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CST: 20/08/2019 23:51:11   

Stifel Reports Second Quarter 2019 Financial Results

21 Days ago

  • Net revenues of $800.8 million, increased 7.8% compared with the year-ago quarter.
  • Record net revenues in Global Wealth Management.
  • Net income available to common shareholders of $103.8 million, or $1.31 per diluted common share.
  • Non-GAAP net income available to common shareholders of $111.4 million, or $1.41 per diluted common share.
  • Record client assets of $305.2 billion, increased 9.9% compared with the year-ago quarter.
  • Non-GAAP return on tangible common equity of 23.1%.
  • Repurchased approximately 1.3 million shares of the Company’s common stock at an average price of $56.32.

ST. LOUIS, July 30, 2019 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $103.8 million, or $1.31 per diluted common share on net revenues of $800.8 million for the three months ended June 30, 2019, compared with net income available to common shareholders of $84.9 million, or $1.04 per diluted common share, on net revenues of $742.7 million for the second quarter of 2018.

For the three months ended June 30, 2019, the Company reported non-GAAP net income available to common shareholders of $111.4 million, or $1.41 per diluted common share. The Company’s reported GAAP net income for the three months ended June 30, 2019 was primarily impacted by merger-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“I’m very pleased with our second quarter results. The $801 million in net revenue in the second quarter was the second highest quarterly revenue in our history and, through the first half of 2019, we have generated a record $1.6 billion of net revenue. In addition to our revenue growth, our expense discipline contributed to margins of nearly 20% in the quarter which drove non-GAAP return on tangible common equity of 23% and non-GAAP earnings per share of $1.41, up nearly 16% over 2018. We repurchased approximately 2.3 million shares in the first half of the year while maintaining our commitment to growing our business both organically and through accretive acquisitions. In the first half of 2019, we recruited 80 financial advisors and our pipeline remains very strong. Additionally, we announced two acquisitions in the first half of 2019 and closed another. As I look forward, I am optimistic about the second half of 2019 as well as our longer-term future,” stated Ronald J. Kruszewski, Chairman and Chief Executive Officer of Stifel.

   
Financial Highlights (Unaudited)   Three Months Ended  
($ in 000s, except per share data)   GAAP
6/30/19
    GAAP
6/30/18
    %
Change
    GAAP
3/31/19
    %
Change
      Non-
GAAP (1)
6/30/19
    Non-
GAAP (1)
6/30/18
    %
Change
 
Net revenues   $ 800,787     $ 742,732       7.8     $ 770,420       3.9       $ 800,787     $ 742,541       7.8  
Net income applicable to Stifel Financial Corp.   $ 109,085     $ 87,287       25.0     $ 99,207       10.0       $ 116,659     $ 101,131       15.4  
Preferred dividend     5,288       2,344       125.6       2,344       125.6         5,288       2,344       125.6  
Net income available to common shareholders   $ 103,797     $ 84,943       22.2     $ 96,863       7.2       $ 111,371     $ 98,787       12.7  
Earnings per diluted common share   $ 1.38     $ 1.07       29.0     $ 1.25       10.4       $ 1.48     $ 1.24       19.4  
Earnings per diluted common share available to common shareholders   $ 1.31     $ 1.04       26.0     $ 1.22       7.4       $ 1.41     $ 1.22       15.6  
Compensation ratio     58.3 %     59.5 %             59.5 %               57.9 %     59.0 %        
Non-compensation ratio     23.2 %     24.5 %             22.6 %               22.3 %     22.5 %        
Pre-tax operating margin (2)     18.5 %     16.0 %             17.9 %               19.8 %     18.5 %        
 

For six months ended June 30, 2019, the Company reported net income available to common shareholders of $200.7 million, or $2.53 per diluted common share on net revenues of $1.6 billion, compared with net income available to common shareholders of $171.4 million, or $2.10 per diluted common share, on net revenues of $1.5 billion for the six months ended June 30, 2018.

For the six months ended June 30, 2019, the Company reported non-GAAP net income available to common shareholders of $215.9 million, or $2.73 per diluted common share.

