Stifel Reports Fourth Quarter and Full-Year 2016 Financial Results
ST. LOUIS, MO -- (Marketwired) -- 01/31/17 --
- Record fourth quarter net revenues of $661.4 million, increased 14% compared with the year-ago quarter.
- Record 2016 net revenues of $2.6 billion, increased 11% compared with 2015.
- Record 2016 net revenues and pre-tax operating income in Global Wealth Management.
- Record 2016 net revenues in Institutional Group.
- 2016 net income available to common shareholders of $77.6 million, or $1.00 per diluted common share.
Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $24.5 million, or $0.31 per diluted common share on record net revenues of $661.4 million for the three months ended December 31, 2016, compared with net income available to common shareholders of $11.2 million, or $0.14 per diluted common share, on net revenues of $581.3 million for the fourth quarter of 2015.
The GAAP results for the three months ended December 31, 2016 were impacted by the following:
- Anticipated merger-related charges of approximately $14.2 million, primarily for the Barclays Wealth and Investment Management, Americas transaction; and
- Litigation-related expenses of approximately $20.0 million associated with previously disclosed legal matters; and
- The previously disclosed settlement with the SEC, which impacted the Company's provision for income taxes by approximately $8.9 million due to the non-deductibility of the settlement payment.
Taken together, these items reduced net income available to common shareholders by $29.6 million, or $0.37 per diluted common share. Details discussed below and in the "Non-GAAP Financial Measures" section.
For the year ended December 31, 2016, the Company reported net income available to common shareholders of $77.6 million, or $1.00 per diluted common share on record net revenues of $2.6 billion, compared with net income available to common shareholders of $92.3 million, or $1.18 per diluted common share, on net revenues of $2.3 billion in 2015.
Three Months Ended Year Ended
-------------------------------------- ---------------------
Financial
Highlights
(Unaudited) U.S. GAAP NON-GAAP U.S. GAAP
-------------------------- ---------------------
(in 000s,
except per 12/31/2016
share data) 12/31/16 12/31/15 9/30/16 (1) 12/31/16 12/31/15
-------- -------- -------- ----------- ---------- ----------
Net revenues $661,391 $581,286 $641,986 $ 661,392 $2,575,496 $2,331,594
Compensation
ratio 63.6% 68.6% 67.6% 62.3% 67.0% 67.3%
Non-
compensation
ratio 28.1% 29.5% 28.0% 24.2% 27.5% 26.6%
Pre-tax
operating
margin 8.3% 1.9% 4.4% 13.5% 5.5% 6.1%
Net income $ 26,880 $ 11,172 $ 17,814 $ 56,528 $ 81,520 $ 92,336
Preferred
dividend 2,343 - 1,563 2,343 3,906 -
-------- -------- -------- ----------- ---------- ----------
Net income
available to
common
shareholders $ 24,537 $ 11,172 $ 16,251 $ 54,185 $ 77,614 $ 92,336
Earnings per
diluted common
share $ 0.34 $ 0.14 $ 0.23 $ 0.71 $ 1.05 $ 1.18
Earnings per
diluted common
share
available to
common
shareholders $ 0.31 $ 0.14 $ 0.21 $ 0.68 $ 1.00 $ 1.18
(1) Reconciliations of the Company's GAAP results to these non-GAAP measures is discussed below and under "Non-GAAP Financial Measures."
Chairman's Comments
"I'm very happy to announce we posted our 21st consecutive year of record net revenues despite what was a challenging operating environment for the vast majority of the year. The business we've built over the past 20 years continues to benefit from the diversity of our revenue streams and is well positioned if the post-election market optimism continues. Our results underscore this diversity as the investments we made in 2015 helped drive substantial growth in net interest income, asset management & service fees, fixed income brokerage and trading, and advisory revenue. These more than offset weaker institutional commissions and underwriting revenue," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.
Mr. Kruszewski continued, "The improved market environment is a solid backdrop for continued organic revenue growth in 2017 and we will continue look to deploy our excess capital in ways that generate the best returns. However, as we continue to grow our top line, we will put increased emphasis on improved operating leverage through expense efficiencies. In 2016, we illustrated our commitment to meeting our expense expectations as our comp. and non-comp. expenses consistently fell within our guidance. We have instituted a firm-wide cost reduction initiative that I expect will continue to generate positive results that will ultimately result in improved operating margins. Lastly, I'd note that the vast majority of our non-GAAP deal related charges are behind us and as we have consistently stated over the past year, we expect the difference between GAAP and non-GAAP results in 2017 will be materially less than our 2016 results."
