Stifel Reports First Quarter 2015 Financial Results
ST. LOUIS, MO -- (Marketwired) -- 05/11/15 --
Stifel Financial Corp. (NYSE: SF)
- Net revenues of $561.0 million, increased 3% compared with the year-ago quarter.
- Record asset management and service fee revenues of $113.9 million.
- Net income of $43.1 million, a 9% decline from the year-ago quarter
- Core diluted EPS of $0.65 compared with $0.68 in the first quarter of 2014.
- GAAP diluted EPS of $0.56 compared with $0.63 in the first quarter of 2014.
Stifel Financial Corp. (NYSE: SF) today reported net income of $43.1 million, or $0.56 per diluted common share on net revenues of $561.0 million for the three months ended March 31, 2015, compared with net income of $47.4 million, or $0.63 per diluted common share, on net revenues of $546.8 million for the first quarter of 2014.
For the three months ended March 31, 2015, the Company reported non-GAAP net income of $49.9 million, or $0.65 per diluted common share, compared with non-GAAP net income of $51.4 million, or $0.68 per diluted common share for the first quarter of 2014. These non-GAAP results exclude merger-related expenses associated with the Company's acquisitions.
Chairman's Comments
“We are pleased with our first quarter results, which represent our third best revenue quarter. That said, while investment banking was a good quarter, results can and will be lumpy. Furthermore, we have incurred additional operating expenses relating to the build-out of our infrastructure. Looking forward, we are optimistic about the continued growth in our business. In today’s environment, we see ample opportunities to continue to build the premier investment banking and wealth management firm,” stated Ronald J. Kruszewski, Chairman and CEO of Stifel.
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Summary Results of Operations (Unaudited)
Three Months Ended
------------------------------------------------------
(in 000s) 3/31/15 3/31/14 % Change 12/31/14 % Change
---------- ---------- ---------- ---------- ----------
Net revenues $ 560,982 $ 546,756 2.6 $ 578,030 (2.9)
Net income 43,097 47,382 (9.0) 45,182 (4.6)
Non-GAAP net income
(1) 49,940 51,437 (2.9) 58,134 (14.1)
Earnings per common
share:
Basic $ 0.63 $ 0.72 (12.5) $ 0.67 (6.0)
Diluted 0.56 0.63 (11.1) 0.58 (3.4)
Non-GAAP net income
(1) 0.65 0.68 (4.4) 0.75 (13.3)
Weighted average number of common shares outstanding:
Basic 68,006 66,037 3.0 66,851 1.7
Diluted 77,359 75,691 2.2 77,540 (0.2)
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Brokerage Revenues
Brokerage revenues, defined as commissions plus principal transactions, were $280.5 million, a 1% decrease compared with the first quarter of 2014 and a 4% increase compared with the fourth quarter of 2014.
- Global wealth management brokerage revenues were $158.0 million, a 1% decrease compared with the first quarter of 2014 and a 1% decrease compared with the fourth quarter of 2014.
- Institutional equity brokerage revenues were $61.8 million, a 4% decrease compared with the first quarter of 2014 and an 8% decrease compared with the fourth quarter of 2014.
- Institutional fixed income brokerage revenues were $60.7 million, a 5% increase compared with the first quarter of 2014 and a 45% increase compared with the fourth quarter of 2014.
Investment Banking Revenues
Investment banking revenues were $125.1 million, an 8% decrease compared with the first quarter of 2014 and a 28% decrease compared with record revenues in the fourth quarter of 2014.
- Equity capital raising revenues were $48.9 million, a 19% decrease compared with the first quarter of 2014 and a 2% decrease compared with the fourth quarter of 2014.
- Fixed income capital raising revenues were $26.7 million, a 63% increase compared with the first quarter of 2014 and a 25% increase compared with the fourth quarter of 2014.
- Advisory fee revenues were $49.4 million, a 16% decrease compared with the first quarter of 2014 and a 52% decrease compared with record revenues in the fourth quarter of 2014.
