SWS (SWS) 8-K SWS Announces Fiscal 2004 Financial Results

Exhibit 99.1

For Immediate Release

SWS Announces Fiscal 2004 Financial Results

$2.7 Million in Net Income Reported for the Year

DALLAS, September 7, 2004 – SWS Group, Inc. (NYSE:SWS -news) today announced financial results for the fiscal year and fourth quarter ended June 25, 2004.

For fiscal 2004, SWS recorded net income of $2.7 million, or diluted earnings per share (EPS) of 16 cents, on revenues of $273.3 million, compared with net income of $2.9 million, or diluted EPS of 17 cents per share, on revenues of $263.5 million in the prior fiscal year. Fiscal 2003 figures include a $445,000 after-tax, extraordinary gain.

For the fourth quarter, SWS recorded a net loss of $4.3 million, or a loss of 25 cents per share, on revenues of $67.9 million, compared with net income of $3 million, or diluted EPS of 18 cents, on revenues of $72.1 million in the fourth quarter of the prior fiscal year.

As disclosed today, the fourth quarter loss includes an $8 million contingent liability for an anticipated enforcement action by regulatory authorities. In the immediately preceding quarter, the company recorded a $2 million contingent liability related to the same matter, bringing the total impact of the contingency to $9.3 million after tax. The charge relates to regulatory inquiries into improper mutual fund trading alleged to have occurred at the company’s largest operating subsidiary, Southwest Securities, Inc.

“We are moving as quickly as we can to put this matter behind us,” said SWS Group CEO Donald W. Hultgren. “We believe we have taken the steps necessary to prevent these regulatory inquiries from having any additional material impact on our financial results and have addressed the issues raised by the regulatory authorities. It is unfortunate that these matters mask dramatically improved operating results.”

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SWS Announces Fiscal 2004 Financial Results / 2

Net income, excluding the impact of the contingent liability, was $12 million in fiscal 2004 compared with net income of $2.9 million in fiscal 2003. Last year’s results also included a $2.7 million after-tax gain from the sale of My discount broker accounts.

“We are pleased that we were able to post revenue gains absent growth in daily market volume,” Hultgren said, noting that volume on the New York Stock Exchange was virtually unchanged in fiscal 2004 versus 2003. He said Southwest Securities’ investment banking business grew, the firm increased its margin and stock lending balances, and Southwest Securities Bank diversified its lending base through the growth of its community banking business.

Hultgren said Southwest Securities Bank began diversifying its lending base through increased commercial lending in fiscal 2004. As a result the bank’s commercial real estate loans were up 21 percent from the prior fiscal year, and consumer and commercial loans were both more than 25 percent higher than in the prior fiscal year.

Balances in the brokerage business also improved. “We rely on margin lending and securities lending to generate revenue,” Hultgren said. “During fiscal 2004, our average total margin balances increased $40 million, or 13 percent, to $340 million. In the stock lending business, the increases were more pronounced with a 40 percent growth in balances.

The firm’s commission businesses finished the year with strong revenue growth, up 16 percent over last year. “We’ve benefited from our recruiting efforts over the last two years,” Hultgren said.

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SWS Announces Fiscal 2004 Financial Results / 3

“We also continued to hold the line on operating expenses during the year,” he continued. “Occupancy and equipment and communications expenses were down $7.5 million from last year as a result of successfully negotiating new telecommunications contracts and the expiration of equipment leases.”

Southwest Securities’ volume of cleared or executed trades increased four percent to 28.8 million in fiscal 2004 compared with 27.8 million in the prior year. Southwest had a total of 215 correspondents and registered investment advisors at the end of fiscal 2004. Book value per share was $14.47 at the end of June 2004, compared with $14.73 at the end of the prior fiscal year.

SWS Group will broadcast its quarterly conference call with financial professionals via the Internet on Wednesday, September 8, at 9 a.m. Central Daylight Time. Shareholders and other interested parties will be able to access the webcast from a link on the SWS Internet home page athttp://www.swsgroupinc.com.

SWS Group, Inc. is a Dallas-based holding company that offers 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., Southwest Securities Bank, SWS Financial Services, Inc., May Financial Corporation, SWS Capital Corporation and Southwest Insurance Agency.

This release contains forward-looking statements regarding the company’s future overall performance. Readers are cautioned that any forward-looking statements, including those predicting or forecasting future events or results, which depend on future events for their accuracy, embody projections or assumptions, or express the intent, belief or current expectations of the company or management, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially as a result of various factors, some of which are out of our control, including, but not limited to, final resolution of the SEC and NYSE regulatory inquiries and those factors discussed in our Annual Report on Form 10-K and in our other reports filed with and available from the SEC.