Fourth Quarter 2016
Brokerage Revenues
Brokerage revenues, defined as commissions and principal transactions, were $289.7 million, a 1.7% decrease compared with the fourth quarter of 2015 and a 0.5% increase compared with the third quarter of 2016. Brokerage revenues generated by the Sterne Businesses that were sold on July 1, 2016 were $16.5 million during the fourth quarter of 2015.
Three Months Ended
---------------------------------------------
(in 000s) 12/31/16 12/31/15 % Change 9/30/16 % Change
-------- -------- -------- -------- --------
Global Wealth Management
brokerage revenues $160,017 $166,339 (3.8) $165,475 (3.3)
Institutional brokerage:
Equity 64,007 54,837 16.7 51,004 25.5
Fixed income 65,712 73,574 (10.7) 71,794 (8.5)
-------- -------- -------- -------- --------
Total institutional brokerage 129,719 128,411 1.0 122,798 5.6
-------- -------- -------- -------- --------
Total brokerage revenues (1) $289,736 $294,750 (1.7) $288,273 0.5
-------- -------- -------- -------- --------
(1) Excludes brokerage revenues included in the Other segment.
- Global wealth management brokerage revenues were $160.0 million, a 3.8% decrease compared with the fourth quarter of 2015 and a 3.3% decrease compared with the third quarter of 2016. Excluding the revenues from the Sterne businesses, global wealth brokerage revenues for the fourth quarter of 2016 increased 5.6% compared to the fourth quarter of 2015.
- Institutional equity brokerage revenues were $64.0 million, a 16.7% increase compared with the fourth quarter of 2015 and a 25.5% increase compared with the third quarter of 2016.
- Institutional fixed income brokerage revenues were $65.7 million, a 10.7% decrease compared with the fourth quarter of 2015 and an 8.5% decrease compared with the third quarter of 2016.
Investment Banking Revenues
Investment banking revenues were $134.5 million, a 30.8% increase compared with the fourth quarter of 2015 and a 7.1% decrease compared with the third quarter of 2016.
Three Months Ended
-----------------------------------------------
(in 000s) 12/31/16 12/31/15 % Change 9/30/16 % Change
--------- --------- -------- --------- --------
Investment banking:
Capital raising:
Equity $ 48,393 $ 40,536 19.4 $ 32,546 48.7
Fixed income 29,811 29,632 0.6 25,931 15.0
--------- --------- -------- --------- --------
Capital raising 78,204 70,168 11.5 58,477 33.7
Advisory fees: 56,248 32,643 72.3 86,322 (34.8)
--------- --------- -------- --------- --------
Total investment banking $ 134,452 $ 102,811 30.8 $ 144,799 (7.1)
--------- --------- -------- --------- --------
- Equity capital raising revenues were $48.4 million, a 19.4% increase compared with the fourth quarter of 2015 and a 48.7% increase compared with the third quarter of 2016.
- Fixed income capital raising revenues were $29.8 million, a 0.6% increase compared with the fourth quarter of 2015 and a 15.0% increase compared with the third quarter of 2016.
- Advisory fee revenues were $56.2 million, a 72.3% increase compared with the fourth quarter of 2015 and a 34.8% decrease compared with the third quarter of 2016.
Asset Management and Service Fee Revenues
Asset management and service fee revenues were $149.5 million, a 15.6% increase compared with the fourth quarter of 2015 and a 3.7% increase compared with the third quarter of 2016. The increase from the comparative period in 2015 is primarily attributable to the growth in the value of fee-based accounts and an increase in the Federal Funds rate.
Net Interest Income
Net interest income was $74.7 million, a 106.7% increase compared with the fourth quarter of 2015 and a 34.6% increase compared with the third quarter of 2016.
- Interest income was $90.8 million, an 86.8% increase compared with the fourth quarter of 2015 and a 21.3% increase compared with the third quarter of 2016. Interest income was impacted by the continued growth of interest-earning assets.
- Interest expense was $16.1 million, a 29.1% increase compared with the fourth quarter of 2015 and a 16.8% decrease compared with the third quarter of 2016. Interest expense was impacted by the Company's July 2016 issuance of $200.0 million senior notes, the write-off of debt issuance costs as a result of the redemption of the Company's $150.0 million 5.375% senior notes in July 2016, and the December 2015 issuance of $300.0 million of 3.50% senior notes.
