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CST: 18/07/2019 04:29:35   

Stifel Reports First Quarter 2019 Financial Results

78 Days ago

  • Net revenues of $770.4 million, increased 2.7% compared with the year-ago quarter.
  • Record net revenues and pre-tax operating income in Global Wealth Management.
  • Net income available to common shareholders of $96.9 million, or $1.22 per diluted common share.
  • Non-GAAP net income available to common shareholders of $104.5 million, or $1.32 per diluted common share.
  • Record client assets of $300.0 billion, increased 9.2% compared with the year-ago quarter and 11.2% sequentially.
  • Bank net interest margin of 3.17% increased 28 basis points sequentially.
  • Non-GAAP return on tangible common equity of 22.3%.
  • Increase in quarterly dividend by 25% to $0.15 per common share.
  • Repurchased approximately 1.0 million shares of the Company’s common stock at an average price of $53.25.

ST. LOUIS, April 30, 2019 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $96.9 million, or $1.22 per diluted common share on net revenues of $770.4 million for the three months ended March 31, 2019, compared with net income available to common shareholders of $86.4 million, or $1.06 per diluted common share, on net revenues of $750.4 million for the first quarter of 2018.

For the three months ended March 31, 2019, the Company reported non-GAAP net income available to common shareholders of $104.5 million, or $1.32 per diluted common share. The Company’s reported GAAP net income for the three months ended March 31, 2019 was primarily impacted by merger-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“Stifel generated record first quarter results highlighting the diversity of our business model. Net revenue of $770 million increased 3% from last year’s first quarter record and we achieved non-GAAP pre-tax margins of 19% and return on tangible equity of 22%. Our Global Wealth Management segment posted record net revenues and record pre-tax income, overcoming the expected decline in asset management revenue resulting from the market sell off in the fourth quarter of 2018. Our Institutional Group generated strong advisory, public finance, and fixed income brokerage revenue that helped to minimize the impact of the government shutdown on our equities business. As we look forward, we are optimistic about our business prospects for the remainder of 2019 and beyond,” stated Ronald J. Kruszewski, Chairman and Chief Executive Officer of Stifel.

Financial Highlights (Unaudited)   Three Months Ended  
($ in 000s, except per share data)   GAAP
3/31/19
    GAAP
3/31/18
    %
Change
    GAAP
12/31/18
    %
Change
      Non-
GAAP (1)
3/31/19
    Non-
GAAP (1)
3/31/18
    %
Change
 
Net revenues   $ 770,420     $ 750,358       2.7     $ 793,449       (2.9 )     $ 770,420     $ 750,549       2.6  
Net income applicable to Stifel Financial Corp.   $ 99,207     $ 88,761       11.8     $ 114,062       (13.0 )     $ 106,864     $ 96,147       11.1  
Preferred dividend     2,344       2,344             2,344               2,344       2,344        
Net income available to common shareholders   $ 96,863     $ 86,417       12.1     $ 111,718       (13.3 )     $ 104,520     $ 93,803       11.4  
Earnings per diluted common share   $ 1.25     $ 1.09       14.7     $ 1.41       (11.3 )     $ 1.35     $ 1.18       14.4  
Earnings per diluted common share available to common shareholders   $ 1.22     $ 1.06       15.1     $ 1.38       (11.6 )     $ 1.32     $ 1.15       14.8  
Compensation ratio     59.5 %     61.0 %             56.5 %               59.0 %     60.5 %        
Non-compensation ratio     22.6 %     23.0 %             23.8 %               22.0 %     22.2 %        
Pre-tax operating margin (2)     17.9 %     16.0 %             19.7 %               19.0 %     17.3 %        

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $259.5 million, a 1.5% decrease compared with the first quarter of 2018 and a 4.4% increase compared with the fourth quarter of 2018.

