Stifel Reports Record Fourth Quarter and Full-Year Results

January 29, 2021 7:00 AM EST

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  • 25th consecutive year of record net revenues of $3.8 billion, an increase of 12.4% compared with 2019.
  • Quarterly record net revenues of $1.1 billion, an increase of 20.0% over the third quarter of 2020.
  • Record quarterly net income available to common shareholders of $180.8 million, or $1.55 per diluted common share.(1)
  • Record non-GAAP net income available to common shareholders of $195.1 million, or $1.67 per diluted common share.(1)
  • Record client assets of $357.4 billion, increased 8.5% compared with the year-ago quarter.
  • Annualized return on average tangible common shareholders’ equity(2) was 30.8%.
  • Non-GAAP annualized return on average tangible common shareholders’ equity(2) was 33.3%.
  • Increasing quarterly dividend by approximately 32% to $0.15 per common share starting in first quarter of 2021.

ST. LOUIS, Jan. 29, 2021 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported record net income available to common shareholders of $180.8 million, or $1.55 per diluted common share(1) on record net revenues of $1.1 billion for the three months ended December 31, 2020, compared with net income available to common shareholders of $125.8 million, or $1.08 per diluted common share,(1) on net revenues of $944.3 million for the fourth quarter of 2019.

For the three months ended December 31, 2020, the Company reported record non-GAAP net income available to common shareholders of $195.1 million, or $1.67 per diluted common share.(1) The Company’s reported GAAP net income for the three months ended December 31, 2020 was primarily impacted by merger-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“Stifel’s performance in 2020 was a testament to the strength of our business model as we were able to navigate market challenges and generated our 25th consecutive year of record net revenue. We entered the year expecting two of our primary growth drivers to be continued strength in net interest income and advisory revenue. However, following the pandemic outbreak, Stifel and our associates were able to successfully pivot to the subsequent changes in the market environment and we finished the year with record results from our brokerage and capital raising businesses. Our record revenue also generated record non-GAAP earnings per share of $4.56 and non-GAAP return on tangible equity of nearly 25%,” stated Ronald J. Kruszewski, Chairman and Chief Executive Officer of Stifel.

Mr. Kruszewski continued, “We entered 2021 with record recruiting and investment banking pipelines, record client assets, and more than $500 million of excess capital. These factors, combined with our long history of profitable growth, drive my optimism for 2021 and beyond.”

Fourth Quarter Review

Quarterly Highlights

  • Record net revenues of $1.1 billion, increased 12.2% with the year-ago quarter, and increased 20.0% sequentially.
  • Record net revenues in Global Wealth Management and Institutional Group segments.
  • Record net income available to common shareholders of $180.8 million, or $1.55 per diluted common share.(1)
  • Record non-GAAP net income available to common shareholders of $195.1 million, or $1.67 per diluted common share.(1)
 
Financial Highlights (Unaudited) Three Months Ended 
($ in 000s, except per share data) GAAP 12/31/20  GAAP 12/31/19  % Change  GAAP 9/30/20  % Change   Non-GAAP (3) 12/31/20  Non-GAAP (3) 12/31/19  % Change 
Net revenues $1,059,910  $944,251   12.2  $883,300   20.0   $1,059,883  $944,425   12.2 
Net income applicable to Stifel Financial Corp. $188,469  $130,690   44.2  $120,527   56.4   $202,731  $151,442   33.9 
Preferred dividends  7,677   4,843   58.5   9,897   (22.4)   7,677   4,843   58.5 
Net income available to common shareholders $180,792  $125,847   43.7  $110,630   63.4   $195,054  $146,599   33.1 
Earnings per diluted common share (1) $1.61  $1.12   43.8  $1.06   51.9   $1.74  $1.30   33.8 
Earnings per diluted common share available to common shareholders (1) $1.55  $1.08   43.5  $0.97   59.8   $1.67  $1.26   32.5 
Compensation ratio  58.6%  60.0%      60.4%       57.9%  58.3%    
Non-compensation ratio  19.3%  22.8%      21.7%       18.3%  21.2%    
Pre-tax operating margin (4)  22.1%  17.2%      17.9%       23.8%  20.5%    

Net Revenues

Net revenues were a record $1.1 billion for the fourth quarter of 2020, a 12.2% increase from the fourth quarter of 2019 and a 20.0% increase from the third quarter of 2020. Net revenues, compared with the fourth quarter of 2019, reflected higher brokerage revenues, an increase in capital raising and advisory fee revenues and asset management and service fees, partially offset by a decline in net interest income. Net revenues, compared with the third quarter of 2020, reflected increased capital raising and advisory fee revenues, growth in brokerage revenues and asset management and services fees, as well as higher net interest income.

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $342.6 million, an 18.3% increase compared with the fourth quarter of 2019 and a 9.3% increase compared with the third quarter of 2020.

  Three Months Ended 
($ in 000s) 12/31/20  12/31/19  % Change  9/30/20  % Change 
Global Wealth Management $185,719  $174,000   6.7  $162,627   14.2 
Institutional brokerage:                    
Equity capital markets  69,201   45,989   50.5   54,204   27.7 
Fixed income capital markets  87,664   69,563   26.0   96,706   (9.3)
Total institutional brokerage  156,865   115,552   35.8   150,910   3.9 
Total brokerage revenues $342,584  $289,552   18.3  $313,537   9.3 
  • Global Wealth Management brokerage revenues were $185.7 million, a 6.7% increase compared with the fourth quarter of 2019 and a 14.2% increase compared with the third quarter of 2020.
  • Institutional equity brokerage revenues were $69.2 million, a 50.5% increase compared with the fourth quarter of 2019 and a 27.7% increase compared with the third quarter of 2020.
  • Institutional fixed income brokerage revenues were $87.7 million, a 26.0% increase compared with the fourth quarter of 2019 and a 9.3% decrease compared with the third quarter of 2020.