Compensation and Benefits Expenses
For the quarter ended December 31, 2016, compensation and benefits expenses were $420.6 million, which included $8.3 million of merger-related expenses. This compares with $399.0 million in the fourth quarter of 2015 and $434.2 million in the third quarter of 2016. Excluding merger-related expenses, compensation and benefits as a percentage of net revenues were 62.3% in the fourth quarter of 2016.
GAAP compensation and benefits $ 420,644
As a percentage of net revenues 63.6%
Non-GAAP adjustments:(1)
Merger-related 8,270
---------
Non-GAAP compensation and benefits $ 412,374
---------
As a percentage of non-GAAP net revenues (2) 62.3%
(1) See further discussion of non-GAAP adjustments under "Non-GAAP Financial Measures."
(2) There were no non-GAAP adjustments to net revenues during the three months ended December 31, 2016.
Non-Compensation Operating Expenses
For the quarter ended December 31, 2016, non-compensation operating expenses were $185.9 million, which included litigation and merger-related expenses of $26.0 million. This compares with $171.2 million in the fourth quarter of 2015 and $179.8 million in the third quarter of 2016. Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2016 were 24.2%.
GAAP non-compensation expenses $ 185,853
As a percentage of net revenues 28.1%
Non-GAAP adjustments:(1)
Litigation and merger-related 25,956
---------
Non-GAAP non-compensation expenses $ 159,897
---------
As a percentage of non-GAAP net revenues (2) 24.2%
(1) See further discussion of non-GAAP adjustments under "Non-GAAP Financial Measures."
(2) There were no non-GAAP adjustments to net revenues during the three months ended December 31, 2016.
Provision for Income Taxes
The GAAP effective income tax rate for the quarter ended December 31, 2016 was 51.0% compared with 36.3% for the third quarter of 2016. The adjusted non-GAAP effective income tax rate for the quarter ended December 31, 2016 was 36.6%.
GAAP provision for income taxes $ 28,014
GAAP effective tax rate 51.0%
Non-GAAP adjustments:(1)
Litigation and merger-related (13,458)
Non-deductible settlement 8,880
---------
(4,578)
---------
Non-GAAP provision for income taxes $ 32,592
---------
Non-GAAP effective tax rate 36.6%
(1) See further discussion of non-GAAP adjustments under "Non-GAAP Financial Measures."
Certain settlements or judgments associated with the Company's disclosed matters are not deductible for tax purposes to the extent they constitute penalties. The previously disclosed settlement was not deductible and negatively impacted the Company's provision for income taxes during the fourth quarter of 2016.
Full Year 2016
Brokerage Revenues
Brokerage revenues for the year ended December 31, 2016 were $1.2 billion, a 5.8% increase compared with 2015. Excluding the revenues from the Sterne businesses, brokerage revenues for the year ended December 31, 2016 increased 7.6% compared to 2015.
Year Ended
-------------------------------
(in 000s) 12/31/16 12/31/15 % Change
---------- ---------- ---------
Global Wealth Management brokerage revenues $ 670,635 $ 652,681 2.8
Institutional brokerage:
Equity 232,292 235,155 (1.2)
Fixed income 302,491 251,019 20.5
---------- ---------- ---------
Total institutional brokerage 534,783 486,174 10.0
---------- ---------- ---------
Total brokerage revenues $1,205,418 $1,138,855 5.8
---------- ---------- ---------
(1) Excludes brokerage revenues included in the Other segment.
- Global wealth management brokerage revenues were $670.6 million, a 2.8% increase compared with 2015. Excluding the revenues from the Sterne businesses, global wealth brokerage revenues for the year ended December 31, 2016 increased 5.3% compared to 2015.
- Institutional equity brokerage revenues were $232.3 million, a 1.2% decrease compared with 2015.
- Institutional fixed income brokerage revenues were $302.5 million, a 20.5% increase compared with 2015.
Investment Banking Revenues
Investment banking revenues were $513.0 million, a 2.0% increase compared with 2015.
Year Ended
----------------------------
(in 000s) 12/31/16 12/31/15 % Change
--------- --------- --------
Investment banking:
Capital raising:
Equity $ 144,125 $ 177,486 (18.8)
Fixed income 112,272 130,085 (13.7)
--------- --------- --------
Capital raising 256,397 307,571 (16.6)
Advisory fees: 256,637 195,481 31.3
--------- --------- --------
Total investment banking $ 513,034 $ 503,052 2.0
--------- --------- --------
- Equity capital raising revenues were $144.1 million, an 18.8% decrease compared with 2015.