Financial Statements Follow

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SWS Announces Fiscal 2004 Financial Results / 4

SWS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

June 25, 2004 and June 27, 2003

(In thousands, except par values and share amounts)

	2004			2003
Assets
Cash and cash equivalents	$	88,589		$	74,706
Assets segregated for regulatory purposes		367,070			441,184
Marketable equity securities available for sale		7,038			5,599
Receivable from brokers, dealers and clearing organizations		3,107,287			2,488,008
Receivable from clients, net		421,799			297,238
Loans held for sale, net		79,083			201,265
Loans, net		462,957			366,008
Securities owned, at market value		141,108			122,693
Goodwill		8,183			7,558
Other assets		59,536			87,825
Total assets	$	4,742,650		$	4,092,084
Liabilities and Stockholders’ Equity
Payable to brokers, dealers and clearing organizations	$	3,050,748		$	2,405,427
Payable to clients		691,456			705,474
Deposits		501,094			528,515
Securities sold, not yet purchased, at market value		88,957			40,620
Drafts payable		32,212			29,331
Advances from Federal Home Loan Bank		36,576			49,885
Other liabilities		82,968			73,953
Exchangeable subordinated notes		8,604			7,284
Total liabilities		4,492,615			3,840,489
Minority interest in consolidated subsidiaries		2,396			1,822
Stockholders’ equity:
Preferred stock of $1.00 par value. Authorized 100,000 shares; none issued		—			—
Common stock of $.10 par value. Authorized 60,000,000 shares, Issued 17,817,444 and outstanding 17,109,925 shares at June 25, 2004; issued 17,707,998 and outstanding 16,957,287 shares at June 27, 2003		1,781			1,770
Additional paid-in capital		245,391			243,683
Retained earnings (accumulated deficit)		(2,718	)		1,217
Accumulated other comprehensive income – unrealized holding gain (loss), net of tax		12,833			12,673
Deferred compensation, net		834			1,549
Treasury stock (707,519 shares at June 25, 2004 and 750,711 shares at June 27, 2003, at cost)		(10,482	)		(11,119	)
Total stockholders’ equity		247,639			249,773
Commitments and contingencies
Total liabilities and stockholders’ equity	$	4,742,650		$	4,092,084

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SWS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

For the three months and fiscal years ended June 25, 2004 and June 27, 2003

(In thousands, except per share and share amounts)

	For the three months ended						For the twelve months ended
	Fiscal 2004			Fiscal 2003			Fiscal 2004			Fiscal 2003
Net revenues from clearing operations	$	4,290		$	5,059		$	19,253		$	19,267
Commissions		23,758			23,221			96,838			83,591
Interest		24,716			25,941			95,871			97,304
Investment banking, advisory and administrative fees		8,672			6,015			28,384			25,589
Net gains on principal transactions		3,348			4,371			17,960			18,515
Other		3,077			7,468			15,043			19,215
Total revenue		67,861			72,075			273,349			263,481
Commissions and other employee compensation		34,731			34,110			141,163			128,650
Interest		8,729			10,090			33,324			39,885
Occupancy, equipment and computer service costs		6,946			9,077			28,443			33,674
Communications		3,212			3,863			12,990			15,305
Floor brokerage and clearing organization charges		1,494			1,554			6,324			6,416
Advertising and promotional		1,280			1,237			3,707			3,708
Other		14,636			7,472			38,106			30,828
Total expense		71,028			67,403			264,057			258,466
Income (loss) before income tax expense and minority interest in consolidated subsidiaries		(3,167	)		4,672			9,292			5,015
Income tax expense		936			1,445			5,555			1,041
Income (loss) before minority interest in consolidated subsidiaries		(4,103	)		3,227			3,737			3,974
Minority interest in consolidated subsidiaries		(207	)		(633	)		(1,027	)		(1,551	)
Net income (loss) before extraordinary item		(4,310	)		2,594			2,710			2,423
Extraordinary gain, net of tax		—			445			—			445
Net income (loss)		(4,310	)		3,039			2,710			2,868
Net income (loss) recognized in other comprehensive income (loss), net of tax		(1,058	)		1,216			160			1,201
Comprehensive income (loss)	$	(5,368	)	$	4,255		$	2,870		$	4,069
Earnings per share - basic
Net income (loss) before extraordinary item	$	(0.25	)	$	0.15		$	0.16		$	0.14
Extraordinary gain		—			0.03			—			0.03
Net income (loss)	$	(0.25	)	$	0.18		$	0.16		$	0.17
Weighted average shares outstanding – basic		17,107,725			16,892,583			17,068,457			16,950,561
Earnings per share - diluted
Net income (loss) before extraordinary item	$	(0.25	)	$	0.15		$	0.16		$	0.14
Extraordinary gain		—			0.03			—			0.03
Net income (loss)	$	(0.25	)	$	0.18		$	0.16		$	0.17
Weighted average shares outstanding - diluted		17,107,725			17,034,029			17,216,735			16,997,078

CONTACT: Jim Bowman, Vice President - - Corporate Communications, (214) 859-9335jbowman@swst.com

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