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CST: 19/11/2019 21:38:16   

Stifel Reports Third Quarter 2019 Financial Results

20 Days ago

  • Record net revenues of $821.6 million, increased 11.3% compared with the year-ago quarter.
  • Record net revenues in Global Wealth Management.
  • Net income available to common shareholders of $104.6 million, or $1.34 per diluted common share.
  • Non-GAAP net income available to common shareholders of $117.1 million, or $1.50 per diluted common share.
  • Record client assets of $311.8 billion, increased 7.8% compared with the year-ago quarter.
  • Non-GAAP return on tangible common equity of 24.2%.
  • Repurchased approximately 1.0 million shares of the Company’s common stock at an average price of $55.43.

ST. LOUIS, Mo., Oct. 30, 2019 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $104.6 million, or $1.34 per diluted common share on record net revenues of $821.6 million for the three months ended September 30, 2019, compared with net income available to common shareholders of $101.5 million, or $1.25 per diluted common share, on net revenues of $738.3 million for the third quarter of 2018.

For the three months ended September 30, 2019, the Company reported non-GAAP net income available to common shareholders of $117.1 million, or $1.50 per diluted common share. The Company’s reported GAAP net income for the three months ended September 30, 2019 was primarily impacted by merger-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“I am pleased with our performance in the third quarter. We generated record net revenue of $822 million, a pre-tax margin greater than 20%, and return on tangible common equity of more than 24%. Our record results and the growth in the business validate of our long-term strategy to build a diversified financial services firm that can consistently generate strong performance in various market conditions. This was illustrated by our record wealth management revenue and our second strongest institutional revenues in our history despite less than optimal market conditions. As I look forward, I am optimistic about our business as the investments we’ve made in our firm will continue to drive revenue growth,” stated Ronald J. Kruszewski, Chairman and Chief Executive Officer of Stifel.

   
Financial Highlights (Unaudited)   Three Months Ended  
($ in 000s, except per share data)   GAAP 9/30/19     GAAP 9/30/18     % Change     GAAP 6/30/19     % Change       Non-GAAP (1) 9/30/19     Non-GAAP (1) 9/30/18     % Change  
Net revenues   $ 821,572     $ 738,342       11.3     $ 800,787       2.6       $ 821,572     $ 738,367       11.3  
Net income applicable to Stifel Financial Corp.   $ 109,414     $ 103,858       5.3     $ 109,085       0.3       $ 121,990     $ 112,405       8.5  
Preferred dividends     4,844       2,343       106.7       5,288       (8.4 )       4,844       2,343       106.7  
Net income available to common shareholders   $ 104,570     $ 101,515       3.0     $ 103,797       0.7       $ 117,146     $ 110,062       6.4  
Earnings per diluted common share   $ 1.40     $ 1.27       10.2     $ 1.38       1.4       $ 1.56     $ 1.38       13.0  
Earnings per diluted common share available to common shareholders   $ 1.34     $ 1.25       7.2     $ 1.31       2.3       $ 1.50     $ 1.35       11.1  
Compensation ratio     59.2 %     57.2 %             58.3 %               58.1 %     56.5 %        
Non-compensation ratio     22.5 %     23.8 %             23.2 %               21.7 %     22.9 %        
Pre-tax operating margin (2)     18.3 %     19.0 %             18.5 %               20.2 %     20.6 %        
 

For nine months ended September 30, 2019, the Company reported net income available to common shareholders of $305.2 million, or $3.87 per diluted common share on record net revenues of $2.4 billion, compared with net income available to common shareholders of $272.9 million, or $3.35 per diluted common share, on net revenues of $2.2 billion for the nine months ended September 30, 2018.

For the nine months ended September 30, 2019, the Company reported non-GAAP net income available to common shareholders of $333.0 million, or $4.22 per diluted common share.

 
Financial Highlights (Unaudited)   Nine Months Ended  
($ in 000s, except per share data)   GAAP 9/30/19     GAAP 9/30/18     % Change       Non-GAAP (1) 9/30/19     Non-GAAP (1) 9/30/18     % Change  
Net revenues   $ 2,392,779     $ 2,231,432       7.2       $ 2,392,779     $ 2,231,457       7.2  
Net income applicable to Stifel Financial Corp.   $ 317,706     $ 279,906       13.5       $ 345,513     $ 309,683       11.6  
Preferred dividends     12,476       7,031       77.4         12,476       7,031       77.4  
Net income available to common shareholders   $ 305,230     $ 272,875       11.9       $ 333,037     $ 302,652       10.0  
Earnings per diluted common share   $ 4.03     $ 3.44       17.2       $ 4.38     $ 3.80       15.3  
Earnings per diluted common share available to common shareholders   $ 3.87     $ 3.35       15.5       $ 4.22     $ 3.72       13.4  
Compensation ratio     59.0 %     59.3 %               58.3 %     58.7 %        
Non-compensation ratio     22.8 %     23.8 %               22.1 %     22.5 %        
Pre-tax operating margin (3)     18.2 %     16.9 %               19.6 %     18.8 %        
 