 
Financial Highlights (Unaudited)   Six Months Ended  
($ in 000s, except per share data)   GAAP
6/30/19
    GAAP
6/30/18
    %
Change
      Non-
GAAP (1)
6/30/19
    Non-
GAAP (1)
6/30/18
    %
Change
 
Net revenues   $ 1,571,207     $ 1,493,090       5.2       $ 1,571,207     $ 1,493,090       5.2  
Net income applicable to Stifel Financial Corp.   $ 208,292     $ 176,048       18.3       $ 223,523     $ 197,278       13.3  
Preferred dividend     7,632       4,688       62.8         7,632       4,688       62.8  
Net income available to common shareholders   $ 200,660     $ 171,360       17.1       $ 215,891     $ 192,590       12.1  
Earnings per diluted common share   $ 2.63     $ 2.16       21.8       $ 2.82     $ 2.42       16.5  
Earnings per diluted common share available to common shareholders   $ 2.53     $ 2.10       20.5       $ 2.73     $ 2.36       15.7  
Compensation ratio     58.9 %     60.3 %               58.4 %     59.8 %        
Non-compensation ratio     22.9 %     23.8 %               22.2 %     22.4 %        
Pre-tax operating margin (3)     18.2 %     15.9 %               19.4 %     17.8 %        
 

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $261.4 million, a 2.2% increase compared with the second quarter of 2018 and a 0.8% increase compared with the first quarter of 2019.

 
    Three Months Ended  
($ in 000s)   6/30/19     6/30/18     % Change     3/31/19     % Change  
Global Wealth Management   $ 162,388     $ 159,290       1.9     $ 153,194       6.0  
Institutional brokerage:                                        
Equity capital markets     40,670       45,266       (10.2 )     38,881       4.6  
Fixed income capital markets     58,387       51,330       13.7       67,406       (13.4 )
Total institutional brokerage     99,057       96,596       2.5       106,287       (6.8 )
Total brokerage revenues   $ 261,445     $ 255,886       2.2     $ 259,481       0.8  
 
  • Global Wealth Management brokerage revenues were $162.4 million, a 1.9% increase compared with the second quarter of 2018 and a 6.0% increase compared with the first quarter of 2019.
  • Institutional equity brokerage revenues were $40.7 million, a 10.2% decrease compared with the second quarter of 2018 and a 4.6% increase compared with the first quarter of 2019.
  • Institutional fixed income brokerage revenues were $58.4 million, a 13.7% increase compared with the second quarter of 2018 and a 13.4% decrease compared with the first quarter of 2019.

Investment Banking Revenues

Investment banking revenues were $179.6 million, an 11.5% increase compared with the second quarter of 2018 and an 11.0% increase compared with the first quarter of 2019.

 
    Three Months Ended  
($ in 000s)   6/30/19     6/30/18     % Change     3/31/19     % Change  
Capital raising:                                        
Global Wealth Management   $ 10,559     $ 7,968       32.5     $ 8,223       28.4  
                                         
Equity capital markets     59,156       44,087       34.2       27,859       112.3  
Fixed income capital markets     26,997       22,025       22.6       20,863       29.4  
Institutional Group     86,153       66,112       30.3       48,722       76.8  
Total capital raising (4)     96,712       74,080       30.6       56,945       69.8  
Advisory fees (4)     82,905       87,004       (4.7 )     104,895       (21.0 )
Total investment banking (4)   $ 179,617     $ 161,084       11.5     $ 161,840       11.0  
 
  • Global Wealth Management capital raising revenues were $10.6 million, a 32.5% increase compared with the second quarter of 2018 and a 28.4% increase compared with the first quarter of 2019.
  • Institutional equity capital raising revenues were $59.2 million, a 34.2% increase compared with the second quarter of 2018 and a 112.3% increase compared with the first quarter of 2019.
  • Institutional fixed income capital raising revenues were $27.0 million, a 22.6% increase compared with the second quarter of 2018 and a 29.4% increase compared with the first quarter of 2019.
  • Advisory fee revenues were $82.9 million, a 4.7% decrease compared with the second quarter of 2018 and a 21.0% decrease compared with the first quarter of 2019.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $211.2 million, a 5.8% increase compared with the second quarter of 2018 and an 8.1% increase compared with the first quarter of 2019. See Asset Management and Service Fee Break-down table.

Net Interest Income

Net interest income of $135.0 million, a 15.3% increase compared with the second quarter of 2018 and a 4.6% decrease compared with the first quarter of 2019. See Net Interest Income Analysis table.

  • Interest income was $187.9 million, a 21.7% increase compared with the second quarter of 2018 and a 1.6% decrease compared with the first quarter of 2019.
  • Interest expense was $52.9 million, a 41.9% increase compared with the second quarter of 2018 and a 7.0% increase compared with the first quarter of 2019.

Compensation and Benefits Expenses

For the quarter ended June 30, 2019, compensation and benefits expenses were $466.9 million, which included $3.3 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $442.2 million in the second quarter of 2018 and $458.1 million in the first quarter of 2019. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 57.9% in the second quarter of 2019 (non-GAAP measure).

