SWS (SWS) 8-K SWS Reports Improved Results from Core Business Segments

Exhibit 99.1

SWS Reports Improved Results from Core Business Segments

DALLAS, May 8, 2007 – SWS Group, Inc. (NYSE: SWS) today reported net income of $7.6 million, or diluted earnings per share (EPS) of 28 cents, on net revenues of $63.5 million for the company’s third fiscal quarter ended March 30, 2007. Net revenue is defined as total revenue less interest expense.

SWS recorded income from continuing operations for the quarter of $7.6 million, or 28 cents per share, a 10 percent decline from $8.4 million, or 32 cents per share, in the third quarter of the prior fiscal year. For the nine-month period, SWS earned $30.6 million, or $1.13 per share, in income from continuing operations, compared with $23.2 million, or 88 cents per share, in the first three quarters of the prior fiscal year. Net revenues for the period increased to $208.2 million from $192.7 million. Book value per share increased 5 percent to $11.97 from $11.40.

The prior year’s quarter and fiscal year to date benefited from a $3.4 million after-tax gain on NYX stock that SWS holds as a result of the merger between the NYSE and Archipelago. Excluding this item, last year’s adjusted income from continuing operations was $5.1 million, or 19 cents per share, for the quarter and $19.8 million, or 75 cents per share, for the nine-month period. SWS had a $244,000 after-tax decline in the value of its NYX stock in the current year’s third quarter while the nine-month period benefited from a $1.8 million increase in the value of NYX. The year-to-date results also include proceeds from company owned life insurance of $2.3 million. After adjusting for these items, income from continuing operations for the quarter was $7.8 million and 28 cents per share. Year-to-date results were $26.5 million and 98 cents per share. (See Non-GAAP table.)

“We had an excellent quarter with all of our business segments recording nice gains in pre-tax income,” said SWS Group Chief Executive Officer Donald W. Hultgren. “We are continuing to work hard to add experienced bankers and brokers and to find new clearing correspondents.”

(more)

SWS Group Announces Third Quarter Results / 2

For the quarter, each of the company’s business segments recorded gains of 20 percent or more in pre-tax income. Clearing’s pre-tax income increased $824,000 or 21 percent; retail brokerage rose $630,000 or 26 percent; institutional brokerage increased $2.3 million or 60 percent, and banking gained $1.5 million or 35 percent.

In March 2006, the company’s bank sold the assets of its FSB Financial auto finance subsidiary. The results of FSB Financial are classified as discontinued operations for all periods presented in the company’s financial statements. In addition, all references in this press release and accompanying financial statements to amounts per share and number of shares outstanding have been restated to give retroactive effect to the 3-for-2 stock split declared Nov. 30, 2006. The additional shares were distributed on Jan. 2, 2007.

Third quarter net revenues increased $244,000 from year-ago levels. Commissions increased $2.6 million as a result of increased business in both the retail and institutional brokerage segments. Higher levels of public and corporate finance activity produced a $2 million improvement in investment banking, advisory and administrative fees. Net interest revenue increased $1.5 million because of higher average loan balances at the bank. The largest change from the prior year’s quarter was a $5.2 million decline in net gains on principal transactions due to the $5.2 million gain realized a year ago upon the merger of NYSE and Archipelago into NYX.

Third quarter operating expenses increased just under $2 million. The largest increase, $4.4 million in commissions and employee compensation, was primarily a result of increased business profitability. Other expense decreased $2.5 million primarily from a reduction in legal expense and the provision for loan loss, which helped offset the increased compensation expense.

Each business segment also recorded increases of at least 20 percent in pre-tax income for the nine-month period. Clearing’s pre-tax rose $2.4 million or 20 percent; retail brokerage increased $2.9 million or 43 percent; institutional brokerage gained $6.9 million or 40 percent; and banking increased $4.5 million or 31 percent.

(more)

SWS Group Announces Third Quarter Results / 3

Nine-month net revenues increased $15.5 million over the prior year’s nine-month number. Large increases were recorded in net interest revenue, $11.1 million, and investment banking, advisory and administrative fees, $4.4 million, largely for the same reasons as described for the third quarter. Other revenues increased $2.2 million due to proceeds from company owned life insurance and an increase in insurance product sales, partially offset by a decrease in earnings on equity investments. The largest decline came in net revenues from clearing operations, $1.8 million, primarily as a result of decreased revenue from general securities correspondents.