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $261.8 million, an 8.5% increase compared with the third quarter of 2018 and a 0.1% increase compared with the second quarter of 2019.

    Three Months Ended  
($ in 000s)   9/30/19     9/30/18     % Change     6/30/19     % Change  
Global Wealth Management   $ 160,117     $ 158,818       0.8     $ 162,388       (1.4 )
Institutional brokerage:                                        
Equity capital markets     41,037       43,904       (6.5 )     40,670       0.9  
Fixed income capital markets     60,613       38,446       57.7       58,387       3.8  
Total institutional brokerage     101,650       82,350       23.4       99,057       2.6  
Total brokerage revenues   $ 261,767     $ 241,168       8.5     $ 261,445       0.1  
  • Global Wealth Management brokerage revenues were $160.1 million, a 0.8% increase compared with the third quarter of 2018 and a 1.4% decrease compared with the second quarter of 2019.
  • Institutional equity brokerage revenues were $41.0 million, a 6.5% decrease compared with the third quarter of 2018 and a 0.9% increase compared with the second quarter of 2019.
  • Institutional fixed income brokerage revenues were $60.6 million, a 57.7% increase compared with the third quarter of 2018 and a 3.8% increase compared with the second quarter of 2019.


Investment Banking Revenues

Investment banking revenues were $198.8 million, a 17.6% increase compared with the third quarter of 2018 and a 10.7% increase compared with the second quarter of 2019.

    Three Months Ended  
($ in 000s)   9/30/19     9/30/18     % Change     6/30/19     % Change  
Capital raising:                                        
Global Wealth Management   $ 9,855     $ 7,722       27.6     $ 10,559       (6.7 )
                                         
Equity capital markets     53,006       65,000       (18.5 )     59,156       (10.4 )
Fixed income capital markets     31,082       20,553       51.2       26,997       15.1  
Institutional Group     84,088       85,553       (1.7 )     86,153       (2.4 )
Total capital raising (4)     93,943       93,275       0.7       96,712       (2.9 )
Advisory fees (4)     104,847       75,717       38.5       82,905       26.5  
Total investment banking (4)   $ 198,790     $ 168,992       17.6     $ 179,617       10.7  
  • Global Wealth Management capital raising revenues were $9.9 million, a 27.6% increase compared with the third quarter of 2018 and a 6.7% decrease compared with the second quarter of 2019.
  • Institutional equity capital raising revenues were $53.0 million, an 18.5% decrease compared with the third quarter of 2018 and a 10.4% decrease compared with the second quarter of 2019.
  • Institutional fixed income capital raising revenues were $31.1 million, a 51.2% increase compared with the third quarter of 2018 and a 15.1% increase compared with the second quarter of 2019.
  • Advisory fee revenues were $104.8 million, a 38.5% increase compared with the third quarter of 2018 and a 26.5% increase compared with the second quarter of 2019.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $217.6 million, an 8.4% increase compared with the third quarter of 2018 and a 3.1% increase compared with the second quarter of 2019. See Asset Management and Service Fee Break-down table.

Net Interest Income

Net interest income of $134.7 million, an 11.0% increase compared with the third quarter of 2018 and a 0.3% decrease compared with the second quarter of 2019. See Net Interest Income Analysis table.

  • Interest income was $178.8 million, a 5.3% increase compared with the third quarter of 2018 and a 4.9% decrease compared with the second quarter of 2019.
  • Interest expense was $44.1 million, an 8.9% decrease compared with the third quarter of 2018 and a 16.5% decrease compared with the second quarter of 2019.

Compensation and Benefits Expenses

For the quarter ended September 30, 2019, compensation and benefits expenses were $486.2 million, which included $8.8 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $422.3 million in the third quarter of 2018 and $466.9 million in the second quarter of 2019. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 58.1% in the third quarter of 2019 (non-GAAP measure).

