878520--9/5/2008--SWS_GROUP

related topics

{loan, real, estate}

{condition, economic, financial}

{system, service, information}

{stock, price, operating}

{regulation, government, change}

{competitive, industry, competition}

{customer, product, revenue}

{regulation, change, law}

{financial, litigation, operation}

{loss, insurance, financial}

{debt, indebtedness, cash}

{personnel, key, retain}

WE ARE SUBJECT TO RISKS SPECIFIC TO OUR INDUSTRIES Our ability to access capital markets is dependent on market conditions and our credit standing, which could change unfavorably. Our revenues may decrease if securities transaction volumes decline. Market fluctuations could adversely impact our securities business. Housing market fluctuations, specifically in North Texas, could adversely impact our banking business. We are subject to risks relating to litigation and potential securities law liabilities. Failure to comply with the extensive state and federal laws governing our securities and banking operations, or the regulations adopted by several self-regulatory agencies having jurisdiction over us, could have material adverse consequences for us. Our business and prospects, including our ability to attract and retain clients and employees, may be adversely affected if our reputation is harmed. WE ARE SUBJECT TO RISKS SPECIFIC TO OUR COMPANY Our securities business is subject to numerous operational risks. Our business is significantly dependent on net interest margins. Our margin lending, stock lending, securities execution, bank lending and mortgage purchase businesses are all subject to credit risk. If our allowance for loan losses is not sufficient to cover actual loan losses, the profitability of our financial services segment could decrease. The Bank s mortgage and residential construction lending business is dependent on the general health of the North Texas economy. We depend on the highly skilled, and often specialized, individuals we employ, particularly certain personnel in our loan production, private client group, securities lending and trading businesses. We face liquidity risk, which is the potential inability to repay short-term borrowings with new borrowings or assets that can be quickly converted into cash while meeting other obligations and continuing to operate as a going concern. We depend on our computer and communications systems and an interruption in service would negatively affect our business. Our computer systems and network infrastructure could be vulnerable to security problems. Our portfolio trading business is highly price competitive and serves a very limited market. Our existing correspondents may choose to perform their own clearing services. Several of our product lines rely on favorable tax treatment and changes in Federal tax law could impact the attractiveness of these products to our customers.

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878520--9/5/2008--SWS_GROUP_INC