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Stifel Reports Second Quarter 2019 Financial Results

July 30, 2019 6:00 AM

ST. LOUIS, July 30, 2019 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $103.8 million, or $1.31 per diluted common share on net revenues of $800.8 million for the three months ended June 30, 2019, compared with net income available to common shareholders of $84.9 million, or $1.04 per diluted common share, on net revenues of $742.7 million for the second quarter of 2018.

For the three months ended June 30, 2019, the Company reported non-GAAP net income available to common shareholders of $111.4 million, or $1.41 per diluted common share. The Company’s reported GAAP net income for the three months ended June 30, 2019 was primarily impacted by merger-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“I’m very pleased with our second quarter results. The $801 million in net revenue in the second quarter was the second highest quarterly revenue in our history and, through the first half of 2019, we have generated a record $1.6 billion of net revenue. In addition to our revenue growth, our expense discipline contributed to margins of nearly 20% in the quarter which drove non-GAAP return on tangible common equity of 23% and non-GAAP earnings per share of $1.41, up nearly 16% over 2018. We repurchased approximately 2.3 million shares in the first half of the year while maintaining our commitment to growing our business both organically and through accretive acquisitions. In the first half of 2019, we recruited 80 financial advisors and our pipeline remains very strong. Additionally, we announced two acquisitions in the first half of 2019 and closed another. As I look forward, I am optimistic about the second half of 2019 as well as our longer-term future,” stated Ronald J. Kruszewski, Chairman and Chief Executive Officer of Stifel.

Financial Highlights (Unaudited) Three Months Ended
($ in 000s, except per share data) GAAP6/30/19 GAAP6/30/18 %Change GAAP3/31/19 %Change Non-GAAP (1)6/30/19 Non-GAAP (1)6/30/18 %Change
Net revenues $800,787 $742,732 7.8 $770,420 3.9 $800,787 $742,541 7.8
Net income applicable to Stifel Financial Corp. $109,085 $87,287 25.0 $99,207 10.0 $116,659 $101,131 15.4
Preferred dividend 5,288 2,344 125.6 2,344 125.6 5,288 2,344 125.6
Net income available to common shareholders $103,797 $84,943 22.2 $96,863 7.2 $111,371 $98,787 12.7
Earnings per diluted common share $1.38 $1.07 29.0 $1.25 10.4 $1.48 $1.24 19.4
Earnings per diluted common share available to common shareholders $1.31 $1.04 26.0 $1.22 7.4 $1.41 $1.22 15.6
Compensation ratio 58.3% 59.5% 59.5% 57.9% 59.0%
Non-compensation ratio 23.2% 24.5% 22.6% 22.3% 22.5%
Pre-tax operating margin (2) 18.5% 16.0% 17.9% 19.8% 18.5%

For six months ended June 30, 2019, the Company reported net income available to common shareholders of $200.7 million, or $2.53 per diluted common share on net revenues of $1.6 billion, compared with net income available to common shareholders of $171.4 million, or $2.10 per diluted common share, on net revenues of $1.5 billion for the six months ended June 30, 2018.

For the six months ended June 30, 2019, the Company reported non-GAAP net income available to common shareholders of $215.9 million, or $2.73 per diluted common share.

Financial Highlights (Unaudited) Six Months Ended
($ in 000s, except per share data) GAAP6/30/19 GAAP6/30/18 %Change Non-GAAP (1)6/30/19 Non-GAAP (1)6/30/18 %Change
Net revenues $1,571,207 $1,493,090 5.2 $1,571,207 $1,493,090 5.2
Net income applicable to Stifel Financial Corp. $208,292 $176,048 18.3 $223,523 $197,278 13.3
Preferred dividend 7,632 4,688 62.8 7,632 4,688 62.8
Net income available to common shareholders $200,660 $171,360 17.1 $215,891 $192,590 12.1
Earnings per diluted common share $2.63 $2.16 21.8 $2.82 $2.42 16.5
Earnings per diluted common share available to common shareholders $2.53 $2.10 20.5 $2.73 $2.36 15.7
Compensation ratio 58.9% 60.3% 58.4% 59.8%
Non-compensation ratio 22.9% 23.8% 22.2% 22.4%
Pre-tax operating margin (3) 18.2% 15.9% 19.4% 17.8%

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $261.4 million, a 2.2% increase compared with the second quarter of 2018 and a 0.8% increase compared with the first quarter of 2019.