Investment Banking Revenues

Investment banking revenues were a record $337.7 million, a 21.8% increase compared with the fourth quarter of 2019 and a 54.8% increase compared with the third quarter of 2020.

  Three Months Ended 
($ in 000s) 12/31/20  12/31/19  % Change  9/30/20  % Change 
Capital raising:                    
Global Wealth Management $9,562  $9,278   3.1  $8,113   17.9 
                     
Equity capital markets  104,097   64,384   61.7   78,462   32.7 
Fixed income capital markets  50,613   48,181   5.0   50,717   (0.2)
Institutional Group  154,710   112,565   37.4   129,179   19.8 
Total capital raising (6)  164,272   121,843   34.8   137,292   19.7 
Advisory fees  173,395   155,331   11.6   80,842   114.5 
Total investment banking (6) $337,667  $277,174   21.8  $218,134   54.8 
  • Global Wealth Management capital raising revenues were $9.6 million, a 3.1% increase compared with the fourth quarter of 2019 and a 17.9% increase compared with the third quarter of 2020.
  • Institutional equity capital raising revenues were $104.1 million, a 61.7% increase compared with the fourth quarter of 2019 and a 32.7% increase compared with the third quarter of 2020.
  • Institutional fixed income capital raising revenues were $50.6 million, a 5.0% increase compared with the fourth quarter of 2019 and a 0.2% decrease compared with the third quarter of 2020.
  • Advisory fee revenues were $173.4 million, an 11.6% increase compared with the fourth quarter of 2019 and a 114.5% increase compared with the third quarter of 2020.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $249.9 million, an 11.6% increase compared with the fourth quarter of 2019 and an 8.3% increase compared with the third quarter of 2020. The increase from the comparative period in 2019 is primarily attributable to higher asset values and strong fee-based asset flows. Please refer to the Asset Management and Service Fee Break-down table for additional details.

Net Interest Income

Net interest income of $105.4 million, a 22.3% decrease compared with the fourth quarter of 2019 and a 4.7% increase compared with the third quarter of 2020. The decrease from the fourth quarter of 2019 was primarily driven by the impact of lower interest rates. Please refer to the Net Interest Income Analysis table for additional details.

  • Interest income was $119.9 million, a 28.3% decrease compared with the fourth quarter of 2019 and a 4.8% increase compared with the third quarter of 2020.
  • Interest expense was $14.5 million, a 53.8% decrease compared with the fourth quarter of 2019 and a 5.0% increase compared with the third quarter of 2020.

Annual Review

Annual Highlights

  • Record net revenues of $3.8 billion, increased 12.4% compared with 2019.
  • Record net revenues in Global Wealth Management.
  • Record net revenues and pre-tax operating income in Institutional Group.
  • Record net income available to common shareholders of $476.2 million, or $4.16 per diluted common share.(1)
  • Record non-GAAP net income available to common shareholders of $522.8 million, or $4.56 per diluted common share.(1)

For year ended December 31, 2020, the Company reported record net income available to common shareholders of $476.2 million, or $4.16 per diluted common share(1) on record net revenues of $3.8 billion, compared with net income available to common shareholders of $431.1 million, or $3.66 per diluted common share,(1) on net revenues of $3.3 billion for the comparable in 2019.

For the year ended December 31, 2020, the Company reported non-GAAP net income available to common shareholders of $522.8 million, or $4.56 per diluted common share.(1) The Company’s reported GAAP net income for the year ended December 31, 2020 was primarily impacted by merger-related expenses. Details are discussed below and in the “Non-GAAP Financial Matters” section.

Financial Highlights (Unaudited) Year Ended 
($ in 000s, except per share data) GAAP 12/31/20  GAAP 12/31/19  % Change   Non-GAAP (3) 12/31/20  Non-GAAP (3) 12/31/19  % Change 
Net revenues $3,752,061  $3,337,030   12.4   $3,752,213  $3,337,204   12.4 
Net income applicable to Stifel Financial Corp. $503,472  $448,396   12.3   $550,108  $496,955   10.7 
Preferred dividends  27,261   17,319   57.4    27,261   17,319   57.4 
Net income available to common shareholders $476,211  $431,077   10.5   $522,847  $479,636   9.0 
Earnings per diluted common share (1) $4.39  $3.80   15.5   $4.80  $4.22   13.7 
Earnings per diluted common share available to common shareholders (1) $4.16  $3.66   13.7   $4.56  $4.07   12.0 
Compensation ratio  60.7%  59.3%       59.9%  58.3%    
Non-compensation ratio  21.9%  22.7%       21.1%  21.8%    
Pre-tax operating margin (5)  17.4%  18.0%       19.0%  19.9%    

Net Revenues

Net revenues were a record $3.8 billion for the year ended December 31, 2020, a 12.4% increase compared with 2019. Net revenues, compared with 2019, reflected significantly higher brokerage revenues, increased capital raising revenues, and asset management and service fees, partially offset by lower net interest income and advisory fee revenues.

Brokerage Revenues

Brokerage revenues were $1.3 billion, a 25.8% increase compared with 2019.