 
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     6/30/19     6/30/18  
GAAP compensation and benefits   $ 466,861     $ 442,170     $ 924,975     $ 900,063  
As a percentage of net revenues     58.3 %     59.5 %     58.9 %     60.3 %
Non-GAAP adjustments: (5)                                
Merger-related and severance     (3,304 )     (4,075 )     (7,236 )     (7,814 )
Non-GAAP compensation and benefits   $ 463,557     $ 438,095     $ 917,739     $ 892,249  
As a percentage of non-GAAP net revenues     57.9 %     59.0 %     58.4 %     59.8 %
                                 

Non-Compensation Operating Expenses

For the quarter ended June 30, 2019, non-compensation operating expenses were $185.9 million, which included $6.9 million of merger-related and litigation-related expenses (non-GAAP adjustments). This compares with $182.2 million in the second quarter of 2018 and $174.5 million in the first quarter of 2019. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2019 were 22.3% (non-GAAP measure).

 
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     6/30/19     6/30/18  
GAAP non-compensation expenses   $ 185,944     $ 182,215     $ 360,441     $ 355,126  
As a percentage of net revenues     23.2 %     24.5 %     22.9 %     23.8 %
Non-GAAP adjustments: (5)                                
Merger-related     (3,417 )     (8,892 )     (7,676 )     (14,915 )
Litigation-related     (3,507 )     (6,000 )     (3,507 )     (6,000 )
      (6,924 )     (14,892 )     (11,183 )     (20,915 )
Non-GAAP non-compensation expenses   $ 179,020     $ 167,323     $ 349,258     $ 334,211  
As a percentage of non-GAAP net revenues     22.3 %     22.5 %     22.2 %     22.4 %
                                 

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended June 30, 2019 was 5.9%. This compares with an effective income tax rate of 26.2% for the second quarter of 2018 and 27.9% for the first quarter of 2019. The adjusted non-GAAP effective income tax rate for the quarter ended June 30, 2019 was 5.9%.

 
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     6/30/19     6/30/18  
GAAP provision for income taxes   $ 38,225     $ 31,060     $ 76,595     $ 61,853  
GAAP effective tax rate     25.9 %     26.2 %     26.9 %     26.0 %
Non-GAAP adjustments: (5)                                
Merger-related, litigation-related, and severance     2,752       5,102       4,955       7,814  
Other     (98 )     (170 )     (1,767 )     (315 )
      2,654       4,932       3,188       7,499  
Non-GAAP provision for income taxes   $ 40,879     $ 35,992     $ 79,783     $ 69,352  
Non-GAAP effective tax rate     25.9 %     26.2 %     26.3 %     26.0 %
                                 

Conference Call Information

Stifel Financial Corp. will host its second quarter 2019 financial results conference call on Tuesday, July 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 #8069647. 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     Six Months Ended  
($ in 000s, except per share amounts)   6/30/19     6/30/18     %
Change
    3/31/19     %
Change
    6/30/19     6/30/18     %
Change
 
Revenues:                                                                
Commissions   $ 164,981     $ 166,902       (1.2 )   $ 155,449       6.1     $ 320,430     $ 332,677       (3.7 )
Principal transactions     96,464       88,984       8.4       104,032       (7.3 )     200,496       186,766       7.4  
Brokerage revenues     261,445       255,886       2.2       259,481       0.8       520,926       519,443       0.3  
                                                                 
Advisory fees     82,911       87,004       (4.7 )     104,890       (21.0 )     187,801       184,676       1.7  
Capital raising     96,706       74,059       30.6       56,950       69.8       153,656       152,749       0.6  
Investment banking     179,617       161,063       11.5       161,840       11.0       341,457       337,425       1.2  
Asset management and service fees     211,171       199,568       5.8       195,267       8.1       406,438       395,369       2.8  
Other income     13,505       9,073       48.8       12,209       10.6       25,714       12,430       106.9  
Operating revenues     665,738       625,590       6.4       628,797       5.9       1,294,535       1,264,667       2.4  
Interest revenue     187,940       154,421       21.7       191,071       (1.6 )     379,011       292,155       29.7  
Total revenues     853,678       780,011       9.4       819,868       4.1       1,673,546       1,556,822       7.5  
Interest expense     52,891       37,279       41.9       49,448       7.0       102,339       63,732       60.6  
Net revenues     800,787       742,732       7.8       770,420       3.9       1,571,207       1,493,090       5.2  
                                                                 