Three Months Ended
($ in 000s) 6/30/19 6/30/18 % Change 3/31/19 % Change
Global Wealth Management $162,388 $159,290 1.9 $153,194 6.0
Institutional brokerage:
Equity capital markets 40,670 45,266 (10.2) 38,881 4.6
Fixed income capital markets 58,387 51,330 13.7 67,406 (13.4)
Total institutional brokerage 99,057 96,596 2.5 106,287 (6.8)
Total brokerage revenues $261,445 $255,886 2.2 $259,481 0.8

Investment Banking Revenues

Investment banking revenues were $179.6 million, an 11.5% increase compared with the second quarter of 2018 and an 11.0% increase compared with the first quarter of 2019.

Three Months Ended
($ in 000s) 6/30/19 6/30/18 % Change 3/31/19 % Change
Capital raising:
Global Wealth Management $10,559 $7,968 32.5 $8,223 28.4
Equity capital markets 59,156 44,087 34.2 27,859 112.3
Fixed income capital markets 26,997 22,025 22.6 20,863 29.4
Institutional Group 86,153 66,112 30.3 48,722 76.8
Total capital raising (4) 96,712 74,080 30.6 56,945 69.8
Advisory fees (4) 82,905 87,004 (4.7) 104,895 (21.0)
Total investment banking (4) $179,617 $161,084 11.5 $161,840 11.0

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $211.2 million, a 5.8% increase compared with the second quarter of 2018 and an 8.1% increase compared with the first quarter of 2019. See Asset Management and Service Fee Break-down table.

Net Interest Income

Net interest income of $135.0 million, a 15.3% increase compared with the second quarter of 2018 and a 4.6% decrease compared with the first quarter of 2019. See Net Interest Income Analysis table.

Compensation and Benefits Expenses

For the quarter ended June 30, 2019, compensation and benefits expenses were $466.9 million, which included $3.3 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $442.2 million in the second quarter of 2018 and $458.1 million in the first quarter of 2019. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 57.9% in the second quarter of 2019 (non-GAAP measure).

Three Months Ended Six Months Ended
($ in 000s) 6/30/19 6/30/18 6/30/19 6/30/18
GAAP compensation and benefits $466,861 $442,170 $924,975 $900,063
As a percentage of net revenues 58.3% 59.5% 58.9% 60.3%
Non-GAAP adjustments: (5)
Merger-related and severance (3,304) (4,075) (7,236) (7,814)
Non-GAAP compensation and benefits $463,557 $438,095 $917,739 $892,249
As a percentage of non-GAAP net revenues 57.9% 59.0% 58.4% 59.8%

Non-Compensation Operating Expenses

For the quarter ended June 30, 2019, non-compensation operating expenses were $185.9 million, which included $6.9 million of merger-related and litigation-related expenses (non-GAAP adjustments). This compares with $182.2 million in the second quarter of 2018 and $174.5 million in the first quarter of 2019. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2019 were 22.3% (non-GAAP measure).

Three Months Ended Six Months Ended
($ in 000s) 6/30/19 6/30/18 6/30/19 6/30/18
GAAP non-compensation expenses $185,944 $182,215 $360,441 $355,126
As a percentage of net revenues 23.2% 24.5% 22.9% 23.8%
Non-GAAP adjustments: (5)
Merger-related (3,417) (8,892) (7,676) (14,915)
Litigation-related (3,507) (6,000) (3,507) (6,000)
(6,924) (14,892) (11,183) (20,915)
Non-GAAP non-compensation expenses $179,020 $167,323 $349,258 $334,211
As a percentage of non-GAAP net revenues 22.3% 22.5% 22.2% 22.4%

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended June 30, 2019 was 5.9%. This compares with an effective income tax rate of 26.2% for the second quarter of 2018 and 27.9% for the first quarter of 2019. The adjusted non-GAAP effective income tax rate for the quarter ended June 30, 2019 was 5.9%.