    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     9/30/19     9/30/18  
GAAP compensation and benefits   $ 486,160     $ 422,324     $ 1,411,135     $ 1,322,387  
As a percentage of net revenues     59.2 %     57.2 %     59.0 %     59.3 %
Non-GAAP adjustments: (5)                                
Merger-related and severance     (8,827 )     (5,475 )     (16,063 )     (13,289 )
Non-GAAP compensation and benefits   $ 477,333     $ 416,849     $ 1,395,072     $ 1,309,098  
As a percentage of non-GAAP net revenues     58.1 %     56.5 %     58.3 %     58.7 %
 

Non-Compensation Operating Expenses

For the quarter ended September 30, 2019, non-compensation operating expenses were $184.7 million, which included $6.0 million of merger-related expenses (non-GAAP adjustments). This compares with $175.5 million in the third quarter of 2018 and $185.9 million in the second quarter of 2019. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2019 were 21.7% (non-GAAP measure).

    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     9/30/19     9/30/18  
GAAP non-compensation expenses   $ 184,658     $ 175,488     $ 545,099     $ 530,614  
As a percentage of net revenues     22.5 %     23.8 %     22.8 %     23.8 %
Non-GAAP adjustments: (5)                                
Merger-related     (6,023 )     (5,277 )     (13,699 )     (20,192 )
Litigation-related           (774 )     (3,507 )     (6,774 )
      (6,023 )     (6,051 )     (17,206 )     (26,966 )
Non-GAAP non-compensation expenses   $ 178,635     $ 169,437     $ 527,893     $ 503,648  
As a percentage of non-GAAP net revenues     21.7 %     22.9 %     22.1 %     22.5 %
 

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended September 30, 2019 was 27.1%. This compares with an effective income tax rate of 26.1% for the third quarter of 2018 and 25.9% for the second quarter of 2019. The adjusted non-GAAP effective income tax rate for the quarter ended September 30, 2019 was 26.0%.

    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     9/30/19     9/30/18  
GAAP provision for income taxes   $ 40,632     $ 36,672     $ 117,227     $ 98,525  
GAAP effective tax rate     27.1 %     26.1 %     27.0 %     26.0 %
Non-GAAP adjustments: (5)                                
Merger-related, litigation-related, and severance     3,994       3,166       8,949       10,980  
Other     (1,720 )     (162 )     (3,487 )     (477 )
      2,274       3,004       5,462       10,503  
Non-GAAP provision for income taxes   $ 42,906     $ 39,676     $ 122,689     $ 109,028  
Non-GAAP effective tax rate     26.0 %     26.1 %     26.2 %     26.0 %
 

Conference Call Information

Stifel Financial Corp. will host its third quarter 2019 financial results conference call on Wednesday, October 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 (888) 676-3684 and referencing conference ID #1347575. 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 and Stifel Bank & Trust 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     Nine Months Ended  
($ in 000s, except per share amounts)   9/30/19     9/30/18     % Change     6/30/19     % Change     9/30/19     9/30/18     % Change  
Revenues:                                                                
Commissions   $ 163,920     $ 158,016       3.7     $ 164,981       (0.6 )   $ 484,350     $ 490,693       (1.3 )
Principal transactions     97,847       83,152       17.7       96,464       1.4       298,343       269,918       10.5  
Brokerage revenues     261,767       241,168       8.5       261,445       0.1       782,693       760,611       2.9  
                                                                 
Advisory fees     104,847       75,717       38.5       82,911       26.5       292,648       260,393       12.4  
Capital raising     93,943       93,295       0.7       96,706       (2.9 )     247,599       246,044       0.6  
Investment banking     198,790       169,012       17.6       179,617       10.7       540,247       506,437       6.7  
Asset management and service fees     217,628       200,743       8.4       211,171       3.1       624,066       596,112       4.7  
Other income     8,747       6,127       42.8       13,505       (35.2 )     34,461       18,557       85.7  
Operating revenues     686,932       617,050       11.3       665,738       3.2       1,981,467       1,881,717       5.3  
Interest revenue     178,784       169,760       5.3       187,940       (4.9 )     557,795       461,915       20.8  
Total revenues     865,716       786,810       10.0       853,678       1.4       2,539,262       2,343,632       8.3  
Interest expense     44,144       48,468       (8.9 )     52,891       (16.5 )     146,483       112,200       30.6  
Net revenues     821,572       738,342       11.3       800,787       2.6       2,392,779       2,231,432       7.2  
                                                                 