- Fixed income capital raising revenues were $112.3 million, a 13.7% decrease compared with 2015.
- Advisory fee revenues were $256.6 million, a 31.3% increase compared with 2015.
Asset Management and Service Fee Revenues
Asset management and service fee revenues were $582.8 million, an 18.0% increase compared with 2015. The increase from the comparative period in 2015 is primarily attributable to the growth in the value of fee-based accounts and an increase in the Federal Funds rate.
Net Interest Income
Net interest income was $227.5 million, a 70.1% increase compared with 2015.
- Interest income was $294.3 million, a 64.3% increase compared with 2015. Interest income was impacted by the continued growth of interest-earning assets.
- Interest expense was $66.9 million, a 47.3% increase compared with 2015. Interest expense was impacted by the Company's July 2016 issuance of $200.0 million senior notes, the write-off of debt issuance costs as a result of the redemption of the Company's $150.0 million 5.375% senior notes in July 2016, and the December 2015 issuance of $300.0 million of 3.50% senior notes.
Compensation and Benefits Expenses
For the year ended December 31, 2016, compensation and benefits expenses were $1.7 billion compared to $1.6 billion in 2015. Included in compensation and benefits for the year ended December 31, 2016 were non-GAAP adjustments of $97.0 million, which included merger-related expenses of $61.0 million; and stock-based compensation expense of $36.0 million associated with the Barclays acquisition. In addition to the non-GAAP adjustments, compensation and benefits expenses for the year ended December 31, 2016 included duplicative expenses of $8.5 million associated with the Company's recent acquisitions. These costs are no longer reported as non-GAAP adjustments.
Non-Compensation Operating Expenses
For the year ended December 31, 2016, non-compensation operating expenses were $706.9 million compared with $621.2 million in 2015. Included in non-compensation operating expenses for the year ended December 31, 2016 were non-GAAP adjustments of $63.0 million, which consisted of merger-related expenses of $31.2 million; and litigation-related expenses of $31.8 million associated with previously disclosed legal matters. In addition to the non-GAAP adjustments, non-compensation operating expenses for the year ended December 31, 2016 included duplicative expenses of $19.5 million. These costs are no longer reported as non-GAAP adjustments.
Provision for Income Taxes
The effective income tax rate for the year ended December 31, 2016 was 42.8% compared with 34.8% in 2015.
Certain settlements or judgments associated with the Company's disclosed matters may not be deductible for tax purposes to the extent they constitute penalties. The previously disclosed settlement are not deductible and negatively impacted the Company's provision for income taxes during the year ended December 31, 2016.
Assets and Capital
Assets
- Assets increased 43.5% to $19.1 billion as of December 31, 2016 from $13.3 billion as of December 31, 2015. The increase is attributable to growth of Stifel Bank, which as of December 31, 2016 has grown its assets to $12.8 billion from $7.2 billion as of December 31, 2015. Stifel Bank has increased its investment portfolio by 78.5% and its loan portfolio by 77.9% since December 31, 2015.
- Non-performing assets as a percentage of total assets as of December 31, 2016 was 0.21%.
Capital
- Shareholders' equity as of December 31, 2016 increased 9.9% to $2.7 billion from $2.5 billion as of December 31, 2015.
- During the year ended December 31, 2016, the Company repurchased 3.4 million shares of the Company's common stock at an average price of $33.22 per share.
- At December 31, 2016, book value per common share was $41.09 based on 66.6 million common shares outstanding. This represents an 10.5% increase from December 31, 2015.
- At December 31, 2016, the Company's Tier 1 leverage capital and Tier 1 risk-based capital ratios were 10.2% and 20.3%, respectively, compared to 16.6% and 26.3%, respectively, at December 31, 2015.
Conference Call Information
Stifel Financial Corp. will host its fourth quarter 2016 financial results conference call on Tuesday, January 31, 2017, at 8:30 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 #58716957. A live audio webcast of the call, as well as a presentation highlighting the Company's results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.
Company Information
Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel's broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. The Company's broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company's web site at www.stifel.com.