  Year Ended 
($ in 000s) 12/31/20  12/31/19  % Change 
Global Wealth Management $687,348  $649,699   5.8 
Institutional brokerage:            
Equity capital markets  256,793   166,577   54.2 
Fixed income capital markets  404,789   255,969   58.1 
Total institutional brokerage  661,582   422,546   56.6 
Total brokerage revenues $1,348,930  $1,072,245   25.8 
  • Global Wealth Management brokerage revenues were $687.3 million, a 5.8% increase compared with 2019.
  • Institutional equity brokerage revenues were $256.8 million, a 54.2% increase compared with 2019.
  • Institutional fixed income brokerage revenues were $404.8 million, a 58.1% increase compared with 2019.

Investment Banking Revenues

Investment banking revenues were $952.3 million, a 16.5% increase compared with 2019.

  Year Ended 
($ in 000s) 12/31/20  12/31/19  % Change 
Capital raising:            
Global Wealth Management  36,005   37,915   (5.0)
             
Equity capital markets  306,031   204,405   49.7 
Fixed income capital markets  182,121   127,122   43.3 
Institutional Group  488,152   331,527   47.2 
Total capital raising (6)  524,157   369,442   41.9 
Advisory fees  428,147   447,979   (4.4)
Total investment banking (6) $952,304  $817,421   16.5 
  • Global Wealth Management capital raising revenues were $36.0 million, a 5.0% decrease compared with 2019.
  • Institutional equity capital raising revenues were $306.0 million, a 49.7% increase compared with 2019.
  • Institutional fixed income capital raising revenues were $182.1 million, a 43.3% increase compared with 2019.
  • Advisory fee revenues were $428.1 million, a 4.4% decrease compared with 2019.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $917.4 million, an 8.2% increase compared with 2019. The increase is primarily attributable to higher asset values and strong fee-based asset flows.

Net Interest Income

Net interest income of $458.1 million, a 16.3% decrease compared with 2019. The decrease is primarily driven by the impact of lower interest rates.

  • Interest income was $523.8 million, a 27.7% decrease compared with 2019.
  • Interest expense was $65.8 million, a 63.0% decrease compared with 2019.

Fourth Quarter & Full Year 2020

Compensation and Benefits Expenses

For the quarter ended December 31, 2020, compensation and benefits expenses were $621.3 million, which included $7.4 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $567.0 million in the fourth quarter of 2019 and $533.6 million in the third quarter of 2020. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 57.9% in the fourth quarter of 2020 (non-GAAP measure).

For the year ended December 31, 2020, compensation and benefits expenses were $2.3 billion, which included $30.3 million of merger-related and severance expenses (non-GAAP adjustments), compared to $2.0 billion in 2019. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 59.9% in the year ended December 31, 2020 (non-GAAP measure).

The increase in compensation and benefits expenses was primarily attributable to the change in the composition of revenues as compared to 2019.

  Three Months Ended  Year Ended 
($ in 000s) 12/31/20  12/31/19  12/31/20  12/31/19 
GAAP compensation and benefits $621,344  $566,981  $2,279,335  $1,978,116 
As a percentage of net revenues  58.6%  60.0%  60.7%  59.3%
Non-GAAP adjustments: (7)                
Merger-related and severance  (7,352)  (16,304)  (30,259)  (32,367)
Non-GAAP compensation and benefits $613,992  $550,677  $2,249,076  $1,945,749 
As a percentage of non-GAAP net revenues  57.9%  58.3%  59.9%  58.3%

Non-Compensation Operating Expenses

For the quarter ended December 31, 2020, non-compensation operating expenses were $203.9 million, which included $10.4 million of merger-related expenses (non-GAAP adjustments). This compares with $214.7 million in the fourth quarter of 2019 and $191.3 million in the third quarter of 2020. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2020 were 18.3% (non-GAAP measure).

The decrease in non-compensation operating expenses compared with the fourth quarter of 2019 was primarily due to significantly lower travel, entertainment, and conference-related expenses. In addition, the provision for credit losses and net provisions for litigation matters were lower. These decreases were partially offset by higher volume-related expenses, including investment banking transaction expenses, reflecting an increase in activity levels. In addition, occupancy expense and professional fees were higher.

For the year ended December 31, 2020, non-compensation operating expenses were $821.6 million, which included $30.1 million of merger-related expenses (non-GAAP adjustments), compared with $759.8 million in 2019. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the year ended December 31, 2020 were 21.1% (non-GAAP measure).

The increase in non-compensation operating expenses compared with 2019 was primarily attributable to an increase in the provision for credit losses as a result of the impact of COVID-19 on the broader economic environment (incorporating the impact of accounting for credit losses under the CECL standard)(8) and higher volume-related expenses, including investment banking transaction expenses, reflecting an increase in activity levels. In addition, occupancy expense and professional fees were higher. These increases were partially offset by significant decreases in travel, entertainment, and conference-related expenses as a result of the global pandemic.

  Three Months Ended  Year Ended 
($ in 000s) 12/31/20  12/31/19  12/31/20  12/31/19 
GAAP non-compensation expenses $203,865  $214,677  $821,566  $759,776 
As a percentage of net revenues  19.3%  22.8%  21.9%  22.7%
Non-GAAP adjustments: (7)                
Merger-related  (10,381)  (14,964)  (30,053)  (28,663)
Litigation-related           (3,507)
   (10,381)  (14,964)  (30,053)  (32,170)
Non-GAAP non-compensation expenses $193,484  $199,713  $791,513  $727,606 
As a percentage of non-GAAP net revenues  18.3%  21.2%  21.1%  21.8%

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended December 31, 2020 was 19.7%. This compares with an effective income tax rate of 19.6% for the fourth quarter of 2019 and 23.9% for the third quarter of 2020. The adjusted non-GAAP effective income tax rate for the quarter ended December 31, 2020 was 19.7%.