Non-interest expenses:                                                                
Compensation and benefits     486,160       422,324       15.1       466,861       4.1       1,411,135       1,322,387       6.7  
Occupancy and equipment rental     58,649       54,035       8.5       61,055       (3.9 )     178,566       165,226       8.1  
Communication and office supplies     36,817       33,330       10.5       35,069       5.0       107,583       103,468       4.0  
Commissions and floor brokerage     10,542       11,338       (7.0 )     11,008       (4.2 )     32,506       30,798       5.5  
Provision for loan losses     929       6,924       (86.6 )     2,353       (60.5 )     5,565       13,244       (58.0 )
Other operating expenses     77,721       69,861       11.3       76,459       1.7       220,879       217,878       1.4  
Total non-interest expenses     670,818       597,812       12.2       652,805       2.8       1,956,234       1,853,001       5.6  
Income before income taxes     150,754       140,530       7.3       147,982       1.9       436,545       378,431       15.4  
Provision for income taxes     40,632       36,672       10.8       38,225       6.3       117,227       98,525       19.0  
Net income     110,122       103,858       6.0       109,757       0.3       319,318       279,906       14.1  
Net income applicable to non-controlling interests     708           n/m       672       5.4       1,612           n/m  
Net income applicable to Stifel Financial Corp.     109,414       103,858       5.3       109,085       0.3       317,706       279,906       13.5  
Preferred dividends     4,844       2,343       106.7       5,288       (8.4 )     12,476       7,031       77.4  
Net income available to common shareholders   $ 104,570     $ 101,515       3.0     $ 103,797       0.7     $ 305,230     $ 272,875       11.9  
Earnings per common share:                                                                
Basic   $ 1.47     $ 1.41       4.3     $ 1.43       2.8     $ 4.21     $ 3.80       10.8  
Diluted   $ 1.34     $ 1.25       7.2     $ 1.31       2.3     $ 3.87     $ 3.35       15.5  
                                                                 
Cash dividends declared per common share   $ 0.15     $ 0.12       25.0     $ 0.15           $ 0.45     $ 0.36       25.0  
                                                                 
Weighted average number of common shares outstanding:                                                                
Basic     71,197       71,919       (1.0 )     72,519       (1.8 )     72,512       71,824       1.0  
Diluted     78,144       81,484       (4.1 )     79,079       (1.2 )     78,826       81,425       (3.2 )


   
Summary Segment Results (Unaudited)  
    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     % Change     6/30/19     % Change     9/30/19     9/30/18     % Change  
Net revenues:                                                                
Global Wealth Management   $ 534,571     $ 498,161       7.3     $ 532,433       0.4     $ 1,577,614     $ 1,481,063       6.5  
Institutional Group     290,222       245,952       18.0       270,602       7.3       822,110       768,855       6.9  
Other     (3,221 )     (5,771 )     44.2       (2,248 )     (43.3 )     (6,945 )     (18,486 )     62.4  
Total net revenues   $ 821,572     $ 738,342       11.3     $ 800,787       2.6     $ 2,392,779     $ 2,231,432       7.2  
                                                                 
Operating expenses:                                                                
Global Wealth Management   $ 331,748     $ 314,784       5.4     $ 340,081       (2.5 )   $ 987,949     $ 933,020       5.9  
Institutional Group     241,599       211,647       14.2       231,300       4.5       701,981       653,956       7.3  
Other     97,471       71,381       36.6       81,424       19.7       266,304       266,025       0.1  
Total operating expenses   $ 670,818     $ 597,812       12.2     $ 652,805       2.8     $ 1,956,234     $ 1,853,001       5.6  
                                                                 
Operating contribution:                                                                
Global Wealth Management   $ 202,823     $ 183,377       10.6     $ 192,352       5.4     $ 589,665     $ 548,043       7.6  
Institutional Group     48,623       34,305       41.7       39,302       23.7       120,129       114,899       4.6  
Other     (100,692 )     (77,152 )     30.5       (83,672 )     20.3       (273,249 )     (284,511 )     (4.0 )
Income before income taxes   $ 150,754     $ 140,530       7.3     $ 147,982       1.9     $ 436,545     $ 378,431       15.4  
                                                                 
As a percentage of net revenues:                                                              
Compensation and benefits                                                                
Global Wealth Management     49.0       48.5               49.3               48.9       48.7          
Institutional Group     59.1       59.4               57.6               59.2       59.2          
Non-comp. operating expenses                                                                
Global Wealth Management     13.1       14.7               14.6               13.7       14.3          
Institutional Group     24.1       26.7               27.9               26.2       25.9          
Income before income taxes                                                                
Global Wealth Management     37.9       36.8               36.1               37.4       37.0          
Institutional Group     16.8       13.9               14.5               14.6       14.9          
Consolidated pre-tax margin     18.3       19.0               18.5               18.2       16.9          