Operating expenses increased almost $6 million in the first three quarters as compared with the period a year earlier. The largest increase – $10.8 million in commissions and other employee compensation – primarily resulted from increased business profitability. Most other expense categories decreased for the nine-month period.

Active markets, rising equity indices and steady interest rates benefit the company’s primary businesses. Average daily volume on the New York Stock Exchange rose 11.2 percent for fiscal 2007. The Dow Jones Industrial Average increased 10.8 percent from the end of fiscal 2006 to the third quarter of fiscal 2007 while the S&P 500 Index and the Nasdaq Composite Index rose 11.9 percent and 11.5 percent, respectively, for the same time periods. National rates for a 30-year mortgage decreased 4 basis points from the third quarter of fiscal 2006 to the third quarter of fiscal 2007.

“All of these trends are positive signs for our businesses,” Hultgren said. “Each of our business segments is performing well, but we remain focused on expanding revenues in each.”

Year-to-date, Southwest Securities processed 12.1 million securities transactions compared with 7.6 million in the first three quarters of the prior fiscal year. Clearing correspondents totaled 217 compared with 208 a year earlier.

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., Southwest Securities, FSB, SWS Financial Services, Inc., and Southwest Insurance Agency.

(more)

SWS Group Announces Third Quarter Results / 4

FINANCIAL TABLES FOLLOW

Forward-Looking Statements

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, volume of trading in securities, volatility of securities prices and interest rates, customer margin loan activity, credit worthiness of our correspondents and customers, demand for housing, and those factors discussed in our Annual Report on Form 10-K and in our other reports filed with and available from the Securities and Exchange Commission.

Reconciliation of GAAP Financial Information to Non-GAAP Financial Information

SWS has included the presentation of income from continuing operations and earnings per share from continuing operations, excluding the impact of the gain realized with our investment in NYX common stock and the proceeds from company insurance. SWS believes this presentation is useful to investors because it is more indicative of SWS’ income from continuing operations and diluted earnings per share from continuing operations. Management has provided this information to assist the reader in understanding the impact of our investment in the NYX for fiscal 2006 and fiscal 2007 and the gain recognized on company owned insurance in fiscal 2007. While management believes these non-GAAP financial measures are useful in evaluating SWS, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP.

	3 months ended 3/30/2007			3 months ended 3/31/2006
	(In thousands)
Income from continuing operations	$	7,590		$	8,448
Impact of NYX		244			(3,355	)
Adjusted income from continuing operations	$	7,834		$	5,093
EPS from continuing operations	$	0.28		$	0.32
Impact of NYX		—			(0.13	)
	$	0.28		$	0.19
	9 months ended 3/30/2007			9 months ended 3/31/2006
Income from continuing operations	$	30,578		$	23,199
Impact of NYX		(1,785	)		(3,355	)
Gain from insurance proceeds		(2,276	)		—
Adjusted income from continuing operations	$	26,517		$	19,844
EPS from continuing operations	$	1.13		$	0.88
Impact of NYX		(.07	)		(0.13	)
Gain from insurance proceeds		(.08	)		—
	$	0.98		$	0.75

(more)

SWS Group Announces Third Quarter Results / 5

SWS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

March 30, 2007 and June 30, 2006

(In thousands, except par values and share amounts)

	March 30, 2007			June 30, 2006
Assets	(Unaudited)
Cash	$	121,583		$	41,674
Assets segregated for regulatory purposes		360,735			345,028
Receivable from brokers, dealers and clearing organizations		2,781,092			2,821,512
Receivable from clients, net of allowances		291,062			373,245
Loans held for sale, net		123,000			124,874
Loans, net		737,338			642,541
Securities owned, at market value		161,680			159,004
Securities purchased under agreements to resell		43,127			63,636
Goodwill		7,552			7,552
Marketable equity securities available for sale		4,732			3,593
Other assets		82,114			75,192
Total assets	$	4,714,015		$	4,657,851
Liabilities and Stockholders’ Equity
Short-term borrowings	$	—		$	30,500
Payable to brokers, dealers and clearing organizations		2,716,880			2,775,564
Payable to clients		615,465			617,697
Deposits		841,984			705,894
Securities sold under agreements to repurchase		10,753			7,719
Securities sold, not yet purchased, at market value		62,457			96,909
Drafts payable		26,433			29,144
Advances from Federal Home Loan Bank		55,513			47,094
Other liabilities		55,098			57,217
Total liabilities		4,384,583			4,367,738
Minority interest in consolidated subsidiaries		911			641
Commitments and contingencies
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 28,148,976 and outstanding 27,438,613 shares at March 30, 2007; issued 27,424,611 and outstanding 26,591,891 shares at June 30, 2006		2,814			1,828
Additional paid-in capital		274,666			255,331
Retained earnings		55,201			37,968
Accumulated other comprehensive income – unrealized holding gain (loss), net of tax		1,987			1,225
Deferred compensation, net		1,674			1,610
Treasury stock (710,363 shares at March 30, 2007 and 832,720 shares at June 30, 2006, at cost)		(7,821	)		(8,490	)
Total stockholders’ equity		328,521			289,472
Total liabilities and stockholders’ equity	$	4,714,015		$	4,657,851