The GAAP effective income tax rate for the year ended December 31, 2020 was 22.7%, compared with 25.0% in 2019. The adjusted non-GAAP effective income tax rate for the year ended December 31, 2020 was 22.7%.

  Three Months Ended  Year Ended 
($ in 000s) 12/31/20  12/31/19  12/31/20  12/31/19 
GAAP provision for income taxes $46,232  $31,925  $147,688  $149,152 
GAAP effective tax rate  19.7%  19.6%  22.7%  25.0%
Non-GAAP adjustments: (7)                
Merger-related, litigation-related, and severance  3,319   7,203   13,689   16,152 
Other  125   3,487   139    
   3,444   10,690   13,828   16,152 
Non-GAAP provision for income taxes $49,676  $42,615  $161,516  $165,304 
Non-GAAP effective tax rate  19.7%  22.0%  22.7%  25.0%

Conference Call Information

Stifel Financial Corp. will host its fourth quarter 2020 financial results conference call on Friday, January 29, 2021, at 9:30 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 1145988. 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, including its Eaton Partners business division; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc. 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 website at www.stifel.com. For global disclosures, please visit www.stifel.com/investor-relations/press-releases.

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.

Statements about the effects of the COVID-19 pandemic on the Company’s business, results, financial position and liquidity may constitute forward-looking statements and are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected.

  
Summary Results of Operations (Unaudited) 
  Three Months Ended    Year Ended 
($ in 000s, except per share amounts) 12/31/20    12/31/19    % Change    9/30/20    % Change    12/31/20    12/31/19    % Change 
Revenues:                                              
Commissions $199,847    $183,144     9.1    $172,654     15.7    $760,627    $667,494     14.0 
Principal transactions  142,737     106,408     34.1     140,883     1.3     588,303     404,751     45.3 
Brokerage revenues  342,584     289,552     18.3     313,537     9.3     1,348,930     1,072,245     25.8 
                                               
Advisory fees  173,395     155,331     11.6     80,842     114.5     428,147     447,979     (4.4)
Capital raising  164,276     121,843     34.8     137,292     19.7     524,161     369,442     41.9 
Investment banking  337,671     277,174     21.8     218,134     54.8     952,308     817,421     16.5 
Asset management and service fees  249,928     223,969     11.6     230,782     8.3     917,424     848,035     8.2 
Other income  24,366     17,917     36.0     20,258     20.3     75,345     52,378     43.8 
Operating revenues  954,549     808,612     18.0     782,711     22.0     3,294,007     2,790,079     18.1 
Interest revenue  119,876     167,087     (28.3)    114,411     4.8     523,832     724,882     (27.7)
Total revenues  1,074,425     975,699     10.1     897,122     19.8     3,817,839     3,514,961     8.6 
Interest expense  14,515     31,448     (53.8)    13,822     5.0     65,778     177,931     (63.0)
Net revenues  1,059,910     944,251     12.2     883,300     20.0     3,752,061     3,337,030     12.4 
                                               
Non-interest expenses:                                              
Compensation and benefits  621,344     566,981     9.6     533,638     16.4     2,279,335     1,978,116     15.2 
Occupancy and equipment rental  73,729     64,327     14.6     68,598     7.5     274,664     242,893     13.1 
Communication and office supplies  40,443     39,845     1.5     40,123     0.8     164,736     147,428     11.7 
Commissions and floor brokerage  12,687     11,505     10.3     13,254     (4.3)    55,960     44,011     27.2 
Provision for credit losses       4,412    n/m     (1,353)   n/m     33,925     9,977     240.0 
Other operating expenses  77,006     94,588     (18.6)    70,647     9.0     292,281     315,467     (7.3)
Total non-interest expenses  825,209     781,658     5.6     724,907     13.8     3,100,901     2,737,892     13.3 
Income before income taxes  234,701     162,593     44.3     158,393     48.2     651,160     599,138     8.7 
Provision for income taxes  46,232     31,925     44.8     37,866     22.1     147,688     149,152     (1.0)
Net income  188,469     130,668     44.2     120,527     56.4     503,472     449,986     11.9 
Net income/(loss) applicable to non-controlling interests       (22)   n/m                    1,590    n/m 
Net income applicable to Stifel Financial Corp.  188,469     130,690     44.2     120,527     56.4     503,472     448,396     12.3 
Preferred dividends  7,677     4,843     58.5     9,897     (22.4)    27,261     17,319     57.4 
Net income available to common shareholders $180,792    $125,847     43.7    $110,630     63.4    $476,211    $431,077     10.5 
Earnings per common share: (1)                                              
Basic $1.70    $1.19     42.9    $1.04     63.4    $4.49    $3.99     12.5 
Diluted $1.55    $1.08     43.5    $0.97     59.8    $4.16    $3.66     13.7 
                                               
Cash dividends declared per common share (1) $0.11    $0.10     10.0    $0.11         $0.45    $0.40     12.5 
                                               
Weighted average number of common shares outstanding: (1)                                              
Basic  106,041     105,705     0.3     105,941     0.1     106,174     107,997     (1.7)
Diluted  116,828     116,720     0.1     113,775     2.7     114,573     117,878     (2.8)
                                               