Non-interest expenses:                                                                
Compensation and benefits     466,861       442,170       5.6       458,114       1.9       924,975       900,063       2.8  
Occupancy and equipment rental     61,055       53,596       13.9       58,862       3.7       119,917       111,191       7.8  
Communication and office supplies     35,069       36,639       (4.3 )     35,697       (1.8 )     70,766       70,138       0.9  
Commissions and floor brokerage     11,008       10,095       9.0       10,956       0.5       21,964       19,460       12.9  
Provision for loan losses     2,353       4,277       (45.0 )     2,283       3.1       4,636       6,320       (26.6 )
Other operating expenses     76,459       77,608       (1.5 )     66,699       14.6       143,158       148,017       (3.3 )
Total non-interest expenses     652,805       624,385       4.6       632,611       3.2       1,285,416       1,255,189       2.4  
Income before income taxes     147,982       118,347       25.0       137,809       7.4       285,791       237,901       20.1  
Provision for income taxes     38,225       31,060       23.1       38,370       (0.4 )     76,595       61,853       23.8  
Net income     109,757       87,287       25.7       99,439       10.4       209,196       176,048       18.8  
Net income applicable to non-controlling interests     672           n/m       232       189.7       904           n/m  
Net income applicable to Stifel Financial Corp.     109,085       87,287       25.0       99,207       10.0       208,292       176,048       18.3  
Preferred dividends     5,288       2,344       125.6       2,344       125.6       7,632       4,688       62.8  
Net income available to common shareholders   $ 103,797     $ 84,943       22.2     $ 96,863       7.2     $ 200,660     $ 171,360       17.1  
Earnings per common share:                                                                
Basic   $ 1.43     $ 1.18       21.2     $ 1.35       5.9     $ 2.74     $ 2.39       14.6  
Diluted   $ 1.31     $ 1.04       26.0     $ 1.22       7.4     $ 2.53     $ 2.10       20.5  
                                                                 
Cash dividends declared per common share   $ 0.15     $ 0.12       25.0     $ 0.15           $ 0.30     $ 0.24       25.0  
                                                                 
Weighted average number of common shares outstanding:                                              
Basic     72,519       71,692       1.2       71,700       1.1       73,180       71,843       1.9  
Diluted     79,079       81,299       (2.7 )     79,210       (0.2 )     79,160       81,548       (2.9 )


Summary Segment Results (Unaudited)  
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     %
Change
    3/31/19     %
Change
    6/30/19     6/30/18     %
Change
 
Net revenues:                                                                
Global Wealth Management   $ 532,433     $ 497,327       7.1     $ 510,610       4.3     $ 1,043,043     $ 982,902       6.1  
Institutional Group     270,602       252,825       7.0       261,286       3.6       531,888       522,903       1.7  
Other     (2,248 )     (7,420 )     69.7       (1,476 )     (52.3 )     (3,724 )     (12,715 )     70.7  
Total net revenues   $ 800,787     $ 742,732       7.8     $ 770,420       3.9     $ 1,571,207     $ 1,493,090       5.2  
                                                                 
Operating expenses:                                                                
Global Wealth Management   $ 340,081     $ 309,432       9.9     $ 316,120       7.6     $ 656,201     $ 618,236       6.1  
Institutional Group     231,300       216,801       6.7       229,082       1.0       460,382       442,309       4.1  
Other     81,424       98,152       (17.0 )     87,409       (6.8 )     168,833       194,644       (13.3 )
Total operating expenses   $ 652,805     $ 624,385       4.6     $ 632,611       3.2     $ 1,285,416     $ 1,255,189       2.4  
                                                                 
Operating contribution:                                                                
Global Wealth Management   $ 192,352     $ 187,895       2.4     $ 194,490       (1.1 )   $ 386,842     $ 364,666       6.1  
Institutional Group     39,302       36,024       9.1       32,204       22.0       71,506       80,594       (11.3 )
Other     (83,672 )     (105,572 )     (20.7 )     (88,885 )     (5.9 )     (172,557 )     (207,359 )     (16.8 )
Income before income taxes   $ 147,982     $ 118,347       25.0     $ 137,809       7.4     $ 285,791     $ 237,901       20.1  
                                                                 
As a percentage of net revenues:                                                              
Compensation and benefits                                                                
Global Wealth Management     49.3       47.8               48.5               48.9       48.8          
Institutional Group     57.6       59.3               61.0               59.3       59.2          
Non-comp. operating expenses                                                                
Global Wealth Management     14.6       14.4               13.4               14.0       14.1          
Institutional Group     27.9       26.5               26.7               27.3       25.4          
Income before income taxes                                                                
Global Wealth Management     36.1       37.8               38.1               37.1       37.1          
Institutional Group     14.5       14.2               12.3               13.4       15.4          
Consolidated pre-tax margin     18.5       16.0               17.9               18.2       15.9          