    Three Months Ended  
($ in 000s)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Global Wealth Management   $ 153,194     $ 162,734       (5.9 )   $ 157,331       (2.6 )
Institutional brokerage:                                        
Equity capital markets     38,881       48,085       (19.1 )     48,705       (20.2 )
Fixed income capital markets     67,406       52,738       27.8       42,463       58.7  
Total institutional brokerage     106,287       100,823       5.4       91,168       16.6  
Total brokerage revenues   $ 259,481     $ 263,557       (1.5 )   $ 248,499       4.4  
  • Global Wealth Management brokerage revenues were $153.2 million, a 5.9% decrease compared with the first quarter of 2018 and a 2.6% decrease compared with the fourth quarter of 2018.
  • Institutional equity brokerage revenues were $38.9 million, a 19.1% decrease compared with the first quarter of 2018 and a 20.2% decrease compared with the fourth quarter of 2018.
  • Institutional fixed income brokerage revenues were $67.4 million, a 27.8% increase compared with the first quarter of 2018 and a 58.7% increase compared with the fourth quarter of 2018.

Investment Banking Revenues

Investment banking revenues were $161.8 million, an 8.2% decrease compared with the first quarter of 2018 and a 19.6% decrease compared with the fourth quarter of 2018.

    Three Months Ended  
($ in 000s)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Capital raising:                                        
Global Wealth Management   $ 8,223     $ 7,688       7.0     $ 7,915       3.9  
                                         
Equity capital markets     27,859       52,707       (47.1 )     51,839       (46.3 )
Fixed income capital markets     20,863       18,294       14.0       30,390       (31.3 )
Institutional Group     48,722       71,001       (31.4 )     82,229       (40.7 )
Total capital raising (3)     56,945       78,689       (27.6 )     90,144       (36.8 )
Advisory fees (3)     104,895       97,673       7.4       111,089       (5.6 )
Total investment banking   $ 161,840     $ 176,362       (8.2 )   $ 201,233       (19.6 )
  • Global Wealth Management capital raising revenues were $8.2 million, a 7.0% increase compared with the first quarter of 2018 and a 3.9% increase compared with the fourth quarter of 2018.
  • Institutional equity capital raising revenues were $27.9 million, a 47.1% decrease compared with the first quarter of 2018 and a 46.3% decrease compared with the fourth quarter of 2018.
  • Institutional fixed income capital raising revenues were $20.9 million, a 14.0% increase compared with the first quarter of 2018 and a 31.3% decrease compared with the fourth quarter of 2018.
  • Advisory fee revenues were $104.9 million, a 7.4% increase compared with the first quarter of 2018 and a 5.6% decrease compared with the fourth quarter of 2018.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $195.3 million, a 0.3% decrease compared with the first quarter of 2018 and a 7.0% decrease compared with the fourth quarter of 2018. See Asset Management and Service Fee Break-down table.

Net Interest Income

Record net interest income of $141.7 million, a 27.3% increase compared with the first quarter of 2018 and an 11.8% increase compared with the fourth quarter of 2018. The increase is primarily due to growth of interest-earning assets and interest-bearing liabilities, as well as higher interest rates.

  • Interest income was $191.1 million, a 38.7% increase compared with the first quarter of 2018 and a 3.5% increase compared with the fourth quarter of 2018.
  • Interest expense was $49.4 million, an 86.9% increase compared with the first quarter of 2018 and a 14.6% decrease compared with the fourth quarter of 2018.

Compensation and Benefits Expenses

For the quarter ended March 31, 2019, compensation and benefits expenses were $458.1 million, which included $3.9 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $457.9 million in the first quarter of 2018 and $448.4 million in the fourth quarter of 2018. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 59.0% in the first quarter of 2019 (non-GAAP measure).