Forward-Looking Statements
This earnings release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies' operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
Summary Results of Operations (Unaudited)
Three Months Ended
-----------------------------------------------
(in 000s, except per share
amounts) 12/31/16 12/31/15 % Change 9/30/16 % Change
--------- --------- -------- -----------------
Revenues:
Commissions $ 178,683 $ 187,287 (4.6) $ 171,272 4.3
Principal transactions 111,052 107,464 3.3 117,002 (5.1)
--------- --------- -------- -----------------
Brokerage revenues 289,735 294,751 (1.7) 288,274 0.5
Capital raising 78,204 70,168 11.5 58,477 33.7
Advisory fees 56,248 32,643 72.3 86,322 (34.8)
--------- --------- -------- -----------------
Investment banking 134,452 102,811 30.8 144,799 (7.1)
Asset management and
service fees 149,484 129,319 15.6 144,206 3.7
Other income 12,994 18,251 (28.8) 9,209 41.1
--------- --------- -------- -----------------
Operating revenues 586,665 545,132 7.6 586,488 0.0
Interest revenue 90,844 48,639 86.8 74,881 21.3
--------- --------- -------- -----------------
Total revenues 677,509 593,771 14.1 661,369 2.4
Interest expense 16,118 12,485 29.1 19,383 (16.8)
--------- --------- -------- -----------------
Net revenues 661,391 581,286 13.8 641,986 3.0
--------- --------- -------- -----------------
Non-interest expenses:
Compensation and benefits 420,644 398,966 5.4 434,236 (3.1)
Occupancy and equipment
rental 52,869 61,667 (14.3) 62,453 (15.3)
Communication and office
supplies 34,376 34,652 (0.8) 31,182 10.2
Commissions and floor
brokerage 9,662 10,895 (11.3) 10,777 (10.3)
Other operating expenses 88,946 64,024 38.9 75,356 18.0
--------- --------- -------- -----------------
Total non-interest
expenses 606,497 570,204 6.4 614,004 (1.2)
--------- --------- -------- -----------------
Income before income taxes 54,894 11,082 395.3 27,982 96.2
Provision for income
taxes 28,014 (90) n/m 10,168 175.5
--------- --------- -------- -----------------
Net income 26,880 11,172 140.6 17,814 50.9
Preferred dividends 2,343 - n/m 1,563 49.9
--------- --------- -------- -----------------
Net income available to
common shareholders $ 24,537 $ 11,172 119.6 $ 16,251 51.0
========= ========= ======== =================
Earnings per common share:
Basic $ 0.37 $ 0.16 131.3 $ 0.24 54.2
Diluted $ 0.31 $ 0.14 121.4 $ 0.21 47.6
Weighted average number of
common shares outstanding:
Basic 66,636 68,150 (2.2) 66,482 0.2
Diluted 79,539 79,355 0.2 77,544 2.6
Year Ended
----------------------------------
(in 000s, except per share
amounts) 12/31/16 12/31/15 % Change
----------- ----------- ----------
Revenues:
Commissions $ 729,989 $ 749,536 (2.6)
Principal transactions 475,428 389,319 22.1
----------- ----------- ----------
Brokerage revenues 1,205,417 1,138,855 5.8
Capital raising 256,397 307,571 (16.6)
Advisory fees 256,637 195,481 31.3
----------- ----------- ----------
Investment banking 513,034 503,052 2.0
Asset management and
service fees 582,789 493,761 18.0
Other income 46,798 62,224 (24.8)
----------- ----------- ----------
Operating revenues 2,348,038 2,197,892 6.8
Interest revenue 294,332 179,101 64.3
----------- ----------- ----------
Total revenues 2,642,370 2,376,993 11.2
Interest expense 66,874 45,399 47.3
----------- ----------- ----------
Net revenues 2,575,496 2,331,594 10.5
----------- ----------- ----------
Non-interest expenses:
Compensation and benefits 1,726,016 1,568,862 10.0
Occupancy and equipment
rental 231,324 207,465 11.5
Communication and office
supplies 139,644 130,678 6.9
Commissions and floor
brokerage 44,315 42,518 4.2
Other operating expenses 291,615 240,504 21.3
----------- ----------- ----------
Total non-interest
expenses 2,432,914 2,190,027 11.1
----------- ----------- ----------
