Stifel Reports Second Quarter 2017 Financial Results
ST. LOUIS, MO -- (Marketwired) -- 07/31/17 --
- Record net revenues of $725.6 million, increased 11.3% compared with the year-ago quarter and 7.4% sequentially.
- Record net revenues and pre-tax operating income in Global Wealth Management.
- Record net revenues in Institutional Group.
- Net income available to common shareholders of $50.5 million, or $0.63 per diluted common share.
- Non-GAAP net income available to common shareholders of $71.6 million, or $0.90 per diluted common share.
- Record client assets of $258.1 billion, increased 14.2% compared with the year-ago quarter and 2.2% sequentially.
Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $50.5 million, or $0.63 per diluted common share on record net revenues of $725.6 million for the three months ended June 30, 2017, compared with net income available to common shareholders of $9.8 million, or $0.13 per diluted common share, on net revenues of $652.1 million for the second quarter of 2016.
For the three months ended June 30, 2017, the Company reported non-GAAP net income available to common shareholders of $71.6 million, or $0.90 per diluted common share.
For the six months ended June 30, 2017, the Company reported net income available to common shareholders of $113.6 million, or $1.41 per diluted common share on record net revenues of $1.4 billion, compared with net income available to common shareholders of $36.8 million, or $0.48 per diluted share, on net revenues of $1.3 billion for the comparable period in 2016.
For the six months ended June 30, 2017, the Company reported non-GAAP net income available to common shareholders of $131.2 million, or $1.63 per diluted common share.
Chairman's Comments
"We had a very strong quarter as we generated our third consecutive quarter of record net revenue and our non-GAAP pre-tax margins reached 16.3%, the highest level since the fourth quarter of 2010. Our revenues benefited from another record quarter from Global Wealth Management and record net revenue in our Institutional Group driven by record investment banking revenues. Given the increased contributions from more stable revenue streams such as our bank and fee-based accounts, Stifel's top and bottom lines are much better positioned to withstand the cyclicality in certain of our more transactional businesses then we were just a few years ago. Additionally, this quarter illustrated the positive impact that our investments in our investment banking franchise can have our top and bottom lines, despite the challenging environment for institutional brokerage," stated Ronald J. Kruszewski, Chairman & CEO of Stifel.
Financial Highlights
(Unaudited) Three Months Ended
-----------------------------------------------
Non-
(in 000s, except per share GAAP(1)
data) 6/30/17 6/30/16 3/31/17 6/30/17
----------- ----------- ----------- -----------
U.S. GAAP
Net revenues $ 725,647 $ 652,145 $ 675,531 $ 725,647
Compensation ratio 62.5% 70.5% 64.6% 61.4%
Non-compensation ratio 26.0% 27.1% 23.7% 22.3%
Pre-tax operating margin 11.5% 2.4% 11.7% 16.3%
Net income $ 52,811 $ 9,771 $ 65,512 $ 73,991
Preferred dividend 2,344 - 2,344 2,344
----------- ----------- ----------- -----------
Net income available to
common shareholders $ 50,467 $ 9,771 $ 63,168 $ 71,647
Earnings per diluted
common share $ 0.66 $ 0.13 $ 0.81 $ 0.92
Earnings per diluted
common share available to
common shareholders $ 0.63 $ 0.13 $ 0.78 $ 0.90
Financial Highlights
(Unaudited) Six Months Ended
-----------------------------
Non- Non-
(in 000s, except per share GAAP(1) GAAP(1)
data) 6/30/17 6/30/16
-------------- --------------
U.S. GAAP
Net revenues $ 1,403,162 $ 1,272,119
Compensation ratio 61.9% 63.9%
Non-compensation ratio 22.6% 26.1%
Pre-tax operating margin 15.5% 10.0%
Net income $ 135,840 $ 78,364
Preferred dividend 4,688 -
-------------- --------------
Net income available to
common shareholders $ 131,152 $ 78,364
Earnings per diluted
common share $ 1.69 $ 1.03
Earnings per diluted
common share available to
common shareholders $ 1.63 $ 1.03
Brokerage Revenues
Brokerage revenues, defined as commissions and principal transactions, were $268.0 million, a 13.1% decrease compared with the second quarter of 2016 and an 8.3% decrease compared with the first quarter of 2017. Brokerage revenues generated by the Sterne businesses, which were sold in 2016, were $14.1 million during the second quarter of 2016.