    Three Months Ended  
 ($ in 000s)   3/31/19     3/31/18  
GAAP compensation and benefits   $ 458,114     $ 457,893  
As a percentage of net revenues     59.5 %     61.0 %
Non-GAAP adjustments: (4)                
Merger-related and severance     (3,932 )     (3,739 )
Non-GAAP compensation and benefits   $ 454,182     $ 454,154  
As a percentage of non-GAAP net revenues     59.0 %     60.5 %

Non-Compensation Operating Expenses

For the quarter ended March 31, 2019, non-compensation operating expenses were $174.5 million, which included $4.3 million of merger-related expenses (non-GAAP adjustments). This compares with $172.9 million in the first quarter of 2018 and $189.1 million in the fourth quarter of 2018. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended March 31, 2019 were 22.0% (non-GAAP measure).

    Three Months Ended  
($ in 000s)   3/31/19     3/31/18  
GAAP non-compensation expenses   $ 174,497     $ 172,911  
As a percentage of net revenues     22.6 %     23.0 %
Non-GAAP adjustments: (4)                
Merger-related     (4,259 )     (6,023 )
Non-GAAP non-compensation expenses   $ 170,238     $ 166,888  
As a percentage of non-GAAP net revenues     22.0 %     22.2 %

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended March 31, 2019 was 27.8%. This compares with an effective income tax rate of 25.8% for the first quarter of 2018 and 26.9% for the fourth quarter of 2018. The adjusted non-GAAP effective income tax rate for the quarter ended March 31, 2019 was 26.6%.

    Three Months Ended  
($ in 000s)   3/31/19     3/31/18  
GAAP provision for income taxes   $ 38,370     $ 30,793  
GAAP effective tax rate     27.8 %     25.8 %
Non-GAAP adjustments: (4)                
Merger-related and severance     2,203       2,712  
Other     (1,669 )     (145 )
      534       2,567  
Non-GAAP provision for income taxes   $ 38,904     $ 33,360  
Non-GAAP effective tax rate     26.6 %     25.8 %


Conference Call Information

Stifel Financial Corp. will host its first quarter 2019 financial results conference call on Tuesday, April 30, 2019, at 8:00 a.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifel’s Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID #6179475. A live audio webcast of the call, as well as a presentation highlighting the Company’s results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. The Company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust and Stifel Bank offer a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company’s web site at www.stifel.com.

Forward-Looking Statements

This earnings release contains certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies’ operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Summary Results of Operations (Unaudited)  
    Three Months Ended  
($ in 000s, except per share amounts)   3/31/19     3/31/18     % Change       12/31/18     % Change  
Revenues:                                          
Commissions   $ 155,449     $ 165,775       (6.2 )     $ 167,039       (6.9 )
Principal transactions     104,032       97,782       6.4         81,460       27.7  
Brokerage Revenues     259,481       263,557       (1.5 )       248,499       4.4  
                                           
Capital raising     56,950       78,690       (27.6 )       90,144       (36.8 )
Advisory fees     104,890       97,672       7.4         111,089       (5.6 )
Investment banking     161,840       176,362       (8.2 )       201,233       (19.6 )
Asset management and service fees     195,267       195,801       (0.3 )       210,063       (7.0 )
Other income     12,209       3,357       263.7         6,996       74.5  
Operating Revenues     628,797       639,077       (1.6 )       666,791       (5.7 )
Interest Revenue     191,071       137,734       38.7         184,534       3.5  
Total Revenues     819,868       776,811       5.5         851,325       (3.7 )
Interest Expense     49,448       26,453       86.9         57,876       (14.6 )
Net Revenues     770,420       750,358       2.7         793,449       (2.9 )
                                           