Income before income taxes 142,582 141,567 0.7
Provision for income
taxes 61,062 49,231 24.0
----------- ----------- ----------
Net income 81,520 92,336 (11.7)
Preferred dividends 3,906 - n/m
----------- ----------- ----------
Net income available to
common shareholders $ 77,614 $ 92,336 (15.9)
=========== =========== ==========
Earnings per common share:
Basic $ 1.16 $ 1.35 (14.1)
Diluted $ 1.00 $ 1.18 (15.3)
Weighted average number of
common shares outstanding:
Basic 66,871 68,543 (2.4)
Diluted 77,563 78,554 (1.3)
Summary Business Segment Results (Unaudited)
Three Months Ended
-----------------------------------------------
(in 000s) 12/31/16 12/31/15 % Change 9/30/16 % Change
--------- --------- -------- --------- --------
Net revenues:
Global Wealth Management $ 407,535 $ 347,216 17.4 $ 390,032 4.5
Institutional Group 253,168 246,325 2.8 258,800 (2.2)
Other 688 (12,255) (105.6) (6,846) (110.0)
--------- --------- -------- --------- --------
Total net revenues $ 661,391 $ 581,286 13.8 $ 641,986 3.0
Operating expenses:
Global Wealth Management $ 284,683 $ 255,139 11.6 $ 280,953 1.3
Institutional Group 205,653 205,408 0.1 213,877 (3.8)
Other 116,161 109,657 5.9 119,174 (2.5)
--------- --------- -------- --------- --------
Total operating
expenses $ 606,497 $ 570,204 6.4 $ 614,004 (1.2)
Operating contribution:
Global Wealth Management $ 122,852 $ 92,077 33.4 $ 109,079 12.6
Institutional Group 47,515 40,917 16.1 44,923 5.8
Other (115,473) (121,912) (5.3) (126,020) (8.4)
--------- --------- -------- --------- --------
Income before income
taxes $ 54,894 $ 11,082 395.3 $ 27,982 96.2
--------- --------- -------- --------- --------
As a percentage of net
revenues:
Compensation and benefits
Global Wealth Management 52.9 57.1 55.2
Institutional Group 57.7 58.1 61.1
Non-compensation operating
expenses
Global Wealth Management 17.0 16.4 16.9
Institutional Group 23.5 25.3 21.5
Income before income taxes
Global Wealth Management 30.1 26.5 27.9
Institutional Group 18.8 16.6 17.4
--------- --------- ---------
Consolidated pre-tax
margin (1) 8.3 1.9 4.4
--------- --------- ---------
Year Ended
------------------------------------
(in 000s) 12/31/16 12/31/15 % Change
----------- ----------- ----------
Net revenues:
Global Wealth Management$ 1,563,410 $ 1,377,313 13.5
Institutional Group 1,014,164 975,594 4.0
Other (2,078) (21,313) (90.3)
----------- ----------- ----------
Total net revenues $ 2,575,496 $ 2,331,594 10.5
Operating expenses:
Global Wealth Management$ 1,133,092 $ 995,187 13.9
Institutional Group 850,021 834,552 1.9
Other 449,801 360,288 24.8
----------- ----------- ----------
Total operating
expenses $ 2,432,914 $ 2,190,027 11.1
Operating contribution:
Global Wealth Management$ 430,318 $ 382,126 12.6
Institutional Group 164,143 141,042 16.4
Other (451,879) (381,601) 18.4
----------- ----------- ----------
Income before income
taxes $ 142,582 $ 141,567 0.7
----------- ----------- ----------
As a percentage of net
revenues:
Compensation and benefits
Global Wealth Management 55.7 56.7
Institutional Group 60.0 61.1
Non-compensation operating
expenses
Global Wealth Management 16.8 15.6
Institutional Group 23.8 24.4
Income before income taxes
Global Wealth Management 27.5 27.7
Institutional Group 16.2 14.5
----------- -----------
Consolidated pre-tax
margin (1) 5.5 6.1
----------- -----------
(1) Non-GAAP pre-tax margin for the three months ended December 31, 2016 of 13.5% is calculated by adding litgaton and merger-related non-GAAP adjustments of $34.2 million to our GAAP income before income taxes of $54.9 million and dividing it by non-GAAP net revenues for the quarter. Reconciliations of the Company's GAAP results to certain non-GAAP measures is discussed above and under "Non-GAAP Financial Measures."