Three Months Ended
------------------------------------------------
% %
(in 000s) 6/30/17 6/30/16 Change 3/31/17 Change
-------- -------- -------- -------- --------
Global Wealth Management
brokerage revenues $168,085 $172,179 (2.4) $171,494 (2.0)
Institutional brokerage:
Equity 50,869 55,008 (7.5) 53,820 (5.5)
Fixed income 49,013 81,344 (39.7) 66,817 (26.6)
-------- -------- -------- -------- --------
Total institutional
brokerage 99,882 136,352 (26.7) 120,637 (17.2)
-------- -------- -------- -------- --------
Total brokerage revenues $267,967 $308,531 (2) (13.1) $292,131 (8.3)
-------- -------- -------- -------- --------
- Global wealth management brokerage revenues were $168.1 million, a 2.4% decrease compared with the second quarter of 2016 and a 2.0% decrease compared with the first quarter of 2017. Excluding the revenues from the Sterne businesses, global wealth brokerage revenues for the second quarter of 2017 increased 5.5% compared to the second quarter of 2016.
- Institutional equity brokerage revenues were $50.9 million, a 7.5% decrease compared with the second quarter of 2016 and a 5.5% decrease compared with the first quarter of 2017.
- Institutional fixed income brokerage revenues were $49.0 million, a 39.7% decrease compared with the second quarter of 2016 and a 26.6% decrease compared with the first quarter of 2017.
Investment Banking Revenues
Investment banking revenues were $185.3 million, a 39.2% increase compared with the second quarter of 2016 and a 46.0% increase compared with the first quarter of 2017.
Three Months Ended
-----------------------------------------------
(in 000s) 6/30/17 6/30/16 % Change 3/31/17 % Change
--------- --------- -------- --------- --------
Investment banking:
Capital raising:
Equity $ 56,970 $ 37,638 51.4 $ 45,649 24.8
Fixed income 45,830 28,774 59.3 28,267 62.1
--------- --------- -------- --------- --------
Capital raising 102,800 66,412 54.8 73,916 39.1
Advisory fees: 82,461 66,713 23.6 52,936 55.8
--------- --------- -------- --------- --------
Total investment banking $ 185,261 $ 133,125 39.2 $ 126,852 46.0
--------- --------- -------- --------- --------
- Equity capital raising revenues were $57.0 million, a 51.4% increase compared with the second quarter of 2016 and a 24.8% increase compared with the first quarter of 2017.
- Fixed income capital raising revenues were $45.8 million, a 59.3% increase compared with the second quarter of 2016 and a 62.1% increase compared with the first quarter of 2017.
- Advisory fee revenues were $82.5 million, a 23.6% increase compared with the second quarter of 2016 and a 55.8% increase compared with the first quarter of 2017.
Asset Management and Service Fee Revenues
Asset management and service fee revenues were a record $172.9 million, a 19.6% increase compared with the second quarter of 2016 and a 6.3% increase compared with the first quarter of 2017. The increase from the comparative period in 2016 is primarily attributable to the growth in the value of fee-based accounts and an increase in the Federal Funds rate, which increased fees earned on cash balances.
Net Interest Income
Record net interest income of $92.3 million, a 90.3% increase compared with the second quarter of 2016 and an 8.5% increase compared with the first quarter of 2017.
- Interest income was $109.0 million, a 65.6% increase compared with the second quarter of 2016 and a 7.9% increase compared with the first quarter of 2017. Interest income was impacted by the continued growth of interest-earning assets.
- Interest expense was $16.6 million, a 3.6% decrease compared with the second quarter of 2016 and a 4.7% increase compared with the first quarter of 2017.
Compensation and Benefits Expenses
For the quarter ended June 30, 2017, compensation and benefits expenses were $453.9 million, which included $8.0 million of merger-related and severance expenses. This compares with $460.0 million in the second quarter of 2016 and $436.4 million in the first quarter of 2017. Excluding merger-related expenses, compensation and benefits as a percentage of net revenues were 61.4% in the second quarter of 2017.