Financial metrics (unaudited): As of and For the Three Months Ended  
($ in 000s, except percentages and per share amounts) 6/30/19   6/30/18   3/31/19  
Total assets $ 24,343,597   $ 22,608,169   $ 24,183,559  
Total Stifel Financial shareholders' equity   3,429,126     2,954,362     3,376,623  
Book value per common share (6) $ 44.68   $ 39.34   $ 43.18  
Return on common equity (7)   13.4 %   12.1 %   12.7 %
Non-GAAP return on common equity (1) (7)   14.3 %   14.1 %   13.7 %
Return on tangible common equity (8)   21.5 %   20.0 %   20.6 %
Non-GAAP return on tangible common equity (1) (8)   23.1 %   23.3 %   22.3 %
Tier 1 common capital ratio (9)   15.6 %   16.4 %   15.9 %
Tier 1 risk based capital ratio (9)   18.0 %   18.4 %   18.5 %
Tier 1 leverage capital ratio (9)   10.0 %   9.5 %   9.8 %
Pre-tax margin on net revenues   18.5 %   16.0 %   17.9 %
Non-GAAP pre-tax margin on net revenues (1) (2)   19.8 %   18.5 %   19.0 %
Effective tax rate   25.9 %   26.2 %   27.9 %
Non-GAAP effective tax rate (1)   25.9 %   26.2 %   26.7 %


Statistical Information (unaudited):   As of and For the Three Months Ended  
($ in 000s, except financial advisors and locations)   6/30/19     6/30/18     % Change     3/31/19     % Change  
Financial advisors (10)     2,097       2,012       4.2       2,061       1.7  
Independent contractors     96       106       (9.4 )     99       (3.0 )
Total financial advisors     2,193       2,118       3.5       2,160       1.5  
Locations     413       398       3.8       407       1.5  
Total client assets   $ 305,233,000     $ 277,708,000       9.9     $ 299,993,000       1.7  
Fee-based client assets   $ 103,824,000     $ 91,275,000       13.7     $ 99,579,000       4.3  
Client money market and insured product   $ 13,674,000     $ 15,703,000       (12.9 )   $ 14,928,000       (8.4 )
Secured client lending (11)   $ 3,251,723     $ 3,174,639       2.4     $ 3,175,240       2.4  


    Asset Management and Service Fee Break-down (unaudited)  
Asset Management and Service Fee Revenues:   Three Months Ended  
($ in 000s)   6/30/19     6/30/18     % Change     3/31/19     % Change  
Private Client Group (12)   $ 164,554     $ 149,457       10.1     $ 148,092       11.1  
Asset Management     29,485       27,606       6.8       28,469       3.6  
Third-party Bank Sweep Program     6,869       11,601       (40.8 )     8,562       (19.8 )
Other (13)     10,263       10,904       (5.9 )     10,144       1.2  
Total asset management and service fee revenues   $ 211,171     $ 199,568       5.8     $ 195,267       8.1  
                                         
Fee-based Assets:   Three Months Ended  
($ in millions)   6/30/19     6/30/18     % Change     3/31/19     % Change  
Private Client Group (12)   $ 80,983     $ 67,807       19.4     $ 73,553       10.1  
Asset Management     33,156       29,679       11.7       32,952       0.6  
Elimination (14)     (10,315 )     (6,211 )     66.1       (6,926 )     48.9  
Total fee-based assets   $ 103,824     $ 91,275       13.7     $ 99,579       4.3  
                                         
Individual Program Banks   $ 1,459     $ 3,153       (53.7 )   $ 1,875       (22.2 )
                                         
ROA (bps) (15)                                        
Private Client Group (12)     89.5       90.2               89.6          
Asset Management     35.6       37.2               34.6          
Individual Program Banks     163.6       134.0               153.3          


Consolidated Net Interest Income Analysis (Unaudited):  
                                                                         