Asset Management and Service Fee Revenues
Asset management and service fee revenues were a record $113.9 million, a 28% increase compared with the first quarter of 2014 and an 8% increase compared with the fourth quarter of 2014. The increase is due to the higher value of fee-based accounts as a result of market appreciation and new client assets.
Compensation and Benefits Expenses
For the quarter ended March 31, 2015, compensation and benefits expenses were $355.7 million, which included $3.4 million of merger-related expenses. This compares with $347.0 million in the first quarter of 2014 and $370.5 million in the fourth quarter of 2014.
Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 62.5% in the first quarter of 2015, compared with 62.9% in the first quarter of 2014 and 61.5% in the fourth quarter of 2014.
Transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, was 4.1% of net revenues in the first quarter of 2015, compared with 4.3% in the first quarter of 2014 and 4.0% in the fourth quarter of 2014.
Non-Compensation Operating Expenses
For the quarter ended March 31, 2015, non-compensation operating expenses were $135.2 million, which included merger-related expenses of $4.6 million. This compares with $122.3 million in the first quarter of 2014 and $138.5 million in the fourth quarter of 2014.
Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended March 31, 2015 was 23.2%, compared with 21.9% in the first quarter of 2014 and 23.0% in the fourth quarter of 2014.
Provision for Income Taxes
The effective income tax rate for the quarter ended March 31, 2015 was 38.5% compared with 38.6% in the first quarter of 2014 and 34.4% in the fourth quarter of 2014.
Assets and Capital
Assets
- Assets decreased 2% to $9.37 billion as of March 31, 2015 from $9.39 billion as of March 31, 2014. The decrease is attributable to a decrease in Stifel Bank's investment portfolio and financial instruments owned, at fair value, partially offset by an increase in the loan portfolio at Stifel Bank, and growth attributable to acquired assets from the four acquisitions completed in 2014.
- At March 31, 2015, the Company's Level 3 assets of $158.8 million, or 2% of total assets, consisted of $88.2 million of auction rate securities and $70.6 million of partnership interests, private company investments, private equity, and fixed income securities. The Company's Level 3 assets as a percentage of total assets measured at fair value was 6% at March 31, 2015.
- Non-performing assets as a percentage of total assets as of March 31, 2015 was 0.13%.
Capital
- Stockholders' equity as of March 31, 2015 increased $263.1 million, or 13%, to $2.4 billion from $2.1 billion as of March 31, 2014.
- At March 31, 2015, book value per common share was $34.83 based on 67.9 million common shares outstanding. This represents a 9% increase from March 31, 2014.
- At March 31, 2015, the Company's Tier 1 leverage capital and Tier 1 risk-based capital ratios were 17.5% and 29.9%, respectively, compared to 15.1% and 25.7%, respectively, at March 31, 2014, and 16.5% and 25.0%, respectively, at December 31, 2014.
Conference Call Information
Stifel Financial Corp. will host its first quarter 2015 financial results conference call on Monday, May 11, 2015, at 5:00 p.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 #43107466. 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; Keefe, Bruyette & Woods Limited; and Oriel Securities Limited. The Company's broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and 1919 Investment Counsel & Trust Company 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.