Three Months Six Months
Ended Ended
6/30/17 6/30/17
-------------- --------------
GAAP compensation and benefits $ 453,876 $ 890,263
As a percentage of net revenues 62.5% 63.5%
Non-GAAP adjustments:(3)
Merger-related (5,551) (15,356)
Severance (2,420) (6,955)
-------------- --------------
(7,971) (22,311)
-------------- --------------
Non-GAAP compensation and benefits $ 445,905 $ 867,952
-------------- --------------
As a percentage of non-GAAP net revenues 61.4% 61.9%
Non-Compensation Operating Expenses
For the quarter ended June 30, 2017, non-compensation operating expenses were $188.6 million, which included litigation and merger-related expenses of $26.8 million. This compares with $176.3 million in the second quarter of 2016 and $160.1 million in the first quarter of 2017. Excluding litigation and merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2017 were 22.3%.
Three Months Six Months
Ended Ended
6/30/17 6/30/17
-------------- --------------
GAAP non-compensation expenses $ 188,573 $ 348,698
As a percentage of net revenues 26.0% 24.9%
Non-GAAP adjustments:(3)
Litigation and merger-related (26,849) (32,174)
-------------- --------------
Non-GAAP non-compensation expenses $ 161,724 $ 316,524
-------------- --------------
As a percentage of non-GAAP net revenues 22.3% 22.6%
Provision for Income Taxes
The GAAP effective income tax rate for the quarter ended June 30, 2017 was 36.5%. This compares with an effective income tax rate of 38.1% for the second quarter of 2016 and 17.1% for the first quarter of 2017. The adjusted non-GAAP effective income tax rate for the quarter ended June 30, 2017 was 37.3%.
Three Months Six Months
Ended Ended
6/30/17 6/30/17
-------------- --------------
GAAP provision for income taxes $ 30,387 $ 43,894
GAAP effective tax rate 36.5% 27.1%
Non-GAAP adjustments:(3)
Litigation and merger-related and severance 13,428 21,840
Excess tax benefits from stock-based
compensation(4) 212 17,155
-------------- --------------
13,640 38,995
-------------- --------------
Non-GAAP provision for income taxes $ 44,027 $ 82,889
-------------- --------------
Non-GAAP effective tax rate 37.3% 37.9%
Conference Call Information
Stifel Financial Corp. will host its second quarter 2017 financial results conference call on Monday, July 31, 2017, at 8:00 a.m. Eastern time. The conference call may include forward-looking statements.
All interested parties are invited to listen to Stifel's Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID #51914622. 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 Eaton Partners LLC, 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) 6/30/17 6/30/16 Change 3/31/17 Change
---------- ---------- --------- --------- ---------
Revenues:
Commissions $ 172,264 $ 182,104 (5.4) $ 175,274 (1.7)
Principal transactions 95,703 126,426 (24.3) 116,857 (18.1)
---------- ---------- --------- --------- ---------
Brokerage Revenues 267,967 308,530 (13.1) 292,131 (8.3)
Capital raising 102,800 66,412 54.8 73,916 39.1
Advisory fees 82,461 66,713 23.6 52,936 55.8
---------- ---------- --------- --------- ---------
Investment banking 185,261 133,125 39.2 126,852 46.0
Asset management and
service fees 172,914 144,567 19.6 162,739 6.3
Other income 7,198 17,405 (58.6) 8,752 (17.8)
---------- ---------- --------- --------- ---------
Operating Revenue 633,340 603,627 4.9 590,474 7.3
Interest Revenue 108,951 65,780 65.6 100,953 7.9
---------- ---------- --------- --------- ---------
Total Revenue 742,291 669,407 10.9 691,427 7.4
Interest Expense 16,644 17,262 (3.6) 15,896 4.7
---------- ---------- --------- --------- ---------
Net Revenue 725,647 652,145 11.3 675,531 7.4
---------- ---------- --------- --------- ---------
Non-interest Expenses:
Compensation and
