... 2
Unaudited pro forma condensed combined statement of financial condition
as of March 31, 2000.............................................................. 3
Unaudited pro forma condensed combined statement of income and comprehensive income
for the nine months ended March 31, 2000.......................................... 4
Notes to unaudited pro forma condensed combined financial statements................. 5
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Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial statements
combine the historical consolidated statements of financial condition and income
of Southwest Securities Group, Inc. (the "Company") and ASBI Holdings, Inc.
("ASBI") giving effect to the merger using the pooling of interests method of
accounting for a business combination.
The following information was derived from the unaudited financial statements of
the Company and ASBI as of and for the nine months ended March 31, 2000. The
information is only a summary and should be read in conjunction with historical
financial statements and related notes contained in the annual reports and other
information filed with the SEC and incorporated herein by reference and ASBI
historical financial statements identified in Exhibit 99.3.
The unaudited pro forma condensed combined statements of income and
comprehensive income for the nine months ended March 31, 2000 assume the merger
was effected on June 26, 1999. The unaudited pro forma condensed combined
statement of financial condition gives effect to the merger as if it had
occurred on March 31, 2000. The accounting policies of the Company and ASBI are
substantially comparable. Consequently, no adjustments were made to the
unaudited pro forma condensed combined financial statements to conform the
accounting policies of the combining companies.
The unaudited pro forma combined financial information is for illustrative
purposes only. The companies may have performed differently had they always
been combined. The pro forma combined financial information may not be
indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company
will experience operating as a combined company.
(2)
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Southwest Securities Group, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Financial Condition
March 31, 2000
(in thousands, except share and per share amounts)
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Pro Forma
Condensed
Combined
Southwest Southwest
Securities ASBI Securities
Group, Inc. Holdings, Inc. Group, Inc.
and and and
Subsidiaries Subsidiaries Adjustments Subsidiaries
------------------------------------------------------------------------
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ASSETS
Cash $ 22,952 $ 8,660 $ -- $ 31,612
Assets segregated for regulatory purposes 209,691 -- -- 209,691
Marketable equity securities 82,309 -- -- 82,309
Receivable from brokers, dealers and clearing
organizations 3,755,962 -- -- 3,755,962
Receivable from clients, net 1,283,376 -- -- 1,283,376
Loans -- 281,026 -- 281,026
Other assets 197,163 10,568 1,062 (5A) 208,793
------------------------------------------------------------------------
$ 5,551,453 $ 300,254 $ 1,062 $ 5,852,769
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 262,664 $ -- $ -- $ 262,664
Payable to brokers, dealers and clearing
organizations 3,538,060 -- -- 3,538,060
Payable to clients 1,177,535 -- -- 1,177,535
Deposits -- 225,235 -- 225,235
Advances from Federal Home Loan Bank -- 35,632 -- 35,632
Other liabilities 241,551 9,681 1,395 (4) 252,627
Exchangeable subordinated notes 57,500 -- -- 57,500
------------------------------------------------------------------------
5,277,310 270,548 1,395 5,549,253
Minority interest in consolidated subsidiaries 100 886 -- 986
Stockholders' equity:
Preferred stock $1.00 par value. Authorized
100,000 shares; none issued -- -- -- --
Common stock 1,184 27 233 (5B) 1,444
Redeemable preferred stock $1.00 par value.
Authorized 5,000,000 shares; none issued
and outstanding -- -- -- --
Additional paid-in capital 128,818 238 (233) (5B) 157,378
28,555 (5C)
Accumulated other comprehensive income - net
unrealized holding gain, net of tax of $28,736 53,625 -- -- 53,625
Retained earnings 90,517 28,555 (1,395) (4) 90,184
1,062 (5A)
(28,555) (5C)
Deferred compensation, net 538 538
Treasury stock (15,674 shares, at cost) (639) -- -- (639)
------------------------------------------------------------------------
274,043 28,820 (333) 302,530
Commitments and contingencies
------------------------------------------------------------------------
$ 5,551,453 $ 300,254 $ 1,062 $ 5,852,769
========================================================================
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See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
(3)
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Southwest Securities Group, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Income and Comprehensive Income
For the nine months ended March 31, 2000
(in thousands, except share and per share amounts)
Pro Forma
Condensed
Combined
Southwest Southwest
Securities ASBI Securities
Group, Inc. Holdings, Inc. Group, Inc.