Non-interest Expenses:                                          
Compensation and benefits     458,114       457,893       0.0         448,375       2.2  
Occupancy and equipment rental     58,862       57,595       2.2         57,158       3.0  
Communication and office supplies     35,697       33,499       6.6         36,786       (3.0 )
Commissions and floor brokerage     10,956       9,365       17.0         11,169       (1.9 )
Provision for loan losses     2,283       2,043       11.7         5,122       (55.4 )
Other operating expenses     66,699       70,409       (5.3 )       78,908       (15.5 )
Total non-interest expenses     632,611       630,804       0.3         637,518       (0.8 )
Income before income tax expense     137,809       119,554       15.3         155,931       (11.6 )
Provision for income taxes     38,370       30,793       24.6         41,869       (8.4 )
Net income     99,439       88,761       12.0         114,062       (12.8 )
Net income applicable to non-controlling interests     232           n/m             n/m  
Net income applicable to Stifel Financial Corp.     99,207       88,761       11.8         114,062       (13.0 )
Preferred dividends     2,344       2,344               2,344        
Net income available to common shareholders   $ 96,863     $ 86,417       12.1       $ 111,718       (13.3 )
Earnings per common share:                                          
Basic   $ 1.35     $ 1.20       12.5       $ 1.56       (13.5 )
Diluted   $ 1.22     $ 1.06       15.1       $ 1.38       (11.6 )
                                           
Cash dividends declared per common share   $ 0.15     $ 0.12       25.0       $ 0.12       25.0  
                                           
Weighted average number of common shares outstanding:                                          
Basic     71,700       71,999       (0.4 )       71,666       0.0  
Diluted     79,210       81,789       (3.2 )       80,706       (1.9 )


Summary Segment Results (Unaudited)  
    Three Months Ended  
($ in 000s)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Net revenues:                                        
Global Wealth Management   $ 510,610     $ 485,575       5.2     $ 509,256       0.3  
Institutional Group     261,286       270,078       (3.3 )     286,640       (8.8 )
Other     (1,476 )     (5,295 )     72.1       (2,447 )     39.7  
Total net revenues   $ 770,420     $ 750,358       2.7     $ 793,449       (2.9 )
                                         
Operating expenses:                                        
Global Wealth Management   $ 316,120     $ 308,804       2.4     $ 320,296       (1.3 )
Institutional Group     229,082       225,508       1.6       244,488       (6.3 )
Other     87,409       96,492       (9.4 )     72,734       20.2  
Total operating expenses   $ 632,611     $ 630,804       0.3     $ 637,518       (0.8 )
                                         
Operating contribution:                                        
Global Wealth Management   $ 194,490     $ 176,771       10.0     $ 188,960       2.9  
Institutional Group     32,204       44,570       (27.7 )     42,152       (23.6 )
Other     (88,885 )     (101,787 )     (12.7 )     (75,181 )     18.2  
Income before income taxes   $ 137,809     $ 119,554       15.3     $ 155,931       (11.6 )
                                         
As a percentage of net revenues:                                      
Compensation and benefits                                        
Global Wealth Management     48.5       49.8               48.5          
Institutional Group     61.0       59.0               62.0          
Non-comp. operating expenses                                        
Global Wealth Management     13.4       13.8               14.4          
Institutional Group     26.7       24.5               23.3          
Income before income taxes                                        
Global Wealth Management     38.1       36.4               37.1          
Institutional Group     12.3       16.5               14.7          
Consolidated pre-tax margin     17.9       16.0               19.7          


Financial metrics (unaudited): As of and For the Three Months Ended  
($ in 000s, except percentages and per share amounts) 3/31/19   3/31/18   12/31/18  
Total assets $ 24,183,559   $ 21,715,342   $ 24,519,598  
Total Stifel Financial shareholders' equity $ 3,376,623   $ 2,917,540   $ 3,167,593  
Book value per common share (5) $ 43.18   $ 38.49   $ 42.62  
Return on common equity (6)   12.7 %   12.7 %   14.9 %
Non-GAAP return on common equity (1) (6)   13.7 %   13.7 %   16.9 %
Return on tangible common equity (7)   20.6 %   21.0 %   24.1 %
Non-GAAP return on tangible common equity (1) (7)   22.3 %   22.8 %   27.3 %
Tier 1 common capital ratio (8)   15.9 %   16.6 %   16.8 %
Tier 1 risk based capital ratio (8)   18.5 %   18.7 %   18.2 %
Tier 1 leverage capital ratio (8)   9.8 %   9.6 %   9.3 %
Pre-tax margin on net revenues   17.9 %   16.0 %   19.7 %
Non-GAAP pre-tax margin on net revenues (1)   19.0 %   17.3 %   21.9 %
Effective tax rate   27.8 %   25.8 %   26.9 %
Non-GAAP effective tax rate (1)   26.6 %   25.8 %   25.6 %