benefits 453,876 460,023 (1.3) 436,387 4.0
Occupancy and
equipment rental 57,892 58,746 (1.5) 52,545 10.2
Communication and
office supplies 34,192 37,426 (8.6) 33,844 1.0
Commissions and floor
brokerage 11,232 12,145 (7.5) 10,723 4.7
Provision for loan
losses 5,856 1,824 221.1 6,134 (4.5)
Other operating
expenses 79,401 66,188 20.0 56,879 39.6
---------- ---------- --------- --------- ---------
Total non-interest
expenses 642,449 636,352 1.0 596,512 7.7
Income before income
taxes 83,198 15,793 426.8 79,019 5.3
Provision for income
taxes 30,387 6,022 404.6 13,507 125.0
---------- ---------- --------- --------- ---------
Net income 52,811 9,771 440.5 65,512 (19.4)
Preferred dividends 2,344 - nm 2,344 nm
---------- ---------- --------- --------- ---------
Net income available to
common shareholders $ 50,467 $ 9,771 416.5 $ 63,168 (20.1)
========== ========== ========= ========= =========
Earnings per common
share:
Basic $ 0.74 $ 0.15 393.3 $ 0.92 (19.6)
Diluted $ 0.63 $ 0.13 384.6 $ 0.78 (19.2)
Weighted average number
of common shares
outstanding:
Basic 68,556 66,792 2.6 68,386 0.2
Diluted 80,021 75,982 5.3 80,695 (0.8)
Summary Results of Operations (Unaudited)
Six Months Ended
-----------------------------------------
(in 000s, except per %
share amounts) 6/30/17 6/30/16 Change
------------- ------------- -------------
Revenues:
Commissions $ 347,538 $ 380,034 (8.6)
Principal transactions 212,560 247,374 (14.1)
------------- ------------- -------------
Brokerage Revenues 560,098 627,408 (10.7)
Capital raising 176,716 119,716 47.6
Advisory fees 135,397 114,067 18.7
------------- ------------- -------------
Investment banking 312,113 233,783 33.5
Asset management and
service fees 335,653 289,099 16.1
Other income 15,950 24,595 (35.1)
------------- ------------- -------------
Operating Revenue 1,223,814 1,174,885 4.2
Interest Revenue 209,904 128,607 63.2
------------- ------------- -------------
Total Revenue 1,433,718 1,303,492 10.0
Interest Expense 32,540 31,373 3.7
------------- ------------- -------------
Net Revenue 1,401,178 1,272,119 10.1
------------- ------------- -------------
Non-interest Expenses:
Compensation and
benefits 890,263 871,136 2.2
Occupancy and
equipment rental 110,437 116,002 (4.8)
Communication and
office supplies 68,036 74,086 (8.2)
Commissions and floor
brokerage 21,955 23,876 (8.0)
Provision for loan
losses 11,990 6,082 97.1
Other operating
expenses 136,280 121,231 12.4
------------- ------------- -------------
Total non-interest
expenses 1,238,961 1,212,413 2.2
Income before income
taxes 162,217 59,706 171.7
Provision for income
taxes 43,894 22,880 91.8
------------- ------------- -------------
Net income 118,323 36,826 221.3
Preferred dividends 4,688 - nm
------------- ------------- -------------
Net income available to
common shareholders $ 113,635 $ 36,826 208.6
============= ============= =============
Earnings per common
share:
Basic $ 1.66 $ 0.55 201.8
Diluted $ 1.41 $ 0.48 193.8
Weighted average number
of common shares
outstanding:
Basic 68,471 67,186 1.9
Diluted 80,391 76,084 5.7
Summary Segment Results (Unaudited)
Three Months Ended
--------------------------------------------------
% %
(in 000s) 6/30/17 6/30/16 Change 3/31/17 Change
---------- ---------- -------- ---------- --------
Net revenues:
Global Wealth Management $ 451,990 $ 386,039 17.1 $ 442,732 2.1
Institutional Group 276,153 260,920 5.8 237,467 16.3
Other (2,496) 5,186 (148.1) (4,668) (46.5)
---------- ---------- -------- ---------- --------
Total net revenues $ 725,647 $ 652,145 11.3 $ 675,531 7.4
Operating expenses:
Global Wealth Management $ 298,753 $ 280,986 6.3 $ 300,680 (0.6)
Institutional Group 223,261 218,506 2.2 197,595 13.0
Other 120,435 136,860 (12.0) 98,237 22.6
---------- ---------- -------- ---------- --------