Three Months Ended Six Months Ended
($ in 000s) 6/30/19 6/30/18 6/30/19 6/30/18
GAAP provision for income taxes $38,225 $31,060 $76,595 $61,853
GAAP effective tax rate 25.9% 26.2% 26.9% 26.0%
Non-GAAP adjustments: (5)
Merger-related, litigation-related, and severance 2,752 5,102 4,955 7,814
Other (98) (170) (1,767) (315)
2,654 4,932 3,188 7,499
Non-GAAP provision for income taxes $40,879 $35,992 $79,783 $69,352
Non-GAAP effective tax rate 25.9% 26.2% 26.3% 26.0%

Conference Call Information

Stifel Financial Corp. will host its second quarter 2019 financial results conference call on Tuesday, July 30, 2019, at 8:00 a.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifel’s Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID #8069647. 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 and Stifel Bank offer a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company’s web site at www.stifel.com.

Forward-Looking Statements

This earnings release contains certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies’ operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Summary Results of Operations (Unaudited)
Three Months Ended Six Months Ended
($ in 000s, except per share amounts) 6/30/19 6/30/18 %Change 3/31/19 %Change 6/30/19 6/30/18 %Change
Revenues:
Commissions $164,981 $166,902 (1.2) $155,449 6.1 $320,430 $332,677 (3.7)
Principal transactions 96,464 88,984 8.4 104,032 (7.3) 200,496 186,766 7.4
Brokerage revenues 261,445 255,886 2.2 259,481 0.8 520,926 519,443 0.3
Advisory fees 82,911 87,004 (4.7) 104,890 (21.0) 187,801 184,676 1.7
Capital raising 96,706 74,059 30.6 56,950 69.8 153,656 152,749 0.6
Investment banking 179,617 161,063 11.5 161,840 11.0 341,457 337,425 1.2
Asset management and service fees 211,171 199,568 5.8 195,267 8.1 406,438 395,369 2.8
Other income 13,505 9,073 48.8 12,209 10.6 25,714 12,430 106.9
Operating revenues 665,738 625,590 6.4 628,797 5.9 1,294,535 1,264,667 2.4
Interest revenue 187,940 154,421 21.7 191,071 (1.6) 379,011 292,155 29.7
Total revenues 853,678 780,011 9.4 819,868 4.1 1,673,546 1,556,822 7.5
Interest expense 52,891 37,279 41.9 49,448 7.0 102,339 63,732 60.6
Net revenues 800,787 742,732 7.8 770,420 3.9 1,571,207 1,493,090 5.2
Non-interest expenses:
Compensation and benefits 466,861 442,170 5.6 458,114 1.9 924,975 900,063 2.8
Occupancy and equipment rental 61,055 53,596 13.9 58,862 3.7 119,917 111,191 7.8
Communication and office supplies 35,069 36,639 (4.3) 35,697 (1.8) 70,766 70,138 0.9
Commissions and floor brokerage 11,008 10,095 9.0 10,956 0.5 21,964 19,460 12.9
Provision for loan losses 2,353 4,277 (45.0) 2,283 3.1 4,636 6,320 (26.6)
Other operating expenses 76,459 77,608 (1.5) 66,699 14.6 143,158 148,017 (3.3)
Total non-interest expenses 652,805 624,385 4.6 632,611 3.2 1,285,416 1,255,189 2.4
Income before income taxes 147,982 118,347 25.0 137,809 7.4 285,791 237,901 20.1
Provision for income taxes 38,225 31,060 23.1 38,370 (0.4) 76,595 61,853 23.8
Net income 109,757 87,287 25.7 99,439 10.4 209,196 176,048 18.8
Net income applicable to non-controlling interests 672 — n/m 232 189.7 904 — n/m
Net income applicable to Stifel Financial Corp. 109,085 87,287 25.0 99,207 10.0 208,292 176,048 18.3
Preferred dividends 5,288 2,344 125.6 2,344 125.6 7,632 4,688 62.8
Net income available to common shareholders $103,797 $84,943 22.2 $96,863 7.2 $200,660 $171,360 17.1
Earnings per common share:
Basic $1.43 $1.18 21.2 $1.35 5.9 $2.74 $2.39 14.6
Diluted $1.31 $1.04 26.0 $1.22 7.4 $2.53 $2.10 20.5
Cash dividends declared per common share $0.15 $0.12 25.0 $0.15 — $0.30 $0.24 25.0
Weighted average number of common shares outstanding:
Basic 72,519 71,692 1.2 71,700 1.1 73,180 71,843 1.9
Diluted 79,079 81,299 (2.7) 79,210 (0.2) 79,160 81,548 (2.9)