and and and
Subsidiaries Subsidiaries Adjustments Subsidiaries
------------------------------------------------------------------------
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REVENUES
Net revenues from clearing operations $ 45,086 $ -- $ -- $ 45,086
Commissions 55,778 -- -- 55,778
Interest 165,385 25,647 -- 191,032
Investment banking, advisory and administrative fees 21,976 -- -- 21,976
Net gains on principal transactions 115,506 -- -- 115,506
Other 12,126 2,997 -- 15,123
------------------------------------------------------------------------
415,857 28,644 -- 444,501
EXPENSES
Commissions and other employee compensation 113,307 4,929 -- 118,236
Interest 117,555 9,479 -- 127,034
Occupancy, equipment and computer service costs 18,627 921 -- 19,548
Communications 12,137 -- -- 12,137
Floor brokerage and clearing organization charges 6,233 -- -- 6,233
Other 37,807 3,314 -- 41,121
------------------------------------------------------------------------
305,666 18,643 -- 324,309
Income before income taxes and minority interest
in consolidated subsidiaries 110,191 10,001 -- 120,192
Income taxes 38,385 93 3,407 (5A) 41,885
------------------------------------------------------------------------
Income before minority interest in consolidated
subsidiaries 71,806 9,908 (3,407) 78,307
Minority interest in consolidated subsidiaries -- (586) -- (586)
------------------------------------------------------------------------
Net income 71,806 9,322 (3,407) 77,721
Other comprehensive loss - unrealized holding
loss arising during period, net of tax (58,497) -- -- (58,497)
------------------------------------------------------------------------
Comprehensive income $ 13,309 $ 9,322 $ (3,407) $ 19,224
========================================================================
Earnings per share - basic $ 5.52 $ 4.98
============= ===============
Earnings per share - diluted $ 5.46 $ 4.94
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Weighted average shares outstanding - basic 12,997,012 $ 15,597,001
============= ===============
Weighted average shares outstanding - diluted 13,141,513 $ 15,741,502
============= ===============
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See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
(4)
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Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements are based on the
unaudited consolidated financial statements of the Company and ASBI as of and
for the nine months ended March 31, 2000.
The Company and ASBI consolidated financial statements are prepared in
conformity with generally accepted accounting principles and require the Company
and ASBI management to make estimates that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities. In the opinion of the Company and ASBI, the unaudited
pro forma condensed combined financial statements include all the adjustments
necessary to present fairly the results of the periods presented. Actual
results could differ materially from these estimates.
2. Accounting Policies
The accounting policies of the Company and ASBI are substantially comparable.
Consequently, no adjustments were made to the unaudited pro forma condensed
combined financial statements to conform the accounting policies of the
combining companies.
3. Pro Forma Earnings Per Share
The pro forma combined net income per common share is based on net income less
preferred stock dividends and the weighted average number of outstanding common
shares. Net income per common share, assuming dilution, includes the dilutive
effect of stock options. The weighted average number of outstanding common
shares has been adjusted to reflect the exchange ratio of 0.0956 shares of the
Company's common stock for each share of ASBI common stock.
4. Merger-Related Expenses
Merger-related fees and expenses, consisting primarily of fees and expenses of
investment bankers, attorneys and accountants and financial printing and other
related charges, are estimated to be approximately $1.4 million. These fees and
expenses have been reflected in the unaudited pro forma condensed combined
statement of financial condition as of March 31, 2000. These charges are not
reflected in the unaudited pro forma condensed combined statements of income or
the pro forma combined per share data.
(5)
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5. Other Pro Forma Adjustments
(A) A pro forma adjustment has been made to reflect the tax implications of the
conversion of ASBI from an S corporation to a C corporation.
(B) A pro forma adjustment has been made to reflect the cancellation of ASBI
common stock and the assumed issuance of 2.6 million shares of the Company's
common stock in exchange for all of the outstanding ASBI common stock (based on
the exchange ratio of 0.0956).
(C) A pro forma adjustment has been made to reflect the termination of ASBI as
an S corporation and the effect of the contribution of undistributed earnings of
ASBI to the combined enterprise.
(6)