Statistical Information (unaudited):   As of and For the Three Months Ended  
($ in 000s, except financial advisors and locations)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Financial advisors (9)     2,061       2,008       2.6       2,051       0.5  
Independent contractors     99       109       (9.2 )     101       (2.0 )
Total financial advisors     2,160       2,117       2.0       2,152       0.4  
Locations     407       397       2.5       404       0.7  
Total client assets   $ 299,993,000     $ 274,651,000       9.2     $ 269,862,000       11.2  
Fee-based client assets   $ 99,579,000     $ 89,031,000       11.8     $ 90,174,000       10.4  
Client money market and insured product   $ 14,928,000     $ 16,659,000       (10.4 )   $ 16,109,000       (7.3 )
Secured client lending (10)   $ 3,175,240     $ 3,119,473       1.8     $ 2,893,074       9.8  


    Asset Management and Service Fee Break-down (unaudited)  
Asset Management and Service Fee Revenues:   Three Months Ended  
($ in 000s)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Private Client Group (11)   $ 148,092     $ 146,769       0.9     $ 159,775       (7.3 )
Asset Management     28,469       27,104       5.0       28,670       (0.7 )
Third-party Bank Sweep Program     8,562       11,603       (26.2 )     11,062       (22.6 )
Other (12)     10,144       10,325       (1.8 )     10,556       (3.9 )
Total asset management and service fee revenues   $ 195,267     $ 195,801       (0.3 )   $ 210,063       (7.0 )
                                         
Fee-based Assets:   Three Months Ended  
($ in millions)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Private Client Group (11)   $ 73,553     $ 66,255       11.0     $ 66,097       11.3  
Asset Management     32,952       29,086       13.3       30,269       8.9  
Elimination (13)     (6,926 )     (6,310 )     9.8       (6,192 )     11.9  
Total fee-based assets   $ 99,579     $ 89,031       11.8     $ 90,174       10.4  
                                         
Individual Program Banks   $ 1,875     $ 3,676       (49.0 )   $ 2,569       (27.0 )
                                         
ROA (bps) (14)                                        
Private Client Group (11)     89.6       90.9               89.4          
Asset Management     34.6       37.3               37.9          
Individual Program Banks     153.3       121.7               159.3          


Net Interest Income Analysis (Unaudited):  
                                                                     
    Three Months Ended  
    March 31, 2019     March 31, 2018     December 31, 2018  
($ in millions, except percentages)   Average
Balance
    Interest
Income/
Expense
  Average
Interest
Rate
    Average
Balance
    Interest
Income/
Expense
  Average
Interest
Rate
    Average
Balance
    Interest
Income/
Expense
    Average
Interest
Rate
 