Summary Business Segment Results (Unaudited) 
  Three Months Ended  Year Ended 
($ in 000s) 12/31/20  12/31/19    % Change  9/30/20  % Change  12/31/20  12/31/19  % Change 
Net revenues:                                  
Global Wealth Management $575,252  $552,945     4.0  $526,836   9.2  $2,190,826  $2,130,559   2.8 
Institutional Group  489,448   391,907     24.9   363,365   34.7   1,583,147   1,214,017   30.4 
Other  (4,790)  (601)   n/m   (6,901) n/m   (21,912)  (7,546) n/m 
Total net revenues $1,059,910  $944,251     12.2  $883,300   20.0  $3,752,061  $3,337,030   12.4 
                                   
Operating expenses:                                  
Global Wealth Management $378,790  $356,650     6.2  $347,906   8.9  $1,464,942  $1,344,599   9.0 
Institutional Group  365,793   336,366     8.7   286,524   27.7   1,257,862   1,038,347   21.1 
Other  80,626   88,642     (9.0)  90,477   (10.9)  378,097   354,946   6.5 
Total operating expenses $825,209  $781,658     5.6  $724,907   13.8  $3,100,901  $2,737,892   13.3 
                                   
Operating contribution:                                  
Global Wealth Management $196,462  $196,295     0.1  $178,930   9.8  $725,884  $785,960   (7.6)
Institutional Group  123,655   55,541     122.6   76,841   60.9   325,285   175,670   85.2 
Other  (85,416)  (89,243)    (4.3)  (97,378)  (12.3)  (400,009)  (362,492)  10.3 
Income before income taxes $234,701  $162,593     44.3  $158,393   48.2  $651,160  $599,138   8.7 
                                   
As a percentage of net revenues:                                 
Compensation and benefits                                  
Global Wealth Management  52.8   49.7         52.7       52.0   49.1     
Institutional Group  58.1   63.7         58.0       59.6   60.6     
Non-compensation operating expenses                                  
Global Wealth Management  13.0   14.8         13.3       14.9   14.0     
Institutional Group  16.6   22.1         20.9       19.9   24.9     
Income before income taxes                                  
Global Wealth Management  34.2   35.5         34.0       33.1   36.9     
Institutional Group  25.3   14.2         21.1       20.5   14.5     
Consolidated pre-tax margin  22.1   17.2         17.9       17.4   18.0     

 
Financial metrics (unaudited):As of and For the Three Months Ended 
($ in 000s, except percentages and per share amounts)12/31/20 12/31/19 9/30/20 
Total assets$26,604,254 $24,610,225 $25,549,182 
Total Stifel Financial shareholders' equity 4,238,766  3,614,791  4,030,687 
Book value per common share (1) (9)$35.91 $32.24 $33.97 
Return on common equity (10) 20.0% 15.6% 12.8%
Non-GAAP return on common equity (3) (10) 21.6% 18.2% 14.0%
Return on tangible common equity (2) 30.8% 25.7% 20.4%
Non-GAAP return on tangible common equity (2) (3) 33.3% 29.9% 22.2%
Tier 1 common capital ratio (11)16.5%  15.2% 15.4%
Tier 1 risk based capital ratio (11)20.2%  17.6% 19.2%
Tier 1 leverage capital ratio (11)11.9%  10.0% 11.3%
Pre-tax margin on net revenues 22.1% 17.2% 17.9%
Non-GAAP pre-tax margin on net revenues (3) (4) 23.8% 20.5% 19.4%
Effective tax rate 19.7% 19.6% 23.9%
Non-GAAP effective tax rate (3) 19.7% 22.0% 23.9%
          

Statistical Information (unaudited): As of and For the Three Months Ended 
($ in 000s, except financial advisors and locations) 12/31/20  12/31/19  % Change  9/30/20  % Change 
Financial advisors  2,187   2,127   2.8   2,177   0.5 
Independent contractors  93   95   (2.1)  94   (1.1)
Total financial advisors  2,280   2,222   2.6   2,271   0.4 
Locations  450   446   0.9   451   (0.2)
Total client assets (12) $357,429,000  $329,495,000   8.5  $325,159,000   9.9 
Fee-based client assets (12) $129,372,000  $117,189,000   10.4  $115,162,000   12.3 
Client money market and insured product $22,837,000  $14,841,000   53.9  $20,367,000   12.1 
Secured client lending (13) $2,816,973  $3,363,450   (16.2) $2,783,138   1.2 
                     

  

  Asset Management and Service Fee Break-down (unaudited) 
Asset Management and Service Fee Revenues: Three Months Ended 
($ in 000s) 12/31/20  12/31/19  % Change  9/30/20  % Change 
Private Client Group (14) $208,238  $177,987   17.0  $190,799   9.1 
Asset Management  28,298   31,653   (10.6)  27,539   2.8 
Third-party Bank Sweep Program  2,782   3,821   (27.2)  1,623   71.4 
Other (15)  10,610   10,508   1.0   10,821   (1.9)
Total asset management and service fee revenues $249,928  $223,969   11.6  $230,782   8.3 
                     
Fee-based Assets: Three Months Ended 
($ in millions) 12/31/20  12/31/19  % Change  9/30/20  % Change 
Private Client Group (14) $111,995  $92,110   21.6  $99,374   12.7 
Asset Management  29,864   36,525   (18.2)  27,196   9.8 
Elimination (16)  (12,487)  (11,446)  9.1   (11,408)  9.5 
Total fee-based assets $129,372  $117,189   10.4  $115,162   12.3 
                     