    Three Months Ended  
    June 30, 2019     June 30, 2018     March 31, 2019  
($ 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   $ 750.4     $ 4.3       2.31 %   $ 396.2     $ 2.1       2.11 %   $ 1,124.9     $ 7.8       2.78 %
Financial instruments owned     1,320.5       6.4       1.94       1,230.0       5.0       1.62       1,277.4       6.3       1.98  
Margin balances     1,291.5       13.7       4.23       1,311.1       12.3       3.75       1,258.5       13.4       4.27  
Investments:                                                                        
Asset-backed securities     4,508.4       46.0       4.08       4,692.7       45.4       3.87       4,698.9       49.0       4.17  
Mortgage-backed securities     1,470.9       8.6       2.33       1,684.7       9.0       2.15       1,531.4       9.0       2.35  
Corporate fixed income securities     915.0       6.9       3.02       1,273.2       8.7       2.74       954.5       7.2       3.01  
State and municipal securities     48.0       0.2       1.85       73.6       0.4       1.98       50.1       0.3       2.38  
Total Investments     6,942.3       61.7       3.56       7,724.2       63.5       3.29       7,234.9       65.5       3.62  
Loans:                                                                        
Commercial and industrial     3,337.4       41.3       4.95       2,641.2       28.8       4.36       3,419.8       40.8       4.78  
Residential real estate     2,953.7       22.5       3.05       2,703.4       18.8       2.78       2,927.9       22.5       3.07  
Securities-based loans     1,916.3       20.2       4.21       1,835.4       17.2       3.74       1,799.5       19.1       4.25  
Commercial real estate     354.3       5.0       5.63       103.8       1.1       4.33       336.5       4.7       5.60  
Loans held for sale     178.6       1.8       4.02       189.6       1.9       3.94       179.0       1.8       4.09  
Other     377.9       5.1       5.38       59.7       0.6       4.51       319.0       4.4       5.36  
Total Loans     9,118.2       95.9       4.21       7,533.1       68.4       3.63       8,981.7       93.3       4.15  
Other interest-bearing assets     831.6       5.9       2.86       810.9       3.1       1.54       736.3       4.8       2.61  
Total interest-earning assets/interest income     20,254.5       187.9       3.71       19,005.5       154.4       3.25       20,613.7       191.1       3.71  
Interest-bearing liabilities:                                                                        
Short-term borrowings     29.8       0.2       3.16       101.4       0.7       2.71       68.2       0.5       3.10  
Senior notes     1,016.2       11.1       4.38       1,015.5       11.1       4.38       1,016.1       11.1       4.38  
Deposits     14,660.7       29.3       0.80       13,441.3       15.3       0.46       15,282.3       28.1       0.73  
FHLB     550.2       2.9       2.12       844.6       3.1       1.47       461.4       1.7       1.45  
Other interest-bearing liabilities     1,764.4       9.4       2.10       1,678.0       7.1       1.68       1,588.3       8.0       2.03  
Total interest-bearing liabilities/interest expense   $ 18,021.3     $ 52.9       1.17 %   $ 17,080.8     $ 37.3       0.87 %   $ 18,416.3     $ 49.4       1.07 %
Net interest income/margin           $ 135.0       2.67 %           $ 117.1       2.47 %           $ 141.7       2.75 %


Stifel Bancorp, Inc. (16) Net Interest Income Analysis (Unaudited):  
                                                                         
    Three Months Ended  
    June 30, 2019     June 30, 2018     March 31, 2019  
($ 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   $ 330.6     $ 1.8       2.15 %   $ 35.4     $ 0.2       1.96 %   $ 732.6     $ 4.6       2.49 %
Investments     6,942.3       61.7       3.56       7,724.2       63.5       3.29       7,234.9       65.5       3.62  
Loans     9,118.2       95.9       4.21       7,533.1       68.4       3.63       8,981.7       93.3       4.15  
Other interest-bearing assets     57.2       0.6       4.38       64.5       0.7       4.43       52.3       1.0       8.45  
Total interest-earning assets/interest income     16,448.3       160.0       3.89       15,357.2       132.8       3.46       17,001.5       164.4       3.87  
Interest-bearing liabilities:                                                                        
Deposits     14,660.7       29.3       0.80       13,441.3       15.3       0.46       15,282.3       28.1       0.73  
FHLB     550.2       2.9       2.12       844.6       3.1       1.47       461.4       1.7       1.45  
Other interest-bearing liabilities     1.7       0.1       6.73       16.1       0.2       4.35       1.7             9.16  
Total interest-bearing liabilities/interest expense   $ 15,212.6       32.3       0.85 %   $ 14,302.0       18.6       0.52 %   $ 15,745.4       29.8       0.76 %
Net interest income/margin           $ 127.7       3.11 %           $ 114.2       2.97 %           $ 134.6       3.17 %


Stifel Bancorp, Inc. - a component of Global Wealth Management  
                           
Selected operating data (unaudited): Three Months Ended     Six Months Ended  
($ in 000s, except percentages) 6/30/19     6/30/18     % Change     3/31/19     % Change     6/30/19     6/30/18     % Change  
Net interest income $ 127,714     $ 114,200       11.8     $ 134,564       (5.1 )   $ 262,278     $ 221,827       18.2  
Bank loan loss provision   2,353       4,277       (45.0 )     2,283       3.1       4,636       6,320       (26.6 )
Charge-offs   54           n/m       56       (3.6 )     110       14       685.7  
Net interest margin   3.11 %     2.97 %   14 bps       3.17 %   (6) bps       3.14 %     2.93 %   21 bps  