Summary Segment Results (Unaudited)
Three Months Ended Six Months Ended
($ in 000s) 6/30/19 6/30/18 %Change 3/31/19 %Change 6/30/19 6/30/18 %Change
Net revenues:
Global Wealth Management $532,433 $497,327 7.1 $510,610 4.3 $1,043,043 $982,902 6.1
Institutional Group 270,602 252,825 7.0 261,286 3.6 531,888 522,903 1.7
Other (2,248) (7,420) 69.7 (1,476) (52.3) (3,724) (12,715) 70.7
Total net revenues $800,787 $742,732 7.8 $770,420 3.9 $1,571,207 $1,493,090 5.2
Operating expenses:
Global Wealth Management $340,081 $309,432 9.9 $316,120 7.6 $656,201 $618,236 6.1
Institutional Group 231,300 216,801 6.7 229,082 1.0 460,382 442,309 4.1
Other 81,424 98,152 (17.0) 87,409 (6.8) 168,833 194,644 (13.3)
Total operating expenses $652,805 $624,385 4.6 $632,611 3.2 $1,285,416 $1,255,189 2.4
Operating contribution:
Global Wealth Management $192,352 $187,895 2.4 $194,490 (1.1) $386,842 $364,666 6.1
Institutional Group 39,302 36,024 9.1 32,204 22.0 71,506 80,594 (11.3)
Other (83,672) (105,572) (20.7) (88,885) (5.9) (172,557) (207,359) (16.8)
Income before income taxes $147,982 $118,347 25.0 $137,809 7.4 $285,791 $237,901 20.1
As a percentage of net revenues:
Compensation and benefits
Global Wealth Management 49.3 47.8 48.5 48.9 48.8
Institutional Group 57.6 59.3 61.0 59.3 59.2
Non-comp. operating expenses
Global Wealth Management 14.6 14.4 13.4 14.0 14.1
Institutional Group 27.9 26.5 26.7 27.3 25.4
Income before income taxes
Global Wealth Management 36.1 37.8 38.1 37.1 37.1
Institutional Group 14.5 14.2 12.3 13.4 15.4
Consolidated pre-tax margin 18.5 16.0 17.9 18.2 15.9