Third-party Bank Sweep Program $6,555  $1,185   453.2  $4,691   39.7 
                     
ROA (bps) (17)                    
Private Client Group (14)  83.8   83.6       83.5     
Asset Management  37.9   34.7       40.5     
Third-party Bank Sweep Program  18.9   123.7       15.2     
                     

Consolidated Net Interest Income Analysis (Unaudited): 
                                     
  Three Months Ended 
  December 31, 2020  December 31, 2019  September 30, 2020 
($ 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 $1,545.2  $1.1   0.28% $805.7  $3.6   1.80% $1,789.8  $1.1   0.25%
Financial instruments owned  670.9   2.2   1.33   1,074.2   5.1   1.91   801.3   2.9   1.46 
Margin balances  869.0   5.9   2.70   1,291.7   11.6   3.58   872.5   5.8   2.66 
Investments:                                    
Asset-backed securities  4,826.6   21.5   1.78   4,511.8   38.8   3.44   4,838.7   25.3   2.09 
Mortgage-backed securities  758.8   2.6   1.38   987.9   5.1   2.06   824.0   3.2   1.55 
Corporate fixed income securities  602.8   4.1   2.74   663.7   4.8   2.89   551.8   3.5   2.50 
State and municipal securities  2.4      1.98   27.7   0.2   2.22   2.4      1.97 
Other  4.4   0.1   2.10   4.5      2.02   4.9      2.07 
Total Investments  6,195.0   28.3   1.83   6,195.6   48.9   3.16   6,221.8   32.0   2.06 
Loans:                                    
Commercial and industrial  4,206.7   32.7   3.11   3,380.0   36.9   4.37   4,036.3   30.1   2.98 
Residential real estate  3,820.8   27.7   2.90   3,144.9   24.0   3.06   3,711.2   26.1   2.81 
Securities-based loans  1,899.7   9.6   2.03   2,064.7   18.5   3.59   1,787.1   9.2   2.05 
Commercial real estate  379.1   3.3   3.52   386.2   5.8   6.03   400.0   3.8   3.76 
Loans held for sale  489.1   3.0   2.45   335.3   4.0   4.80   460.1   2.6   2.25 
Other  649.3   4.9   3.02   503.4   6.1   4.75   602.9   4.5   3.02 
Total Loans  11,444.7   81.2   2.84   9,814.5   95.3   3.88   10,997.6   76.3   2.77 
Other interest-bearing assets  469.6   1.2   1.00   642.4   2.6   1.59   547.7   (3.7)  (2.69)
Total interest-earning assets/interest income  21,194.4   119.9   2.26   19,824.1   167.1   3.37   21,230.7   114.4   2.16 
Interest-bearing liabilities:                                    
Short-term borrowings           31.5   0.1   1.66          
Senior notes  1,311.0   14.4   4.39   1,016.8   11.1   4.38   1,411.8   15.4   4.37 
Deposits  16,429.1   1.2   0.03   14,672.8   13.6   0.37   16,379.2   1.5   0.04 
FHLB  137.0   0.1   0.34   513.0   2.1   1.67   157.1   0.5   1.31 
Other interest-bearing liabilities  513.9   (1.2)  (0.94)  1,595.6   4.5   1.12   1,071.6   (3.6)  (1.34)
Total interest-bearing liabilities/interest expense $18,391.0  $14.5   0.32% $17,829.7  $31.4   0.71% $19,019.7  $13.8   0.29%
Net interest income/margin     $105.4   1.99%     $135.7   2.74%     $100.6   1.90%

  
Stifel Bancorp, Inc. (18) Net Interest Income Analysis (Unaudited): 
                                     
  Three Months Ended 
  December 31, 2020  December 31, 2019  September 30, 2020 
($ 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 $546.7  $0.2   0.15% $255.7  $1.2   1.83% $786.0  $0.3   0.14%
Investments  6,195.0   28.3   1.83   6,195.6   48.9   3.16   6,221.8   32.0   2.06 
Loans  11,444.6   81.2   2.84   9,814.5   95.3   3.88   10,997.6   76.3   2.77 
Other interest-bearing assets  42.9   0.4   3.20   57.4   0.5   3.77   42.9   0.2   2.86 
Total interest-earning assets/interest income $18,229.2  $110.1   2.42  $16,323.2  $145.9   3.58  $18,048.3  $108.8   2.41 
Interest-bearing liabilities:                                    
Deposits  16,429.1   1.2   0.03   14,672.8   13.6   0.37   16,379.2   1.5   0.04 
FHLB  137.0   0.1   0.34   513.0   2.1   1.67   157.1   0.5   1.31 
Other interest-bearing liabilities  1.4   0.1   9.87   1.6      7.85   1.5      6.08 
Total interest-bearing liabilities/interest expense $16,567.5   1.4   0.03% $15,187.4   15.7   0.41% $16,537.8   2.0   0.05%
Net interest income/margin     $108.7   2.39%     $130.2   3.19%     $106.8   2.37%

  
Stifel Bancorp, Inc. (18) - a component of Global Wealth Management 
  
Selected operating data (unaudited):Three Months Ended  Year Ended 
($ in 000s, except percentages)12/31/20  12/31/19  % Change  9/30/20  % Change  12/31/20  12/31/19  % Change 
Net interest income$108,699  $130,157   (16.5) $106,812   1.8  $466,940  $520,377   (10.3)
Credit loss provision/(release)    4,412  n/m   (4,731) n/m   30,547   9,977   206.2 
Charge-offs    220  n/m   23  n/m   193   386   (50.0)
Net interest margin 2.39%  3.19% (80) bps   2.37% 2 bps   2.60%  3.15% (55) bps 
                             