Financial Metrics (unaudited):   As of  
($ in 000s, except percentages)   6/30/19     6/30/18     3/31/19  
Total assets   $ 16,645,984     $ 15,859,681     $ 16,822,599  
Total shareholders' equity     1,236,318       1,103,625       1,242,760  
Total loans, net (includes loans held for sale)     9,127,836       7,557,982       8,850,905  
Total deposits     14,901,061       13,890,849       15,049,877  
Available-for-sale securities, at fair value     2,702,211       3,473,366       3,002,751  
Held-to-maturity securities, at amortized cost     3,957,629       4,516,441       4,100,357  
Commercial and industrial     3,338,127       2,677,096       3,314,564  
Residential real estate     2,984,725       2,703,935       2,928,228  
Securities-based loans     1,962,528       1,845,592       1,860,989  
Commercial real estate     367,283       127,253       361,950  
Loans held for sale     163,511       210,611       144,216  
Stifel Bank & Trust:                        
Common equity tier 1 capital ratio (9)     13.4 %     14.4 %     13.7 %
Tier 1 capital ratio (9)     13.4 %     14.4 %     13.8 %
Total capital ratio (9)     14.5 %     15.4 %     14.9 %
Tier 1 leverage ratio (9)     7.2 %     7.2 %     7.1 %
Stifel Bank:                        
Common equity tier 1 capital ratio (9)     17.7 %   n/a       17.5 %
Tier 1 capital ratio (9)     17.7 %   n/a       17.5 %
Total capital ratio (9)     18.9 %   n/a       18.6 %
Tier 1 leverage ratio (9)     7.3 %   n/a       7.5 %
                         
Credit Metrics:                        
Allowance for loan losses   $ 90,472     $ 73,775     $ 88,172  
Allowance as a percentage of retained loans     1.00 %     0.99 %     1.00 %
Net charge-offs as a percentage of average loans     0.00 %     0.00 %     0.00 %
Total nonperforming assets   $ 21,111     $ 18,696     $ 21,276  
Nonperforming assets as % of total assets     0.13 %     0.12 %     0.13 %


Global Wealth Management Summary Results of Operations (Unaudited)  
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     %
Change
    3/31/19     %
Change
    6/30/19     6/30/18     %
Change
 
Revenues:                                                                
Commissions   $ 120,284     $ 118,129       1.8     $ 109,927       9.4     $ 230,211     $ 237,334       (3.0 )
Principal transactions     42,104       41,161       2.3       43,267       (2.7 )     85,371       84,690       0.8  
Brokerage revenues     162,388       159,290       1.9       153,194       6.0       315,582       322,024       (2.0 )
                                                                 
Asset management and service fees     211,156       199,557       5.8       195,253       8.1       406,409       395,346       2.8  
Net interest     137,599       124,987       10.1       145,295       (5.3 )     282,894       243,442       16.2  
Investment banking     10,559       8,049       31.2       8,223       28.4       18,782       15,737       19.3  
Other income     10,731       5,444       97.1       8,645       24.1       19,376       6,353       205.0  
Net revenues     532,433       497,327       7.1       510,610       4.3       1,043,043       982,902       6.1  
Non-interest expenses:                                                                
Compensation and benefits     262,321       237,879       10.3       247,473       6.0       509,794       479,639       6.3  
Non-compensation operating expenses     77,760       71,553       8.7       68,647       13.3       146,407       138,597       5.6  
Total non-interest expenses     340,081       309,432       9.9       316,120       7.6       656,201       618,236       6.1  
Income before income taxes   $ 192,352     $ 187,895       2.4     $ 194,490       (1.1 )   $ 386,842     $ 364,666       6.1  
                                                                 
As a percentage of net revenues:                                                                
Compensation and benefits     49.3       47.8               48.5               48.9       48.8          
Non-compensation operating expenses     14.6       14.4               13.4               14.0       14.1          
Income before income taxes     36.1       37.8               38.1               37.1       37.1          


Institutional Group Summary Results of Operations (Unaudited)  
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     %
Change
    3/31/19     %
Change
    6/30/19     6/30/18     %
Change
 