Interest-earning assets:                                                                    
Cash and federal funds sold   $ 1,124.9     $ 7.8     2.78 %   $ 351.4     $ 1.4     1.64 %   $ 689.1     $ 4.3       2.52 %
Financial instruments owned     1,277.4       6.3     1.98       1,142.4       4.9     1.73       1,275.9       5.8       1.81  
Margin balances     1,258.5       13.4     4.27       1,276.6       11.0     3.43       1,245.0       13.2       4.24  
Investments:                                                                    
Asset-backed securities     4,698.9       49.0     4.17       4,431.2       36.9     3.33       4,909.1       49.2       4.01  
Mortgage-backed securities     1,531.4       9.0     2.35       1,746.1       9.6     2.20       1,599.4       9.0       2.18  
Corporate fixed income securities     954.5       7.2     3.01       1,293.6       8.1     2.51       1,143.9       8.4       2.98  
State and municipal securities     50.1       0.3     2.38       74.1       0.3     1.36       72.8       0.3       2.02  
Total Investments     7,234.9       65.5     3.62       7,545.0       54.9     2.91       7,725.2       66.9       3.47  
Loans:                                                                    
Commercial and industrial     3,419.8       40.8     4.78       2,478.0       26.7     4.32       3,245.7       38.9       4.79  
Residential real estate     2,927.9       22.5     3.07       2,636.9       18.3     2.77       2,844.8       21.1       2.96  
Securities-based loans     1,799.5       19.1     4.25       1,796.6       15.3     3.41       1,844.9       19.3       4.18  
Commercial real estate     336.5       4.7     5.60       104.5       1.0     3.78       322.1       4.8       5.94  
Loans held for sale     179.0       1.8     4.09       200.6       1.8     3.65       236.5       2.3       3.97  
Other     319.0       4.4     5.36       50.2       0.5     4.01       280.2       3.7       5.43  
Total Loans     8,981.7       93.3     4.15       7,266.8       63.6     3.50       8,774.2       90.1       4.11  
Other interest-bearing assets     736.3       4.8     2.61       768.0       1.9     0.97       836.5       4.2       2.00  
Total interest-earning assets/interest income     20,613.7       191.1     3.71       18,350.2       137.7     3.00       20,545.9       184.5       3.59  
Interest-bearing liabilities:                                                                    
Short-term borrowings     68.2       0.5     3.10       160.4       0.9     2.31       58.7       0.5       3.09  
Senior notes     1,016.1       11.1     4.38       1,015.1       11.1     4.38       1,016.0       11.0       4.38  
Deposits     15,282.3       28.1     0.73       13,151.6       8.1     0.25       14,631.2       33.0       0.90  
FHLB     461.4       1.7     1.45       902.9       3.3     1.44       994.2       4.6       1.85  
Other interest-bearing liabilities     1,588.3       8.0     2.03       1,268.8       3.1     0.95       1,532.0       8.8       2.27  
Total interest-bearing liabilities/interest expense   $ 18,416.3     $ 49.4     1.07 %   $ 16,498.8     $ 26.5     0.64 %   $ 18,232.1     $ 57.9       1.27 %
Net interest income/margin           $ 141.7     2.75 %           $ 111.2     2.43 %           $ 126.6       2.47 %


Stifel Bancorp, Inc. (15) - a component of Global Wealth Management  
   
Selected operating data (unaudited): Three Months Ended  
($ in 000s, except percentages) 3/31/19     3/31/18     % Change     12/31/18     % Change  
Net interest income $ 134,564     $ 107,627       25.0     $ 121,790       10.5  
Bank loan loss provision $ 2,283     $ 2,043       11.7     $ 5,122       (55.4 )
Charge-offs $ 56     $ 14       300.0     $     n/m  
Net interest margin   3.17 %     2.89 %     9.7       2.89 %     9.7  


Financial Metrics (unaudited):   As of  
($ in 000s, except percentages)   3/31/19     3/31/18     12/31/18  
Total assets   $ 16,802,553     $ 15,154,798     $ 17,818,887  
Total shareholders' equity     1,227,087       1,081,041       1,203,243  
Total loans, net (includes loans held for sale)     8,850,905       7,337,749       8,723,172  
Total deposits     15,049,877       13,329,623       15,863,613  
Available-for-sale securities, at fair value     2,997,801       3,705,918       3,064,257  
Held-to-maturity securities, at amortized cost     4,100,357       3,842,889       4,215,533  
Commercial and industrial     3,314,564       2,553,671       3,304,234  
Residential real estate     2,928,228       2,634,069       2,875,014  
Securities-based loans     1,860,989       1,809,281       1,786,966  
Commercial real estate     361,950       101,591       318,961  
Loans held for sale   $ 144,216     $ 261,467     $ 205,557  
Stifel Bank & Trust:                        
Common equity tier 1 capital ratio (8)     13.7 %     14.6 %     14.4 %
Tier 1 capital ratio (8)     13.8 %     14.6 %     14.6 %
Total capital ratio (8)     14.9 %     15.6 %     15.6 %
Tier 1 leverage ratio (8)     7.1 %     7.2 %     7.1 %
Stifel Bank:                        
Common equity tier 1 capital ratio (8)     17.5 %   n/a       12.3 %
Tier 1 capital ratio (8)     17.5 %   n/a       12.3 %
Total capital ratio (8)     18.6 %   n/a       13.5 %
Tier 1 leverage ratio (8)     7.5 %   n/a       9.9 %
                         