Statistical Information
(in 000s, except
per share % %
amounts) 12/31/16 12/31/15 Change 9/30/16 Change
------------ -------------- ------ ------------ ------
Statistical
Information:
Book value per
share $ 41.09 $ 37.19 10.5 $ 40.65 1.1
Financial
advisors (3) 2,282 2,300(2) (0.8) 2,280 0.1
Locations 396 402 (1.5) 396 0.0
Total client
assets $236,942,000 $ 219,883,000(2) 7.8 $234,490,000 1.0
Fee-based client
assets $ 70,195,000 $ 62,679,000 12.0 $ 67,927,000 3.3
Client money
market and
insured product $ 19,253,000 $ 17,981,000 7.1 $ 18,478,000 4.2
Secured client
lending (4) $ 2,959,628 $ 2,781,076 6.4 $ 2,770,783 6.8
(2) On July 1, 2016, we sold the independent contractor business acquired with the Sterne Agee transaction in June 2015. As of December 31, 2015, there were 591 independent contractors included in the disposed business unit and $14.2 billion of total client assets. These numbers have been excluded from the above table.
(3) Includes 123, 128, and 125 independent contractors at December 31, 2016, December 31, 2015, and September 30, 2016, respectively.
(4) Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at Stifel Bank.
Global Wealth Management Summary Results of Operations (Unaudited)
Three Months Ended
------------------------------------------------
(in 000s) 12/31/16 12/31/15 % Change 9/30/16 % Change
--------- --------- -------- --------- --------
Revenues:
Commissions $ 114,824 $ 128,395 (10.6) $ 117,596 (2.4)
Principal transactions 45,193 37,944 19.1 47,879 (5.6)
--------- --------- -------- --------- --------
Brokerage revenues 160,017 166,339 (3.8) 165,475 (3.3)
Asset management and
service fees 149,998 130,382 15.0 143,152 4.8
Net interest 78,748 42,187 86.7 63,981 23.1
Investment banking 12,064 8,313 45.1 12,212 (1.2)
Other income 6,708 (5) n/m 5,212 28.7
--------- --------- -------- --------- --------
Net revenues 407,535 347,216 17.4 390,032 4.5
--------- --------- -------- --------- --------
Non-interest expenses:
Compensation and benefits 215,458 198,137 8.7 215,151 0.1
Non-compensation
operating expenses 69,225 57,002 21.4 65,802 5.2
--------- --------- -------- --------- --------
Total non-interest
expenses 284,683 255,139 11.6 280,953 1.3
--------- --------- -------- --------- --------
Income before income taxes $ 122,852 $ 92,077 33.4 $ 109,079 12.6
--------- --------- -------- --------- --------
As a percentage of net
revenues:
Compensation and benefits 52.9 57.1 55.2
Non-compensation
operating expenses 17.0 16.4 16.9
Income before income
taxes 30.1 26.5 27.9
Year Ended
----------------------------------
(in 000s) 12/31/16 12/31/15 % Change
----------- ----------- ----------
Revenues:
Commissions $ 491,214 $ 504,206 (2.6)
Principal transactions 179,421 148,475 20.8
----------- ----------- ----------
Brokerage revenues 670,635 652,681 2.8
Asset management and
service fees 581,862 492,814 18.1
Net interest 248,784 154,389 61.1
Investment banking 42,187 43,687 (3.4)
Other income 19,942 33,742 (40.9)
----------- ----------- ----------
Net revenues 1,563,410 1,377,313 13.5
----------- ----------- ----------
Non-interest expenses:
Compensation and benefits 870,577 781,573 11.4
Non-compensation
operating expenses 262,515 213,614 22.9
----------- ----------- ----------
Total non-interest
expenses 1,133,092 995,187 13.9
----------- ----------- ----------
Income before income taxes $ 430,318 $ 382,126 12.6
----------- ----------- ----------
As a percentage of net
revenues:
Compensation and benefits 55.7 56.7
Non-compensation
operating expenses 16.8 15.6
Income before income
taxes 27.5 27.7
Stifel Bank & Trust - a component of Global Wealth Management (Unaudited)
Key Statistical Information
----------------------------------------------------------------------------
As of and For The Three Months Ended
-----------------------------------------------------
(in 000s, except
percentages) 12/31/16 12/31/15 % Change 9/30/16 % Change
----------- ---------- -------- ----------- --------
Assets $12,798,240 $7,157,583 78.8 $11,018,615 16.2
Investment securities 6,209,022 3,479,336 78.5 5,376,550 15.5
Bank loans, net 5,591,190 3,143,515 77.9 4,956,676 12.8
Loans held for sale 228,588 189,921 20.4 217,316 5.2