Revenues:                                                                
Commissions   $ 44,697     $ 48,773       (8.4 )   $ 45,522       (1.8 )   $ 90,219     $ 95,343       (5.4 )
Principal transactions     54,360       47,823       13.7       60,765       (10.5 )     115,125       102,076       12.8  
Brokerage revenues     99,057       96,596       2.5       106,287       (6.8 )     205,344       197,419       4.0  
Advisory fees     82,905       86,922       (4.6 )     104,895       (21.0 )     187,800       184,595       1.7  
Capital raising     86,153       66,112       30.3       48,722       76.8       134,875       137,113       (1.6 )
Investment banking     169,058       153,034       10.5       153,617       10.1       322,675       321,708       0.3  
Other (17)     2,487       3,195       (22.2 )     1,382       80.0       3,869       3,776       2.5  
Net revenues     270,602       252,825       7.0       261,286       3.6       531,888       522,903       1.7  
Non-interest expenses:                                                                
Compensation and benefits     155,779       149,984       3.9       159,411       (2.3 )     315,190       309,328       1.9  
Non-compensation operating expenses     75,521       66,817       13.0       69,671       8.4       145,192       132,981       9.2  
Total non-interest expenses     231,300       216,801       6.7       229,082       1.0       460,382       442,309       4.1  
Income before income taxes   $ 39,302     $ 36,024       9.1     $ 32,204       22.0     $ 71,506     $ 80,594       (11.3 )
                                                                 
As a percentage of net revenues:                                                                
Compensation and benefits     57.6       59.3               61.0               59.3       59.2          
Non-compensation operating expenses     27.9       26.5               26.7               27.3       25.4          
Income before income taxes     14.5       14.2               12.3               13.4       15.4          
                                                                 

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 June 30, 2019 and 2018, and March 31, 2019. 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 and six months ended June 30, 2019 and 2018, and the three months ended March 31, 2019 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

 
    Three Months Ended     Six Months Ended  
($ in 000s)   6/30/19     6/30/18     3/31/19     6/30/19     6/30/18  
GAAP net income applicable to Stifel Financial Corp.   $ 109,085     $ 87,287     $ 99,207     $ 208,292     $ 176,048  
Preferred dividend     5,288       2,344       2,344       7,632       4,688  
Net income available to common shareholders     103,797       84,943       96,863       200,660       171,360  
                                         
Non-GAAP adjustments:                                        
Merger-related and severance (18)     6,721       12,776       8,191       14,912       22,729  
Litigation-related (19)     3,507       6,000             3,507       6,000  
Provision for income taxes (20)     (2,654 )     (4,932 )     (534 )     (3,188 )     (7,499 )
Total non-GAAP adjustments     7,574       13,844       7,657       15,231       21,230  
Non-GAAP net income available to common shareholders   $ 111,371     $ 98,787     $ 104,520     $ 215,891     $ 192,590  
                                         
Weighted average diluted shares outstanding     79,079       81,299       79,210       79,160       81,548  
                                         
GAAP earnings per diluted common share   $ 1.38     $ 1.07     $ 1.25     $ 2.63     $ 2.16  
Non-GAAP adjustments     0.10       0.17       0.10       0.19       0.26  
Non-GAAP earnings per diluted common share   $ 1.48     $ 1.24     $ 1.35     $ 2.82     $ 2.42  
                                         
GAAP earnings per diluted common share available to common shareholders   $ 1.31     $ 1.04     $ 1.22     $ 2.53     $ 2.10  
Non-GAAP adjustments     0.10       0.18       0.10       0.20       0.26  
Non-GAAP earnings per diluted common share available to common shareholders   $ 1.41     $ 1.22     $ 1.32     $ 2.73     $ 2.36  


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 June 30, 2019 of 19.8% is calculated by adding non-GAAP adjustments of $10.2 million to our GAAP income before income taxes of $148.0 million and dividing it by non-GAAP net revenues for the quarter of $800.8 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(3)   Non-GAAP pre-tax margin for the six months ended June 30, 2019 of 19.4% is calculated by adding non-GAAP adjustments of $18.4 million to our GAAP income before income taxes of $285.8 million and dividing it by non-GAAP net revenues for the quarter of $1.6 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(4)   Excludes revenue included in the Other segment.
(5)   See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”
(6)   Book value per common share represents shareholders’ equity (excluding preferred stock and non-controlling interests) divided by period end common shares outstanding.
(7)   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.
(8)   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.
(9)   Capital ratios are estimates at time of the Company’s earnings release.
(10)   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.
(11)   Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at our bank subsidiaries.
(12)   Includes Private Client Group and Trust Business.
(13)   Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.
(14)   Asset management assets included in Private Client Group or Trust accounts.
(15)   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.
(16)   Includes Stifel Bank & Trust and Stifel Bank, formerly known as The Business Bank of St. Louis, which was acquired on August 31, 2018, and Stifel Trust Company, N.A.
(17)   Includes net interest, asset management and service fees, and other income.
(18)   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.
(19)   Primarily related to costs associated with Company’s legal matters.
(20)   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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