Credit Metrics:                        
Allowance for loan losses   $ 88,172     $ 69,497     $ 85,833  
Allowance as a percentage of retained loans     1.00 %     0.97 %     1.00 %
Net charge-offs as a percentage of average loans     0.00 %     0.00 %     0.00 %
Total nonperforming assets   $ 21,276     $ 21,826     $ 24,455  
Nonperforming assets as % of total assets     0.13 %     0.14 %     0.14 %


Global Wealth Management Summary Results of Operations (Unaudited)  
    Three Months Ended  
($ in 000s)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Revenues:                                        
Commissions   $ 109,927     $ 119,205       (7.8 )   $ 117,006       (6.1 )
Principal transactions     43,267       43,529       (0.6 )     40,325       7.3  
  Brokerage revenues     153,194       162,734       (5.9 )     157,331       (2.6 )
                                         
Asset management and service fees     195,253       195,789       (0.3 )     210,051       (7.0 )
Net interest     145,295       118,455       22.7       132,402       9.7  
Investment banking     8,223       7,688       7.0       7,915       3.9  
Other income     8,645       909       851.0       1,557       455.2  
Net revenues     510,610       485,575       5.2       509,256       0.3  
Non-interest expenses:                                        
Compensation and benefits     247,473       241,760       2.4       246,750       0.3  
Non-compensation operating expenses     68,647       67,044       2.4       73,546       (6.7 )
Total non-interest expenses     316,120       308,804       2.4       320,296       (1.3 )
Income before income taxes   $ 194,490     $ 176,771       10.0     $ 188,960       2.9  
                                         
As a percentage of net revenues:                                        
Compensation and benefits     48.5       49.8               48.5          
Non-compensation operating expenses     13.4       13.8               14.4          
Income before income taxes     38.1       36.4               37.1          


Institutional Group Summary Results of Operations (Unaudited)  
    Three Months Ended  
($ in 000s)   3/31/19     3/31/18     % Change     12/31/18     % Change  
Revenues:                                        
Commissions   $ 45,522     $ 46,570       (2.3 )   $ 50,034       (9.0 )
Principal transactions     60,765       54,253       12.0       41,134       47.7  
Brokerage revenues     106,287       100,823       5.4       91,168       16.6  
Capital raising     48,722       71,001       (31.4 )     82,229       (40.7 )
Advisory fees     104,895       97,673       7.4       111,089       (5.6 )
Investment banking     153,617       168,674       (8.9 )     193,318       (20.5 )
Other (16)     1,382       581       137.8       2,154       (35.8 )
Net revenues     261,286       270,078       (3.3 )     286,640       (8.8 )
Non-interest expenses:                                        
Compensation and benefits     159,411       159,344       0.0       177,782       (10.3 )
Non-compensation operating expenses     69,671       66,164       5.3       66,706       4.4  
Total non-interest expenses     229,082       225,508       1.6       244,488       (6.3 )
Income before income taxes   $ 32,204     $ 44,570       (27.7 )   $ 42,152       (23.6 )
                                         
As a percentage of net revenues:                                        
Compensation and benefits     61.0       59.0               62.0          
Non-compensation operating expenses     26.7       24.5               23.3          
Income before income taxes     12.3       16.5               14.7          


Non-GAAP Financial Measures

The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Company’s financial results for the three months ended March 31, 2019 and 2018, and December 31, 2018. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company’s core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company’s current financial performance. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP measures primarily exclude expenses which management believes are, in some instances, non-recurring and not representative of on-going business.