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Summary Results of Operations (Unaudited)
Three Months Ended
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(in thousands, except
per share amounts) 3/31/15 3/31/14 % Change 12/31/14 % Change
---------- ---------- ---------- ---------- ----------
Revenues:
Commissions $ 180,302 $ 172,243 4.7 $ 174,990 3.0
Principal
transactions 100,205 110,360 (9.2) 94,109 6.5
---------- ---------- ---------- ---------- ----------
Brokerage
revenues 280,507 282,603 (0.7) 269,099 4.2
Investment banking 125,089 135,584 (7.7) 174,598 (28.4)
Asset management
and service fees 113,869 89,170 27.7 105,962 7.5
Other income 11,800 5,238 125.3 (3,961) 398.0
---------- ---------- ---------- ---------- ----------
Operating
revenues 531,265 512,595 3.6 545,698 (2.6)
Interest revenue 42,736 42,836 (0.2) 44,936 (4.9)
---------- ---------- ---------- ---------- ----------
Total revenues 574,001 555,431 3.3 590,634 (2.8)
Interest expense 13,019 8,675 50.1 12,604 3.3
---------- ---------- ---------- ---------- ----------
Net revenues 560,982 546,756 2.6 578,030 (2.9)
---------- ---------- ---------- ---------- ----------
Non-interest
expenses:
Compensation and
benefits 355,693 346,989 2.5 370,455 (4.0)
Occupancy and
equipment rental 44,170 40,782 8.3 44,178 *
Communications and
office supplies 29,234 24,838 17.7 28,776 1.6
Commission and
floor brokerage 10,069 9,029 11.5 8,308 21.2
Other operating
expenses 51,750 47,689 8.5 57,241 (9.6)
---------- ---------- ---------- ---------- ----------
Total non-
interest
expenses 490,916 469,327 4.6 508,958 (3.5)
Income before income
taxes 70,066 77,429 (9.5) 69,072 1.4
Provision for
income taxes 26,969 30,047 (10.2) 23,890 12.9
---------- ---------- ---------- ---------- ----------
Net income $ 43,097 $ 47,382 (9.0) $ 45,182 (4.6)
---------- ---------- ---------- ---------- ----------
Earnings per common
share:
Basic $ 0.63 $ 0.72 (12.5) $ 0.67 (6.0)
Diluted $ 0.56 $ 0.63 (11.1) $ 0.58 (3.4)
Weighted average number of common shares
outstanding:
Basic 68,006 66,037 3.0 66,851 1.7
Diluted 77,359 75,691 2.2 77,540 (0.2)
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* Percentage not
meaningful.
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Statistical Information
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(in thousands, except per share, employee and location amounts)
% %
3/31/15 3/31/14 Change 12/31/14 Change
------------- ------------- ------- ------------- -------
Statistical
Information:
Book value per
share $ 34.83 $ 32.09 8.5 $ 35.00 (0.5)
Financial
advisors (2) 2,097 2,081 0.8 2,103 (0.3)
Full-time
associates 6,274 5,831 7.6 6,223 0.8
Locations 368 359 2.5 367 0.3
Total client
assets $188,616,000 $168,899,000 11.7 $186,558,000 1.1
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Business Segment Results
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Summary Segment Results (Unaudited)
Three Months Ended
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(in 000s) 3/31/15 3/31/14 % Change 12/31/14 % Change
---------- ---------- ---------- ---------- ----------
Net revenues:
Global Wealth
Management $ 329,410 $ 297,183 10.8 $ 310,980 5.9
Institutional Group 238,607 249,987 (4.6) 272,686 (12.5)
Other (7,035) (414) * (5,636) 24.8
---------- ---------- ---------- ---------- ----------
$ 560,982 $ 546,756 2.6 $ 578,030 (2.9)
---------- ---------- ---------- ---------- ----------
Operating
contribution: (3)
Global Wealth
Management $ 98,847 $ 79,676 24.1 $ 84,178 17.4
Institutional Group 32,331 44,923 (28.0) 34,787 (7.1)
Other (50,369) (40,726) 23.7 (29,532) 70.6
---------- ---------- ---------- ---------- ----------
$ 80,809 $ 83,873 (3.7) $ 89,433 (9.6)
---------- ---------- ---------- ---------- ----------
As a percentage of net
revenues:
Compensation and
benefits
Global Wealth
Management 55.6 58.6 58.0
Institutional
Group 62.6 61.7 64.9
Non-comp. operating
expenses
Global Wealth
Management 14.4 14.6 14.9
Institutional
Group 23.8 20.3 22.3
Income before
income taxes(3)
Global Wealth
Management 30.0 26.8 27.1
Institutional
Group 13.6 18.0 12.8
---------- ---------- ----------
14.3 15.2 15.5
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* Percentage not
meaningful.