Financial Metrics (unaudited): As of 
($ in 000s, except percentages) 12/31/20  12/31/19  9/30/20 
Total assets $18,867,133  $16,941,877  $17,854,768 
Total shareholders' equity  1,399,382   1,207,469   1,378,981 
Total loans, net (includes loans held for sale)  11,558,008   10,013,735   10,932,235 
Total deposits  17,396,497   15,332,581   16,400,001 
Available-for-sale securities, at fair value  2,229,878   3,253,588   2,823,885 
Held-to-maturity securities, at amortized cost  4,114,840   2,853,360   3,395,115 
Commercial and industrial  4,296,089   3,438,953   4,080,939 
Residential real estate  3,956,670   3,309,548   3,804,836 
Securities-based loans  1,933,974   2,098,211   1,841,516 
Commercial real estate  366,485   428,549   386,957 
Loans held for sale  551,248   389,693   281,475 
Stifel Bank & Trust:            
Common equity tier 1 capital ratio (11) 11.4%  12.1%  11.7%
Tier 1 capital ratio (11) 11.4%   12.1%  11.7%
Total capital ratio (11) 12.7%   13.3%  13.0%
Tier 1 leverage ratio (11) 7.1%   7.1%  7.2%
Stifel Bank:            
Common equity tier 1 capital ratio (11) 16.5%   17.0%  18.0%
Tier 1 capital ratio (11) 16.5%   17.0%  18.0%
Total capital ratio (11) 17.7%   18.0%  19.3%
Tier 1 leverage ratio (11) 7.3%   7.1%  7.3%
Credit Metrics:            
Allowance for credit losses $135,295  $95,579  $135,275 
Allowance as a percentage of retained loans  1.22%  0.98%  1.26%
Net charge-offs as a percentage of average loans  0.00%  0.00%  0.00%
Total nonperforming assets  13,925   14,748   14,615 
Nonperforming assets as % of total assets  0.07%  0.09%  0.08%
             

Global Wealth Management Summary Results of Operations (Unaudited) 
  Three Months Ended    Year Ended 
($ in 000s) 12/31/20    12/31/19    % Change    9/30/20  % Change    12/31/20    12/31/19    % Change 
Revenues:                                            
Commissions $139,594    $129,129     8.1    $120,600   15.7    $513,247    $477,401     7.5 
Principal transactions  46,125     44,871     2.8     42,027   9.8     174,101     172,298     1.0 
Brokerage revenues  185,719     174,000     6.7     162,627   14.2     687,348     649,699     5.8 
                                             
Asset management and service fees  249,907     223,952     11.6     230,765   8.3     917,353     847,977     8.2 
Net interest  110,521     138,060     (19.9)    108,181   2.2     478,948     558,891     (14.3)
Investment banking (19)  9,562     9,278     3.1     8,113   17.9     36,024     37,915     (5.0)
Other income  19,543     7,655     155.3     17,150   14.0     71,153     36,077     97.2 
Net revenues  575,252     552,945     4.0     526,836   9.2     2,190,826     2,130,559     2.8 
Non-interest expenses:                                            
Compensation and benefits  303,961     274,954     10.5     277,903   9.4     1,138,525     1,046,429     8.8 
Non-compensation operating expenses  74,829     81,696     (8.4)    70,003   6.9     326,417     298,170     9.5 
Total non-interest expenses  378,790     356,650     6.2     347,906   8.9     1,464,942     1,344,599     9.0 
Income before income taxes $196,462    $196,295     0.1    $178,930   9.8    $725,884    $785,960     (7.6)
                                             
As a percentage of net revenues:                                            
Compensation and benefits  52.8     49.7           52.7         52.0     49.1       
Non-compensation operating expenses  13.0     14.8           13.3         14.9     14.0       
Income before income taxes  34.2     35.5           34.0         33.1     36.9       
                                             

Institutional Group Summary Results of Operations (Unaudited) 
  Three Months Ended    Year Ended 
($ in 000s) 12/31/20  12/31/19  % Change    9/30/20  % Change    12/31/20  12/31/19  % Change 
Revenues:                                    
Commissions $60,253  $54,015   11.5    $52,054   15.8    $247,380  $190,093   30.1 
Principal transactions  96,612   61,537   57.0     98,856   (2.3)    414,202   232,453   78.2 
Brokerage revenues  156,865   115,552   35.8     150,910   3.9     661,582   422,546   56.6 
Advisory fees  173,399   155,331   11.6     80,842   114.5     428,132   447,979   (4.4)
Capital raising  154,710   112,565   37.4     129,179   19.8     488,152   331,527   47.2 
Investment banking  328,109   267,896   22.5     210,021   56.2     916,284   779,506   17.5 
Other (20)  4,474   8,459   (47.1)    2,434   83.8     5,281   11,965   (55.9)
Net revenues  489,448   391,907   24.9     363,365   34.7     1,583,147   1,214,017   30.4 
Non-interest expenses:                                    
Compensation and benefits  284,607   249,574   14.0     210,754   35.0     942,769   736,298   28.0 
Non-compensation operating expenses  81,186   86,792   (6.5)    75,770   7.1     315,093   302,049   4.3 
Total non-interest expenses  365,793   336,366   8.7     286,524   27.7     1,257,862   1,038,347   21.1 
Income before income taxes $123,655  $55,541   122.6    $76,841   60.9    $325,285  $175,670   85.2 
                                     