A limitation of utilizing these non-GAAP measures is that the GAAP accounting effects of these charges do, in fact, reflect the underlying financial results of the Company’s business and these effects should not be ignored in evaluating and analyzing its financial results. Therefore, the Company believes that GAAP measures and the same respective non-GAAP measures of the Company’s financial performance should be considered together. 

The following table provides details with respect to reconciling net income and earnings per diluted common share on a GAAP basis for the three months ended March 31, 2019 and 2018, and December 31, 2018 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

    Three Months Ended  
($ in 000s)   3/31/19     3/31/18     12/31/18  
GAAP net income applicable to Stifel Financial Corp.   $ 99,207     $ 88,761     $ 114,062  
Preferred dividend     2,344       2,344       2,344  
Net income available to common shareholders     96,863       86,417       111,718  
                         
Non-GAAP adjustments:                        
Merger-related and severance (17)     8,191       9,953       17,714  
Litigation-related                 18  
Provision for income taxes (18)     (534 )     (2,567 )     (2,660 )
Total non-GAAP adjustments     7,657       7,386       15,072  
Non-GAAP net income available to common shareholders   $ 104,520     $ 93,803     $ 126,790  
                         
Weighted average diluted shares outstanding     79,210       81,789       80,706  
                         
GAAP earnings per diluted common share   $ 1.25     $ 1.09     $ 1.41  
Non-GAAP adjustments     0.10       0.09       0.19  
Non-GAAP earnings per diluted common share   $ 1.35     $ 1.18     $ 1.60  
                         
GAAP earnings per diluted common share available to common shareholders   $ 1.22     $ 1.06     $ 1.38  
Non-GAAP adjustments     0.10       0.09       0.19  
Non-GAAP earnings per diluted common share available to common shareholders   $ 1.32     $ 1.15     $ 1.57  


Footnotes

(1) Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”
(2) Non-GAAP pre-tax margin for the three months ended March 31, 2019 of 19.0% is calculated by adding non-GAAP adjustments of $8.2 million to our GAAP income before income taxes of $137.8 million and dividing it by non-GAAP net revenues for the quarter of $770.4 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(3) Excludes revenue included in the Other segment.
(4) See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”
(5) Book value per common share represents shareholders’ equity (excluding preferred stock and non-controlling interests) divided by period end common shares outstanding.
(6) Computed by dividing annualized net income by average common shareholders’ equity or, in the case of non-GAAP return on common equity, computed by dividing non-GAAP net income by average common shareholders’ equity.
(7) Computed by dividing annualized net income by average tangible shareholders' equity or, in the case of non-GAAP return on tangible common equity, computed by dividing non-GAAP net income by average tangible shareholders' equity. Tangible common shareholders' equity equals total common shareholders' equity less goodwill and identifiable intangible assets.
(8) Capital ratios are estimates at time of the Company’s earnings release.
(9) Reflects change in the definition of producing brokers as of January 1, 2019. Prior period amounts have been restated to conform with current period presentation.
(10) Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at our bank subsidiaries.
(11) Includes Private Client Group and Trust Business.
(12) Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.
(13) Asset management assets included in Private Client Group or Trust accounts.
(14) Return on assets (ROA) is calculated based on prior period-end balances for Private Client Group, period-end balances for Asset Management, and average quarterly balances for Individual Program Banks.
(15) Includes Stifel Bank & Trust and Stifel Bank, formerly known as The Business Bank of St. Louis, which was acquired on August 31, 2018.
(16) Includes net interest, asset management and service fees, and other income.
(17) Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company’s on-going business.
(18) See details of non-GAAP adjustments under “Provision for Income Taxes.”

Media Contact:  Neil Shapiro  (212) 271-3447
Investor Contact:  Joel Jeffrey  (212) 271-3610
www.stifel.com/investor-relations

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