Total operating
expenses $ 642,449 $ 636,352 1.0 $ 596,512 7.7
Operating contribution:
Global Wealth Management $ 153,237 $ 105,053 45.9 $ 142,052 7.9
Institutional Group 52,892 42,414 24.7 39,872 32.7
Other (122,931) (131,674) (6.6) (102,905) 19.5
---------- ---------- -------- ---------- --------
Income before income
taxes $ 83,198 $ 15,793 426.8 $ 79,019 5.3
---------- ---------- -------- ---------- --------
As a percentage of net
revenues:
Compensation and
benefits
Global Wealth
Management 50.7 56.6 51.6
Institutional Group 59.6 58.8 60.5
Non-comp. operating
expenses
Global Wealth
Management 15.4 16.2 16.3
Institutional Group 21.2 25.0 22.7
Income before income
taxes
Global Wealth
Management 33.9 27.2 32.1
Institutional Group 19.2 16.2 16.8
---------- ---------- ----------
Consolidated pre-tax
margin (5) (6) 11.5 2.4 11.7
---------- ---------- ----------
Summary Segment Results (Unaudited)
Six Months Ended
-------------------------------------------
%
(in 000s) 6/30/17 6/30/16 Change
-------------- -------------- -------------
Net revenues:
Global Wealth Management $ 894,722 $ 765,843 16.8
Institutional Group 513,620 502,196 2.3
Other (7,164) 4,080 (275.6)
-------------- -------------- -------------
Total net revenues $ 1,401,178 $ 1,272,119 10.1
Operating expenses:
Global Wealth Management $ 599,433 $ 567,456 5.6
Institutional Group 420,856 430,491 (2.2)
Other 218,672 214,466 2.0
-------------- -------------- -------------
Total operating
expenses $ 1,238,961 $ 1,212,413 2.2
Operating contribution:
Global Wealth Management $ 295,289 $ 198,387 48.8
Institutional Group 92,764 71,705 29.4
Other (225,836) (210,386) 7.3
-------------- -------------- -------------
Income before income
taxes $ 162,217 $ 59,706 171.7
-------------- -------------- -------------
As a percentage of net
revenues:
Compensation and
benefits
Global Wealth
Management 51.1 57.4
Institutional Group 60.0 60.5
Non-comp. operating
expenses
Global Wealth
Management 15.9 16.7
Institutional Group 21.9 25.2
Income before income
taxes
Global Wealth
Management 33.0 25.9
Institutional Group 18.1 14.3
-------------- --------------
Consolidated pre-tax
margin (5) (6) 11.6 4.7
-------------- --------------
Stifel Financial Corp.
Selected Key Metrics
(Unaudited)
Financial metrics: As of and For the Three Months Ended
-----------------------------------------
(in 000s, except percentages) 6/30/17 6/30/16 3/31/17
------------- ------------- -------------
Total assets $ 19,533,575 $ 15,385,602 $ 19,135,892
Total equity 2,845,309 2,490,865 2,777,903
Book value per common share $ 39.47 $ 37.41 $ 38.40
Return on common equity (7) 7.9% 1.6% 10.0%
Non-GAAP return on common equity
(1) (7) 11.1% 8.5% 9.5%
Return on tangible common equity
(8) 13.4% 2.8% 17.2%
Non-GAAP return on tangible
common equity (1) (8) 18.8% 15.1% 16.2%
Tier 1 common capital ratio (9) 18.2% 20.2% 18.4%
Tier 1 risk based capital ratio
(9) 20.5% 20.6% 20.8%
Tier 1 leverage capital ratio
(9) 10.3% 11.5% 10.1%
Pre-tax margin on net revenues 11.5% 2.4% 11.7%
Non-GAAP pre-tax margin on net
revenues (1) 16.3% 12.9% 14.9%
Effective tax rate 36.5% 38.1% 17.1%
Non-GAAP effective tax rate (1) 37.3% 38.1% 38.6%
(in 000s, except
per share % %
amounts) 6/30/17 6/30/16 Change 3/31/17 Change
------------ ------------ ------- ------------ -------
Statistical
Information:
Financial
advisors (10) 2,277 2,291 (11) (0.6) 2,299 (1.0)
Locations 399 400 (0.3) 399 -
Total client
assets $258,097,000 $225,983,000 (11) 14.2 $252,448,000 2.2
Fee-based
client assets $ 79,177,000 $ 65,491,000 20.9 $ 75,414,000 5.0
Client money
market and
insured
product $ 17,831,000 $ 17,674,000 0.9 $ 19,058,000 (6.4)
Secured client
lending (12) $ 2,999,461 $ 2,657,313 12.9 $ 2,962,936 1.2
Stifel Bank & Trust - a component of Global Wealth Management