Financial metrics (unaudited): As of and For the Three Months Ended  
($ in 000s, except percentages and per share amounts) 9/30/19   9/30/18   6/30/19  
Total assets $ 24,160,777   $ 23,760,048   $ 24,343,597  
Total Stifel Financial shareholders' equity   3,501,715     3,161,569     3,429,126  
Book value per common share (6) $ 46.34   $ 41.25   $ 44.68  
Return on common equity (7)   13.2 %   13.8 %   13.4 %
Non-GAAP return on common equity (1) (7)   14.8 %   15.0 %   14.3 %
Return on tangible common equity (8)   21.6 %   22.4 %   21.5 %
Non-GAAP return on tangible common equity (1) (8)   24.2 %   24.3 %   23.1 %
Tier 1 common capital ratio (9)   15.6 %   16.6 %   15.6 %
Tier 1 risk based capital ratio (9)   18.1 %   17.9 %   18.0 %
Tier 1 leverage capital ratio (9)   10.0 %   9.6 %   10.0 %
Pre-tax margin on net revenues   18.3 %   19.0 %   18.5 %
Non-GAAP pre-tax margin on net revenues (1) (2)   20.2 %   20.6 %   19.8 %
Effective tax rate   27.1 %   26.1 %   25.9 %
Non-GAAP effective tax rate (1)   26.0 %   26.1 %   25.9 %
                   


Statistical Information (unaudited):   As of and For the Three Months Ended  
($ in 000s, except financial advisors and locations)   9/30/19     9/30/18     % Change     6/30/19     % Change  
Financial advisors (10)     2,097       2,045       2.5       2,097        
Independent contractors     96       104       (7.7 )     96        
Total financial advisors     2,193       2,149       2.0       2,193        
Locations     426       404       5.4       413       3.1  
Total client assets   $ 311,819,000     $ 289,136,000       7.8     $ 305,233,000       2.2  
Fee-based client assets   $ 108,138,000     $ 96,008,000       12.6     $ 103,824,000       4.2  
Client money market and insured product   $ 14,246,000     $ 15,121,000       (5.8 )   $ 13,674,000       4.2  
Secured client lending (11)   $ 3,299,359     $ 3,185,710       3.6     $ 3,251,723       1.5  


 
    Asset Management and Service Fee Break-down (unaudited)  
Asset Management and Service Fee Revenues:   Three Months Ended  
($ in 000s)   9/30/19     9/30/18     % Change     6/30/19     % Change  
Private Client Group (12)   $ 172,124     $ 152,021       13.2     $ 164,554       4.6  
Asset Management     30,650       27,555       11.2       29,485       4.0  
Third-party Bank Sweep Program     4,907       11,029       (55.5 )     6,869       (28.6 )
Other (13)     9,947       10,138       (1.9 )     10,263       (3.1 )
Total asset management and service fee revenues   $ 217,628     $ 200,743       8.4     $ 211,171       3.1  
                                         
Fee-based Assets:   Three Months Ended  
($ in millions)   9/30/19     9/30/18     % Change     6/30/19     % Change  
Private Client Group (12)   $ 85,163     $ 71,463       19.2     $ 80,983       5.2  
Asset Management     33,698       31,091       8.4       33,156       1.6  
Elimination (14)     (10,723 )     (6,546 )     63.8       (10,315 )     4.0  
Total fee-based assets   $ 108,138     $ 96,008       12.6     $ 103,824       4.2  
                                         
Individual Program Banks   $ 1,225     $ 2,953       (58.5 )   $ 1,459       (16.0 )
                                         
ROA (bps) (15)                                        
Private Client Group (12)     85.0       89.7               89.5          
Asset Management     36.4       35.5               35.6          
Individual Program Banks     145.3       134.0               163.6          


   
Consolidated Net Interest Income Analysis (Unaudited):  
                                                                         