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Global Wealth Management Summary Results of Operations (Unaudited)
Three Months Ended
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(in 000s) 3/31/15 3/31/14 % Change 12/31/14 % Change
---------- ---------- ---------- ---------- ----------
Revenues:
Commissions $ 116,214 $ 112,997 2.8 $ 115,351 0.7
Principal
transactions 41,781 47,154 (11.4) 44,671 (6.5)
---------- ---------- ---------- ---------- ----------
Brokerage
revenues 157,995 160,151 (1.3) 160,022 (1.3)
Asset management
and service fees 113,666 89,130 27.5 105,511 7.7
Net interest 37,924 35,262 7.5 40,236 (5.7)
Investment banking 10,326 11,280 (8.5) 9,811 5.2
Other income 9,499 1,360 598.3 (4,600) *
---------- ---------- ---------- ---------- ----------
Net revenues 329,410 297,183 10.8 310,980 5.9
---------- ---------- ---------- ---------- ----------
Non-interest
expenses:
Compensation and
benefits 183,243 174,168 5.2 180,491 1.5
Non-compensation
operating expenses 47,320 43,339 9.2 46,311 2.2
---------- ---------- ---------- ---------- ----------
Total non-
interest
expenses 230,563 217,507 6.0 226,802 1.7
---------- ---------- ---------- ---------- ----------
Income before income
taxes $ 98,847 $ 79,676 24.1 $ 84,178 17.4
---------- ---------- ---------- ---------- ----------
As a percentage of
net revenues:
Compensation and
benefits 55.6 58.6 58.0
Non-compensation
operating expenses 14.4 14.6 14.9
Income before
income taxes 30.0 26.8 27.1
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* Percentage not
meaningful.
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Stifel Bank & Trust (Unaudited)
Key Statistical Information
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(in 000s, except % %
percentages) 3/31/15 3/31/14 Change 12/31/14 Change
------------ ------------ ------- ------------ -------
Other information:
Assets $ 5,289,349 $ 5,010,987 5.6 $ 5,237,970 1.0
Investment
securities 2,599,854 3,084,007 (15.7) 2,684,947 (3.2)
Bank loans, net 2,505,007 1,616,832 54.9 2,298,929 9.0
Loans held for
sale 188,783 102,367 84.4 121,939 54.8
Deposits 4,834,042 4,607,819 4.9 4,790,084 0.9
Allowance as a
percentage of
loans 0.96% 0.94% 0.94%
Non-performing
assets as a
percentage of
total assets 0.13% 0.03% 0.11%
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Institutional Group Summary Results of Operations (Unaudited)
Three Months Ended
------------------------------------------------------
(in 000s) 3/31/15 3/31/14 % Change 12/31/14 % Change
---------- ---------- ---------- ---------- ----------
Revenues:
Commissions $ 64,088 $ 59,246 8.2 $ 59,640 7.5
Principal
transactions 58,423 63,205 (7.6) 49,437 18.2
---------- ---------- ---------- ---------- ----------
Brokerage
revenues 122,511 122,451 * 109,077 12.3
Capital raising 65,321 65,526 (0.3) 61,521 6.2
Advisory fees 49,443 58,773 (15.9) 103,266 (52.1)
---------- ---------- ---------- ---------- ----------
Investment banking 114,764 124,299 (7.7) 164,787 (30.4)
Other (4) 1,332 3,237 (58.7) (1,179) *
---------- ---------- ---------- ---------- ----------
Net revenues 238,607 249,987 (4.6) 272,686 (12.5)
---------- ---------- ---------- ---------- ----------
Non-interest
expenses:
Compensation and
benefits 149,411 154,234 (3.1) 176,897 (15.5)
Non-compensation
operating expenses 56,865 50,830 11.9 61,002 (6.8)
---------- ---------- ---------- ---------- ----------
Total non-
interest
expenses 206,276 205,064 0.6 237,899 (13.3)
---------- ---------- ---------- ---------- ----------
Income before income
taxes $ 32,331 $ 44,923 (28.0) $ 34,787 (7.1)
---------- ---------- ---------- ---------- ----------
As a percentage of
net revenues:
Compensation and
benefits 62.6 61.7 64.9
Non-compensation
operating expenses 23.8 20.3 22.3
Income before
income taxes 13.6 18.0 12.8
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* Percentage not
meaningful.