Selected Key Metrics
(Unaudited)
Selected operating data: Three Months Ended
---------------------------------------------------
(in 000s, except % %
percentages) 6/30/17 6/30/16 Change 3/31/17 Change
---------- ---------- -------- ---------- ---------
Net Interest Income $ 90,795 $ 48,536 87.1 $ 85,710 5.9
Bank loan loss
provision 5,856 1,824 221.1 6,134 (4.5)
Net charge-offs 2,953 - n/m - n/m
Net Interest Margin 2.77% 2.34% 18.4 2.66% 4.1
Stifel Bank & Trust - a component of Global Wealth Management
Selected Key Metrics
(Unaudited)
Selected operating data: Six Months Ended
------------------------------------------
(in 000s, except %
percentages) 6/30/17 6/30/16 Change
-------------- -------------- ------------
Net Interest Income $ 174,814 $ 94,287 85.4
Bank loan loss
provision 11,991 6,082 97.2
Net charge-offs 2,953 - n/m
Net Interest Margin 2.71% 2.40% 12.9
Financial Metrics: As of
-----------------------------------------
(in 000s, except percentages) 6/30/17 6/30/16 3/31/17
------------- ------------- -------------
Total Assets $ 13,598,260 $ 9,262,027 $ 13,232,940
Total Equity 978,626 613,325 931,913
Total Loans, net 6,299,669 4,421,583 6,071,272
Total Deposits 12,050,474 7,881,219 11,700,961
Available-for-sale securities,
at fair value 3,448,548 2,464,018 3,371,187
Held-to-maturity securities, at
amortized cost 3,304,090 2,115,734 3,185,813
Residential real estate 2,248,528 1,228,234 2,214,356
Commercial and industrial 2,064,052 1,424,671 1,830,865
Securities-based loans 1,755,592 1,418,986 1,728,516
Commercial real estate 71,517 83,628 78,522
Loans held for sale 139,676 250,725 206,724
Common equity tier 1 capital
ratio (9) 14.9% 13.7% 15.4%
Tier 1 capital ratio (9) 14.9% 13.7% 15.4%
Total capital ratio (9) 15.7% 14.5% 16.2%
Tier 1 leverage ratio (9) 7.2% 7.4% 7.2%
Credit Metrics:
Allowance for loan losses $ 54,202 $ 35,866 $ 51,298
Allowance as a percentage of
retained loans 0.88% 0.86% 0.87%
Net charge-offs as a percentage
of average loans 0.05% 0.00% 0.00%
Total nonperforming assets 21,219 34,919 28,036
Nonperforming assets as % of
total assets 0.15% 0.37% 0.21%
Global Wealth Management Summary Results of Operations (Unaudited)
Three Months Ended
-------------------------------------------------
% %
(in 000s) 6/30/17 6/30/16 Change 3/31/17 Change
--------- --------- --------- --------- ---------
Revenues:
Commissions $ 120,344 $ 127,241 (5.4) $ 120,577 (0.2)
Principal transactions 47,741 44,938 6.2 50,917 (6.2)
--------- --------- --------- --------- ---------
Brokerage revenues 168,085 172,179 (2.4) 171,494 (2.0)
Asset management and
service fees 172,889 144,360 19.8 162,664 6.3
Net interest 95,698 54,246 76.4 89,695 6.7
Investment banking 10,641 9,502 12.0 11,854 (10.2)
Other income 4,677 5,752 (18.7) 7,025 (33.4)
--------- --------- --------- --------- ---------
Net revenues 451,990 386,039 17.1 442,732 2.1
--------- --------- --------- --------- ---------
Non-interest expenses:
Compensation and
benefits 229,158 218,553 4.9 228,471 0.3
Non-compensation
operating expenses 69,595 62,433 11.5 72,209 (3.6)
--------- --------- --------- --------- ---------
Total non-interest
expenses 298,753 280,986 6.3 300,680 (0.6)
--------- --------- --------- --------- ---------
Income before income taxes $ 153,237 $ 105,053 45.9 $ 142,052 7.9
--------- --------- --------- --------- ---------
As a percentage of net
revenues:
Compensation and
benefits 50.7 56.6 51.6
Non-compensation
operating expenses 15.4 16.2 16.3
Income before income
taxes 33.9 27.2 32.1
Global Wealth Management Summary Results of Operations (Unaudited)
Six Months Ended
-----------------------------------------
%
(in 000s) 6/30/17 6/30/16 Change
------------- ------------- -------------
Revenues:
Commissions $ 240,921 $ 258,794 (6.9)
Principal transactions 98,658 86,349 14.3
------------- ------------- -------------
Brokerage revenues 339,579 345,143 (1.6)
Asset management and
service fees 335,553 288,712 16.2
Net interest 185,393 106,055 74.8
Investment banking 22,495 17,911 25.6
Other income 11,702 8,022 45.9
------------- ------------- -------------
Net revenues 894,722 765,843 16.8
------------- ------------- -------------
Non-interest expenses:
Compensation and
benefits 457,629 439,968 4.0
Non-compensation
operating expenses 141,804 127,488 11.2
------------- ------------- -------------
Total non-interest
expenses 599,433 567,456 5.6
------------- ------------- -------------
Income before income taxes $ 295,289 $ 198,387 48.8
------------- ------------- -------------
As a percentage of net
revenues:
Compensation and
benefits 51.1 57.4
Non-compensation
operating expenses 15.9 16.7
Income before income
taxes 33.0 25.9
Institutional Group Summary Results of Operations (Unaudited)
Three Months Ended
-------------------------------------------
% %
(in 000s) 6/30/17 6/30/16 Change 3/31/17 Change
-------- -------- -------- ----------------
Revenues:
Commissions $ 51,920 $ 54,864 (5.4) $ 54,697 (5.1)
Principal transactions 47,962 81,488 (41.1) 65,940 (27.3)
-------- -------- -------- ----------------
Brokerage revenues 99,882 136,352 (26.7) 120,637 (17.2)
Capital raising 92,159 56,100 64.3 62,062 48.5
Advisory fees 82,461 67,523 22.1 52,936 55.8
-------- -------- -------- ----------------
Investment banking 174,620 123,623 41.3 114,998 51.8
Other (13) 1,651 945 74.7 1,832 (9.9)
-------- -------- -------- ----------------
Net revenues 276,153 260,920 5.8 237,467 16.3
-------- -------- -------- ----------------
Non-interest expenses:
Compensation and benefits 164,532 153,371 7.3 143,640 14.5
Non-compensation operating
expenses 58,729 65,135 (9.8) 53,955 8.8
-------- -------- -------- ----------------
Total non-interest expenses 223,261 218,506 2.2 197,595 13.0
-------- -------- -------- ----------------
Income before income taxes $ 52,892 $ 42,414 24.7 $ 39,872 32.7
-------- -------- -------- ----------------
As a percentage of net revenues:
Compensation and benefits 59.6 58.8 60.5
Non-compensation operating
expenses 21.2 25.0 22.7
Income before income taxes 19.2 16.2 16.8
Institutional Group Summary Results of Operations (Unaudited)
Six Months Ended
-----------------------------------------
%
(in 000s) 6/30/17 6/30/16 Change
------------- ------------- -------------
Revenues:
Commissions $ 106,617 $ 121,240 (12.1)
Principal transactions 113,902 161,026 (29.3)
------------- ------------- -------------
Brokerage revenues 220,519 282,266 (21.9)
Capital raising 154,221 100,995 52.7
Advisory fees 135,397 114,876 17.9
------------- ------------- -------------
Investment banking 289,618 215,871 34.2
Other (13) 3,483 4,059 (14.2)
------------- ------------- -------------
Net revenues 513,620 502,196 2.3
------------- ------------- -------------
Non-interest expenses:
Compensation and benefits 308,172 303,989 1.4
Non-compensation operating
expenses 112,684 126,502 (10.9)
------------- ------------- -------------
Total non-interest expenses 420,856 430,491 (2.2)
------------- ------------- -------------
Income before income taxes $ 92,764 $ 71,705 29.4
------------- ------------- -------------
As a percentage of net revenues:
Compensation and benefits 60.0 60.5
Non-compensation operating
expenses 21.9 25.2
Income before income taxes 18.1 14.3
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 and six months ended June 30, 2017 and 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 and six months ended June 30, 2017 and 2016 to net income and earnings per diluted common share on a non-GAAP basis for the same period.