    Three Months Ended  
    September 30, 2019     September 30, 2018     June 30, 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   $ 1,056.3     $ 5.7       2.15 %   $ 387.8     $ 2.3       2.35 %   $ 750.4     $ 4.3       2.31 %
Financial instruments owned     1,157.8       5.7       1.96       1,171.4       5.7       1.96       1,320.5       6.4       1.94  
Margin balances     1,308.3       13.3       4.08       1,324.0       13.1       3.95       1,291.5       13.7       4.23  
Investments:                                                                        
Asset-backed securities     4,367.8       42.4       3.88       4,967.2       48.2       3.88       4,508.4       46.0       4.08  
Mortgage-backed securities     1,253.4       6.6       2.10       1,668.4       9.1       2.18       1,470.9       8.6       2.33  
Corporate fixed income securities     743.7       5.7       3.06       1,286.7       9.2       2.85       915.0       6.9       3.02  
State and municipal securities     34.3       0.2       2.27       73.2       0.3       1.99       48.0       0.2       1.85  
Other     4.5             5.98       8.7             1.48                    
Total Investments     6,403.7       54.9       3.43       8,004.2       66.8       3.34       6,942.3       61.7       3.56  
Loans:                                                                        
Commercial and industrial     3,330.2       39.7       4.77       2,950.2       34.1       4.62       3,337.4       41.3       4.95  
Residential real estate     3,003.8       23.2       3.08       2,753.7       19.8       2.88       2,953.7       22.5       3.05  
Securities-based loans     1,959.3       19.9       4.06       1,848.2       18.2       3.94       1,916.3       20.2       4.21  
Commercial real estate     377.2       5.2       5.52       192.4       2.4       4.98       354.3       5.0       5.63  
Loans held for sale     209.7       1.7       3.21       224.5       2.5       4.38       178.6       1.8       4.02  
Other     444.9       5.7       5.23       142.5       1.8       5.12       377.9       5.1       5.38  
Total Loans     9,325.1       95.4       4.09       8,111.5       78.8       3.88       9,118.2       95.9       4.21  
Other interest-bearing assets     678.7       3.8       2.19       747.4       3.1       1.66       831.6       5.9       2.86  
Total interest-earning assets/interest income     19,929.9       178.8       3.59       19,746.3       169.8       3.44       20,254.5       187.9       3.71  
Interest-bearing liabilities:                                                                        
Short-term borrowings     21.0       0.1       2.63       35.3       0.3       2.89       29.8       0.2       3.16  
Senior notes     1,016.6       11.1       4.38       1,015.7       11.2       4.43       1,016.2       11.1       4.38  
Deposits     14,926.2       24.8       0.67       14,003.2       25.9       0.74       14,660.7       29.3       0.80  
FHLB     270.1       1.1       1.70       1,028.8       4.2       1.65       550.2       2.9       2.12  
Other interest-bearing liabilities     1,673.0       7.0       1.66       1,591.7       6.9       1.73       1,764.4       9.4       2.10  
Total interest-bearing liabilities/interest expense   $ 17,906.9     $ 44.1       0.99 %   $ 17,674.7     $ 48.5       1.10 %   $ 18,021.3     $ 52.9       1.17 %
Net interest income/margin           $ 134.7       2.70 %           $ 121.3       2.46 %           $ 135.0       2.67 %


   
Stifel Bancorp, Inc. (16) Net Interest Income Analysis (Unaudited):  
                                                                         
    Three Months Ended  
    September 30, 2019     September 30, 2018     June 30, 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   $ 540.8     $ 3.2       2.36 %   $ 29.4     $ 0.2       2.06 %   $ 330.6     $ 1.8       2.15 %
Investments     6,403.7       54.9       3.43       8,004.2       66.8       3.34       6,942.3       61.7       3.56  
Loans     9,325.1       95.4       4.09       8,111.5       78.8       3.88       9,118.2       95.9       4.21  
Other interest-bearing assets     46.7       0.4       3.04       73.9       0.7       4.19       57.2       0.6       4.38  
Total interest-earning assets/interest income     16,316.3       153.9       3.77       16,219.0       146.5       3.61       16,448.3       160.0       3.89  
Interest-bearing liabilities:                                                                        
Deposits     14,926.2       24.8       0.67       14,003.2       25.9       0.74       14,660.7       29.3       0.80  
FHLB     270.1       1.1       1.70       1,028.8       4.2       1.65       550.2       2.9       2.12  
Other interest-bearing liabilities     1.7       0.1       6.49       28.1       0.2       3.17       1.7       0.1       6.73  
Total interest-bearing liabilities/interest expense   $ 15,198.0       26.0       0.68 %   $ 15,060.1       30.3       0.81 %   $ 15,212.6       32.3       0.85 %
Net interest income/margin           $ 127.9       3.14 %           $ 116.2       2.87 %           $ 127.7       3.11 %