As a percentage of net revenues:                                    
Compensation and benefits  58.1   63.7         58.0         59.6   60.6     
Non-compensation operating expenses  16.6   22.1         20.9         19.9   24.9     
Income before income taxes  25.3   14.2         21.1         20.5   14.5     

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 December 31, 2020, December 31, 2019, and September 30, 2020 and the years ended December 31, 2020 and 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 months ended December 31, 2020, December 31, 2019, and September 30, 2020, and the years ended December 31, 2020 and 2019 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

  Three Months Ended  Year Ended 
($ in 000s) 12/31/20  12/31/19  9/30/20  12/31/20  12/31/19 
GAAP net income applicable to Stifel Financial Corp. $188,469  $130,690  $120,527  $503,472  $448,396 
Preferred dividends  7,677   4,843   9,897   27,261   17,319 
Net income available to common shareholders  180,792   125,847   110,630   476,211   431,077 
                     
Non-GAAP adjustments:                    
Merger-related and severance (21)  17,706   31,442   12,989   60,464   61,204 
Litigation-related (22)              3,507 
Provision for income taxes (23)  (3,444)  (10,690)  (3,094)  (13,828)  (16,152)
Total non-GAAP adjustments  14,262   20,752   9,895   46,636   48,559 
Non-GAAP net income available to common shareholders $195,054  $146,599  $120,525  $522,847  $479,636 
                     
Weighted average diluted shares outstanding (1)  116,828   116,720   113,775   114,573   117,878 
                     
GAAP earnings per diluted common share (1) $1.61  $1.12  $1.06  $4.39  $3.80 
Non-GAAP adjustments (1)  0.13   0.18   0.09   0.41   0.42 
Non-GAAP earnings per diluted common share (1) $1.74  $1.30  $1.15  $4.80  $4.22 
                     
GAAP earnings per diluted common share available to common shareholders (1) $1.55  $1.08  $0.97  $4.16  $3.66 
Non-GAAP adjustments (1)  0.12   0.18   0.09   0.40   0.41 
Non-GAAP earnings per diluted common share available to common shareholders (1) $1.67  $1.26  $1.06  $4.56  $4.07 

Footnotes

(1)All share and per share information has been retroactively adjusted to reflect the December 2020 three-for-two stock split.
(2)Annualized return on average tangible common shareholders’ equity (“ROTE”) is calculated by dividing annualized net income applicable to common shareholders by average tangible shareholders’ equity or, in the case of non-GAAP ROTE, calculated by dividing non-GAAP net income applicable to common shareholders by average tangible shareholders’ equity. Tangible common shareholders’ equity equals total Stifel Financial common shareholders’ equity less goodwill and identifiable intangible assets and the deferred taxes on goodwill and intangible assets. Average deferred taxes on goodwill and intangible assets was $50.7 million, $46.5 million, and $49.6 million, as of December 31, 2020 and 2019, and September 30, 2020, respectively. Historical periods have been restated to conform with the current period presentation.
(3)Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”
(4)Non-GAAP pre-tax margin for the three months ended December 31, 2020 of 23.8% is calculated by adding non-GAAP adjustments of $17.7 million to GAAP income before income taxes of $234.7 million and dividing it by non-GAAP net revenues for the quarter of $1.1 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(5)Non-GAAP pre-tax margin for the year ended December 31, 2020 of 19.0% is calculated by adding non-GAAP adjustments of $60.5 million to GAAP income before income taxes of $651.2 million and dividing it by non-GAAP net revenues of $3.8 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(6)Excludes revenue included in the Other segment.
(7)See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”
(8)In the first quarter of 2020, the Company adopted ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments,” which amends several aspects of the measurement of credit losses on certain financial instruments, including replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (CECL) model. For further information about ASU No. 2016-13, see Note 2 “Summary of Significant Accounting Policies” in Part II, Item 8 “Financial Statements and Supplementary Data” in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
(9)Book value per common share represents shareholders’ equity (excluding preferred stock and non-controlling interests) divided by period end common shares outstanding.
(10)Annualized return on average common shareholders’ equity (“ROE”) is calculated by dividing annualized net income applicable to common shareholders by average Stifel Financial common shareholders’ equity or, in the case of non-GAAP ROE, calculated by dividing non-GAAP net income applicable to commons shareholders by average Stifel Financial common shareholders’ equity. 
(11) Capital ratios are estimates at time of the Company’s earnings release. 
(12) On March 27, 2020, the Company sold Ziegler Capital Management LLC, which had approximately $10.5 billion of fee-based client assets at December 31, 2019. 
(13) Includes client margin balances held by the Company’s broker-dealer subsidiaries and securities-based loans held at the Company’s bank subsidiaries. 
(14) Includes Private Client Group and Trust Business. 
(15) Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees. 
(16) Asset management assets managed in Private Client Group or Trust accounts. 
(17) 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. 
(18) Includes Stifel Bank & Trust, Stifel Bank, Stifel Trust Company, N.A, and Stifel Trust Company Delaware, N.A. 
(19) Includes capital raising and advisory fees. 
(20) Includes net interest, asset management and service fees, and other income. 
(21) Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, 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. 
(22) Primarily related to costs associated with Company’s legal matters. 
(23) See details of non-GAAP adjustments under “Provision for Income Taxes.”
  

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

 

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Source: Stifel Financial Corporation


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