Three Months Ended Six Months Ended
----------------------------- -------------------
(in 000s) 6/30/17 6/30/16 3/31/17 6/30/17 6/30/16
--------- --------- --------- --------- ---------
GAAP net income $ 52,811 $ 9,771 $ 65,512 $118,323 $ 36,826
Preferred dividend 2,344 - 2,344 4,688 -
--------- --------- --------- --------- ---------
Net income available to
common shareholders 50,467 9,771 63,168 113,635 36,826
Non-GAAP adjustments:
Merger-related (14) 12,400 53,934 17,114 29,514 67,344
Litigation-related (15) 20,000 - - 20,000 -
Severance 2,420 - 4,535 6,955 -
Provision for income
taxes (13,640) (20,536) (25,355) (38,952) (25,806)
--------- --------- --------- --------- ---------
Total non-GAAP adjustments 21,180 33,398 (3,706) 17,517 41,538
--------- --------- --------- --------- ---------
Non-GAAP net income
available to common
shareholders $ 71,647 $ 43,169 $ 59,462 $131,152 $ 78,364
--------- --------- --------- --------- ---------
Weighted average diluted
shares outstanding 80,021 75,982 80,695 80,391 76,084
GAAP earnings per diluted
common share $ 0.66 $ 0.13 $ 0.81 $ 1.47 $ 0.48
Non-GAAP adjustments 0.26 0.44 (0.04) 0.22 0.55
--------- --------- --------- --------- ---------
Non-GAAP earnings per
diluted common share $ 0.92 $ 0.57 $ 0.77 $ 1.69 $ 1.03
--------- --------- --------- --------- ---------
GAAP earnings per diluted
common share available to
common shareholders $ 0.63 $ 0.13 $ 0.78 $ 1.41 $ 0.48
Non-GAAP adjustments 0.27 0.44 (0.04) 0.22 0.55
--------- --------- --------- --------- ---------
Non-GAAP earnings per
diluted common share
available to common
shareholders $ 0.90 $ 0.57 $ 0.74 $ 1.63 $ 1.03
--------- --------- --------- --------- ---------
Footnotes
(1) Reconciliations of the Company's GAAP results to these non-GAAP
measures are discussed within and under "Non-GAAP Financial Measures."
(2) Excludes brokerage revenues included in the Other segment.
(3) See further discussion of non-GAAP adjustments under "Non-GAAP
Financial Measures."
(4) During the first quarter of 2017, the Company adopted new accounting
guidance associated with stock-based compensation.
(5) Non-GAAP pre-tax margin for the three months ended June 30, 2017 of
16.3% is calculated by adding litigation and merger-related and
severance non-GAAP adjustments of $34.8 million to our GAAP income
before income taxes of $83.2 million and dividing it by non-GAAP net
revenues for the quarter of $725.6 million. Reconciliations of the
Company's GAAP results to certain non-GAAP measures is discussed within
and under "Non-GAAP Financial Measures."
(6) Non-GAAP pre-tax margin for the six months ended June 30, 2017 of 15.5%
is calculated by adding litigation and merger-related and severance
non-GAAP adjustments of $56.5 million to our GAAP income before income
taxes of $162.2 million and dividing it by non-GAAP net revenues for
the quarter of $1,401.2 million. Reconciliations of the Company's GAAP
results to certain non-GAAP measures is discussed within and under
"Non-GAAP Financial Measures."
(7) Computed by dividing annualized net income by average common
shareholders' equity or, in the case of non-GAAP return on common
equity, computed by dividing non-GAAP net income by average common
shareholders' equity.
(8) Computed by dividing annualized net income by average tangible
shareholders' equity or, in the case of non-GAAP return on tangible
common equity, computed by dividing non-GAAP net income by average
tangible shareholders' equity. Tangible common shareholders' equity
equals total common shareholders' equity less goodwill and identifiable
intangible assets.
(9) Capital ratios are estimates at time of the Company's earning release.
(10) Includes 119, 127, and 121 independent contractors at June 30, 2017,
June 30, 2016, and March 31, 2017, respectively.
(11) On July 1, 2016, we sold the independent contractor business acquired
with the Sterne Agee transaction in June 2015. As of June 30, 2016,
there were 540 independent contractors included in the disposed
business unit and $11.5 billion of total client assets. These numbers
have been excluded from the table.
(12) Includes client margin balances held by our broker-dealer subsidiaries
and securities-based loans held at Stifel Bank.
(13) Includes net interest, asset management and service fees, and other
income.
(14) Primarily related to charges attributable to integration-related
activities, signing bonuses, amortization of restricted stock awards
and promissory notes issued as retention, professional fees, and
amortization of intangible assets acquired. These costs were directly
related to acquisitions of certain businesses and are not
representative of the costs of running the Company's on-going business.
(15) Primarily related to costs associated with the Company's previously
disclosed legal matters.
Investor RelationsJoel Jeffrey(212) [email protected]
Source: Stifel Financial Corp.