   
Stifel Bancorp, Inc. (16) - a component of Global Wealth Management  
                           
Selected operating data (unaudited): Three Months Ended     Nine Months Ended  
($ in 000s, except percentages) 9/30/19     9/30/18     %
Change
    6/30/19     %
Change
    9/30/19     9/30/18     %
Change
 
Net interest income $ 127,942     $ 116,204       10.1     $ 127,714       0.2     $ 390,220     $ 338,031       15.4  
Bank loan loss provision   929       6,924       (86.6 )     2,353       (60.5 )     5,565       13,244       (58.0 )
Charge-offs   56           n/m       54       3.7       166       14       n/m  
Net interest margin   3.14 %     2.87 %   27 bps       3.11 %   3 bps       3.14 %     2.91 %   23 bps  


Financial Metrics (unaudited):   As of  
($ in 000s, except percentages)   9/30/19     9/30/18     6/30/19  
Total assets   $ 16,442,707     $ 17,005,070     $ 16,645,984  
Total shareholders' equity     1,234,932       1,200,250       1,236,318  
Total loans, net (includes loans held for sale)     9,367,233       8,516,052       9,127,836  
Total deposits     14,836,646       14,502,952       14,901,061  
Available-for-sale securities, at fair value     3,448,207       3,347,819       2,702,211  
Held-to-maturity securities, at amortized cost     2,878,516       4,562,021       3,957,629  
Commercial and industrial     3,315,706       3,127,435       3,338,127  
Residential real estate     3,043,271       2,792,269       2,984,725  
Securities-based loans     1,986,339       1,836,450       1,962,528  
Commercial real estate     387,868       328,814       367,283  
Loans held for sale     265,330       262,063       163,511  
Stifel Bank & Trust:                        
Common equity tier 1 capital ratio (9)     13.1 %     14.2 %     13.4 %
Tier 1 capital ratio (9)     13.1 %     14.2 %     13.4 %
Total capital ratio (9)     14.3 %     15.2 %     14.5 %
Tier 1 leverage ratio (9)     7.3 %     7.0 %     7.2 %
Stifel Bank:                        
Common equity tier 1 capital ratio (9)     17.9 %     13.8 %     17.7 %
Tier 1 capital ratio (9)     17.9 %     13.8 %     17.7 %
Total capital ratio (9)     19.1 %     15.0 %     18.9 %
Tier 1 leverage ratio (9)     7.0 %     12.5 %     7.3 %
                         
Credit Metrics:                        
Allowance for loan losses   $ 91,360     $ 80,700     $ 90,472  
Allowance as a percentage of retained loans     0.99 %     0.97 %     1.00 %
Net charge-offs as a percentage of average loans     0.00 %     0.00 %     0.00 %
Total nonperforming assets   $ 18,031     $ 24,352     $ 21,111  
Nonperforming assets as % of total assets     0.11 %     0.14 %     0.13 %


   
Global Wealth Management Summary Results of Operations (Unaudited)  
    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     % Change     6/30/19     % Change     9/30/19     9/30/18     % Change  
Revenues:                                                                
Commissions   $ 118,061     $ 117,795       0.2     $ 120,284       (1.8 )   $ 348,272     $ 355,129       (1.9 )
Principal transactions     42,056       41,023       2.5       42,104       (0.1 )     127,427       125,713       1.4  
  Brokerage revenues     160,117       158,818       0.8       162,388       (1.4 )     475,699       480,842       (1.1 )
                                                                 
Asset management and service fees     217,616       200,735       8.4       211,156       3.1       624,025       596,081       4.7  
Net interest     137,937       127,341       8.3       137,599       0.2       420,831       370,783       13.5  
Investment banking     9,855       7,722       27.6       10,559       (6.7 )     28,637       23,459       22.1  
Other income     9,046       3,545       155.2       10,731       (15.7 )     28,422       9,898       187.1  
Net revenues     534,571       498,161       7.3       532,433       0.4       1,577,614       1,481,063       6.5  
Non-interest expenses:                                                                
Compensation and benefits     261,681       241,713       8.3       262,321       (0.2 )     771,475       721,352       6.9  
Non-compensation operating expenses     70,067       73,071       (4.1 )     77,760       (9.9 )     216,474       211,668       2.3  
Total non-interest expenses     331,748       314,784       5.4       340,081       (2.5 )     987,949       933,020       5.9  
Income before income taxes   $ 202,823     $ 183,377       10.6     $ 192,352       5.4     $ 589,665     $ 548,043       7.6  
                                                                 