(more)

SWS Group Announces Third Quarter Results / 6

SWS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the three and nine months ended March 30, 2007 and March 31, 2006

(In thousands, except per share and share amounts)

(Unaudited)

	Three Months Ended March 30, 2007			Three Months Ended March 31, 2006			Nine Months Ended March 30, 2007			Nine Months Ended March 31, 2006
Revenues:
Net revenues from clearing operations	$	2,986		$	3,742		$	9,113		$	10,908
Commissions		21,963			19,357			65,262			65,483
Interest		73,376			54,806			218,158			157,766
Investment banking, advisory and administrative fees		7,822			5,773			26,247			21,881
Net gains on principal transactions		2,613			7,803			16,466			16,647
Other		5,729			5,714			20,498			18,285
Total revenue		114,489			97,195			355,744			290,970
Interest expense		50,985			33,935			147,592			98,268
Net revenues		63,504			63,260			208,152			192,702
Non-Interest Expenses:
Commissions and other employee compensation		38,856			34,474			120,537			109,766
Occupancy, equipment and computer service costs		6,268			6,163			17,097			17,730
Communications		2,218			2,273			6,507			6,925
Floor brokerage and clearing organization charges		415			343			2,691			2,436
Advertising and promotional		849			931			1,908			2,257
Other		3,645			6,104			14,112			17,757
Total non-interest expenses		52,251			50,288			162,852			156,871
Income from continuing operations before income tax expense		11,253			12,972			45,300			35,831
Income tax expense		3,663			4,524			14,722			12,632
Income from continuing operations		7,590			8,448			30,578			23,199
Discontinued operations:
Income from discontinued operations		45			20,775			131			22,576
Income tax expense		(14	)		(6,227	)		(41	)		(6,826	)
Minority interest		(4	)		(2,974	)		(13	)		(3,065	)
Income from discontinued operations		27			11,574			77			12,685
Income before cumulative effect of change in accounting principles		7,617			20,022			30,655			35,884
Cumulative effect of change in accounting principles, net of tax of $40		—			—			—			75
Net income		7,617			20,022			30,655			35,959
Net income recognized in other comprehensive income		331			678			762			1,138
Comprehensive income	$	7,948		$	20,700		$	31,417		$	37,097

(more)

SWS Group Announces Third Quarter Results / 7

	Three Months Ended March 30, 2007		Three Months Ended March 31, 2006		Nine Months Ended March 30, 2007		Nine Months Ended March 31, 2006
Earnings per share – basic
Income from continuing operations	$	0.28	$	0.32	$	1.14	$	0.89
Income from discontinued operations		—		0.44		—		0.49
Cumulative effect of change in accounting principles, net of tax		—		—		—		—
Net income	$	0.28	$	0.76	$	1.14	$	1.38
Weighted average shares outstanding – basic		27,248,436		26,201,053		26,856,992		26,073,195
Earnings per share – diluted
Income from continuing operations	$	0.28	$	0.32	$	1.13	$	0.88
Income from discontinued operations		—		0.44		—		0.48
Cumulative effect of change in accounting principles, net of tax		—		—		—		0.01
Net income	$	0.28	$	0.76	$	1.13	$	1.37
Weighted average shares outstanding – diluted		27,586,700		26,488,406		27,166,758		26,307,160

CONTACT: Jim Bowman, VP, Corporate Communications, Southwest Securities, 214.859.9335,jbowman@swst.com