Deposits 11,527,483 6,638,359 73.6 9,885,441 16.6
Net interest margin 2.24% 2.45% 2.40%
Allowance as a
percentage of loans 0.81% 0.95% 0.79%
Non-performing assets
as a percentage of
total assets 0.21% 0.01% 0.25%
Institutional Group Summary Results of Operations (Unaudited)
Three Months Ended
-----------------------------------------------
(in 000s) 12/31/16 12/31/15 % Change 9/30/16 % Change
--------- --------- -------- --------- --------
Revenues:
Commissions $ 63,859 $ 58,891 8.4 $ 53,676 19.0
Principal transactions 65,860 69,520 (5.3) 69,122 (4.7)
--------- --------- -------- -------- --------
Brokerage revenues 129,719 128,411 1.0 122,798 5.6
Capital raising 66,949 61,766 8.4 46,265 44.7
Advisory fees 55,439 30,810 79.9 86,323 (35.8)
--------- --------- -------- -------- --------
Investment banking 122,388 92,576 32.2 132,588 (7.7)
Other(1) 1,061 25,338 (95.8) 3,414 (68.9)
--------- --------- -------- -------- --------
Net revenues 253,168 246,325 2.8 258,800 (2.2)
--------- --------- -------- -------- --------
Non-interest expenses:
Compensation and benefits 146,056 143,162 2.0 158,126 (7.6)
Non-compensation operating
expenses 59,597 62,246 (4.3) 55,751 6.9
--------- --------- -------- --------- --------
Total non-interest
expenses 205,653 205,408 0.1 213,877 (3.8)
--------- --------- -------- --------- --------
Income before income taxes $ 47,515 $ 40,917 16.1 $ 44,923 5.8
--------- --------- -------- --------- --------
As a percentage of net
revenues:
Compensation and benefits 57.7 58.1 61.1
Non-compensation operating
expenses 23.5 25.3 21.5
Income before income taxes 18.8 16.6 17.4
Year Ended
----------------------------------
(in 000s) 12/31/16 12/31/15 % Change
----------- ----------- ----------
Revenues:
Commissions $ 238,775 $ 241,528 (1.1)
Principal transactions 296,008 244,646 21.0
----------- ----------- ----------
Brokerage revenues 534,783 486,174 10.0
Capital raising 214,209 264,858 (19.1)
Advisory fees 256,638 192,584 33.3
---------- ---------- ----------
Investment banking 470,847 457,442 2.9
Other(1) 8,534 31,978 (73.3)
---------- ----------- ----------
Net revenues 1,014,164 975,594 4.0
---------- ----------- ----------
Non-interest expenses:
Compensation and benefits 608,171 596,561 1.9
Non-compensation operating
expenses 241,850 237,991 1.6
----------- ----------- ----------
Total non-interest
expenses 850,021 834,552 1.9
----------- ----------- ----------
Income before income taxes $ 164,143 $ 141,042 16.4
----------- ----------- ----------
As a percentage of net
revenues:
Compensation and benefits 60.0 61.1
Non-compensation operating
expenses 23.8 24.4
Income before income taxes 16.2 14.5
(1) Includes net interest, asset management and service fees, and other income.
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, 2016. 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, 2016 to net income and earnings per diluted common share on a non-GAAP basis for the same period.
(in 000s)
GAAP net income $ 26,880
Preferred dividend 2,343
---------
Net income available to common shareholders 24,537
Non-GAAP adjustments:
Merger-related (1) 14,226
Litigation-related (2) 20,000
Provision for income taxes (3) (4,578)
---------
Total non-GAAP adjustments 29,648
---------
Non-GAAP net income available to common shareholders $ 54,185
---------
Weighted average diluted shares outstanding 79,539
GAAP earnings per diluted common share $ 0.34
Non-GAAP adjustments 0.37
---------
Non-GAAP earnings per diluted common share $ 0.71
---------
GAAP earnings per diluted common share available to common
shareholders $ 0.31
Non-GAAP adjustments 0.37
---------
Non-GAAP earnings per diluted common share available to common
shareholders $ 0.68
---------
(1) Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, lease abandonment, and professional fees. 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.
(2) Primarily related to costs associated with the Company's previously disclosed legal matters.
(3) Includes an $8.9 million impact as a result of the non-deductibility of the previously disclosed settlement payment.
Investor RelationsJoel Jeffrey(212) [email protected]
Source: Stifel Financial Corp.