As a percentage of net revenues:                                                                
Compensation and benefits     49.0       48.5               49.3               48.9       48.7          
Non-compensation operating expenses     13.1       14.7               14.6               13.7       14.3          
Income before income taxes     37.9       36.8               36.1               37.4       37.0          


   
Institutional Group Summary Results of Operations (Unaudited)  
    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     % Change     6/30/19     % Change     9/30/19     9/30/18     % Change  
Revenues:                                                                
Commissions   $ 45,859     $ 40,220       14.0     $ 44,697       2.6     $ 136,078     $ 135,563       0.4  
Principal transactions     55,791       42,130       32.4       54,360       2.6       170,916       144,206       18.5  
 Brokerage revenues     101,650       82,350       23.4       99,057       2.6       306,994       279,769       9.7  
Advisory fees     104,847       75,717       38.5       82,905       26.5       292,647       260,312       12.4  
Capital raising     84,088       85,553       (1.7 )     86,153       (2.4 )     218,963       222,666       (1.7 )
 Investment banking     188,935       161,270       17.2       169,058       11.8       511,610       482,978       5.9  
Other (17)     (363 )     2,332       (115.6 )     2,487       (114.6 )     3,506       6,108       (42.6 )
    Net revenues     290,222       245,952       18.0       270,602       7.3       822,110       768,855       6.9  
Non-interest expenses:                                                                
Compensation and benefits     171,534       146,187       17.3       155,779       10.1       486,724       455,515       6.9  
Non-compensation operating expenses     70,065       65,460       7.0       75,521       (7.2 )     215,257       198,441       8.5  
    Total non-interest expenses     241,599       211,647       14.2       231,300       4.5       701,981       653,956       7.3  
Income before income taxes   $ 48,623     $ 34,305       41.7     $ 39,302       23.7     $ 120,129     $ 114,899       4.6  
                                                                 
As a percentage of net revenues:                                                                
Compensation and benefits     59.1       59.4               57.6               59.2       59.2          
Non-compensation operating expenses     24.1       26.7               27.9               26.2       25.9          
Income before income taxes     16.8       13.9               14.5               14.6       14.9          


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

   
    Three Months Ended     Nine Months Ended  
($ in 000s)   9/30/19     9/30/18     6/30/19     9/30/19     9/30/18  
GAAP net income applicable to Stifel Financial Corp.   $ 109,414     $ 103,858     $ 109,085     $ 317,706     $ 279,906  
Preferred dividend     4,844       2,343       5,288       12,476       7,031  
Net income available to common shareholders     104,570       101,515       103,797       305,230       272,875  
                                         
Non-GAAP adjustments:                                        
Merger-related and severance (18)     14,850       10,777       6,721       29,762       33,506  
Litigation-related (19)           774       3,507       3,507       6,774  
Provision for income taxes (20)     (2,274 )     (3,004 )     (2,654 )     (5,462 )     (10,503 )
Total non-GAAP adjustments     12,576       8,547       7,574       27,807       29,777  
Non-GAAP net income available to common shareholders   $ 117,146     $ 110,062     $ 111,371     $ 333,037     $ 302,652  
                                         
Weighted average diluted shares outstanding     78,144       81,484       79,079       78,826       81,425  
                                         
GAAP earnings per diluted common share   $ 1.40     $ 1.27     $ 1.38     $ 4.03     $ 3.44  
Non-GAAP adjustments     0.16       0.11       0.10       0.35       0.36  
Non-GAAP earnings per diluted common share   $ 1.56     $ 1.38     $ 1.48     $ 4.38     $ 3.80  
                                         
GAAP earnings per diluted common share available to common shareholders   $ 1.34     $ 1.25     $ 1.31     $ 3.87     $ 3.35  
Non-GAAP adjustments     0.16       0.10       0.10       0.35       0.37  
Non-GAAP earnings per diluted common share available to common shareholders   $ 1.50     $ 1.35     $ 1.41     $ 4.22     $ 3.72  
 

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 September 30, 2019 of 20.2% is calculated by adding non-GAAP adjustments of $14.8 million to our GAAP income before income taxes of $150.8 million and dividing it by non-GAAP net revenues for the quarter of $821.6 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 nine months ended September 30, 2019 of 19.6% is calculated by adding non-GAAP adjustments of $33.3 million to our GAAP income before income taxes of $436.5 million and dividing it by non-GAAP net revenues of $2.4 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 managed 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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