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Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
Three Months Ended
------------------------------------------------------
(in 000s) 3/31/15 3/31/14 % Change 12/31/14 % Change
---------- ---------- ---------- ---------- ----------
Institutional
brokerage:
Equity $ 61,803 $ 64,456 (4.1) $ 67,273 (8.1)
Fixed income 60,708 57,995 4.7 41,804 45.2
---------- ---------- ---------- ---------- ----------
Institutional
brokerage 122,511 122,451 * 109,077 12.3
Investment banking:
Capital raising:
Equity 44,591 55,011 (18.9) 42,187 5.7
Fixed income 20,730 10,515 97.1 19,334 7.2
---------- ---------- ---------- ---------- ----------
Capital raising 65,321 65,526 (0.3) 61,521 6.2
Advisory fees 49,443 58,773 (15.9) 103,266 (52.1)
---------- ---------- ---------- ---------- ----------
Investment banking $ 114,764 $ 124,299 (7.7) $ 164,787 (30.4)
---------- ---------- ---------- ---------- ----------
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* Percentage not
meaningful.
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Non-GAAP Financial Measures
The Company utilized non-GAAP calculations of presented net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin, and basic and diluted earnings per share as additional measures to aid in understanding and analyzing the Company's financial results for the three months ended March 31, 2015. 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. These non-GAAP amounts exclude certain compensation and non-compensation operating expenses associated with the Company's acquisitions and the write-off of debt issuance costs as a result of the redemption of our 6.70% senior notes in January 2015.
A limitation of utilizing these non-GAAP measures of net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expenses ratios, pre-tax margin, and basic and diluted earnings per share is that the GAAP accounting effects of these merger-related 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 of net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin, and basic and diluted earnings per share 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 revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin, and basic and diluted earnings per share on a GAAP basis for the three months ended March 31, 2015 to the aforementioned expenses on a non-GAAP basis for the same period.
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Three Months Ended March 31, 2015
-----------------------------------------
(in 000s, except per share
amounts) Non-GAAP Non-Core GAAP
------------- ------------- -------------
Net revenues $ 563,694 $ (2,712) $ 560,982
Non-interest expenses:
Compensation and benefits 352,283 3,410 355,693
Non-compensation operating
expenses 130,602 4,621 135,223
------------- ------------- -------------
Total non-interest expenses 482,885 8,031 490,916
Income before income taxes 80,809 (10,743) 70,066
Provision for income taxes 30,869 (3,900) 26,969
------------- ------------- -------------
Net income $ 49,940 $ (6,843) $ 43,097
------------- ------------- -------------
Earnings per common share:
Basic $ 0.73 $ (0.10) $ 0.63
Diluted $ 0.65 $ (0.09) $ 0.56
As a percentage of net revenues:
Compensation and benefits 62.5 63.4
Non-compensation operating
expenses 23.2 24.1
Income before income taxes 14.3 12.5
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(1) A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."
(2) Includes 134, 141, and 138 independent contractors at March 31, 2015, March 31, 2014, and December 31, 2014, respectively.
(3) A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."
(4) Includes net interest, asset management and service fees, and other income.
Investor RelationsSarah Anderson (415) [email protected]
Source: Stifel Financial Corp.