Financial metrics (unaudited):As of and For the Three Months Ended
($ in 000s, except percentages and per share amounts)6/30/19 6/30/18 3/31/19
Total assets$24,343,597 $22,608,169 $24,183,559
Total Stifel Financial shareholders' equity 3,429,126 2,954,362 3,376,623
Book value per common share (6)$44.68 $39.34 $43.18
Return on common equity (7) 13.4% 12.1% 12.7%
Non-GAAP return on common equity (1) (7) 14.3% 14.1% 13.7%
Return on tangible common equity (8) 21.5% 20.0% 20.6%
Non-GAAP return on tangible common equity (1) (8) 23.1% 23.3% 22.3%
Tier 1 common capital ratio (9) 15.6% 16.4% 15.9%
Tier 1 risk based capital ratio (9) 18.0% 18.4% 18.5%
Tier 1 leverage capital ratio (9) 10.0% 9.5% 9.8%
Pre-tax margin on net revenues 18.5% 16.0% 17.9%
Non-GAAP pre-tax margin on net revenues (1) (2) 19.8% 18.5% 19.0%
Effective tax rate 25.9% 26.2% 27.9%
Non-GAAP effective tax rate (1) 25.9% 26.2% 26.7%

Statistical Information (unaudited): As of and For the Three Months Ended
($ in 000s, except financial advisors and locations) 6/30/19 6/30/18 % Change 3/31/19 % Change
Financial advisors (10) 2,097 2,012 4.2 2,061 1.7
Independent contractors 96 106 (9.4) 99 (3.0)
Total financial advisors 2,193 2,118 3.5 2,160 1.5
Locations 413 398 3.8 407 1.5
Total client assets $305,233,000 $277,708,000 9.9 $299,993,000 1.7
Fee-based client assets $103,824,000 $91,275,000 13.7 $99,579,000 4.3
Client money market and insured product $13,674,000 $15,703,000 (12.9) $14,928,000 (8.4)
Secured client lending (11) $3,251,723 $3,174,639 2.4 $3,175,240 2.4

Asset Management and Service Fee Break-down (unaudited)
Asset Management and Service Fee Revenues: Three Months Ended
($ in 000s) 6/30/19 6/30/18 % Change 3/31/19 % Change
Private Client Group (12) $164,554 $149,457 10.1 $148,092 11.1
Asset Management 29,485 27,606 6.8 28,469 3.6
Third-party Bank Sweep Program 6,869 11,601 (40.8) 8,562 (19.8)
Other (13) 10,263 10,904 (5.9) 10,144 1.2
Total asset management and service fee revenues $211,171 $199,568 5.8 $195,267 8.1
Fee-based Assets: Three Months Ended
($ in millions) 6/30/19 6/30/18 % Change 3/31/19 % Change
Private Client Group (12) $80,983 $67,807 19.4 $73,553 10.1
Asset Management 33,156 29,679 11.7 32,952 0.6
Elimination (14) (10,315) (6,211) 66.1 (6,926) 48.9
Total fee-based assets $103,824 $91,275 13.7 $99,579 4.3
Individual Program Banks $1,459 $3,153 (53.7) $1,875 (22.2)
ROA (bps) (15)
Private Client Group (12) 89.5 90.2 89.6
Asset Management 35.6 37.2 34.6
Individual Program Banks 163.6 134.0 153.3

Consolidated Net Interest Income Analysis (Unaudited):
Three Months Ended
June 30, 2019 June 30, 2018 March 31, 2019
($ in millions, except percentages) AverageBalance InterestIncome/Expense AverageInterestRate AverageBalance InterestIncome/Expense AverageInterestRate AverageBalance InterestIncome/Expense AverageInterestRate
Interest-earning assets:
Cash and federal funds sold $750.4 $4.3 2.31% $396.2 $2.1 2.11% $1,124.9 $7.8 2.78%
Financial instruments owned 1,320.5 6.4 1.94 1,230.0 5.0 1.62 1,277.4 6.3 1.98
Margin balances 1,291.5 13.7 4.23 1,311.1 12.3 3.75 1,258.5 13.4 4.27
Investments:
Asset-backed securities 4,508.4 46.0 4.08 4,692.7 45.4 3.87 4,698.9 49.0 4.17
Mortgage-backed securities 1,470.9 8.6 2.33 1,684.7 9.0 2.15 1,531.4 9.0 2.35
Corporate fixed income securities 915.0 6.9 3.02 1,273.2 8.7 2.74 954.5 7.2 3.01
State and municipal securities 48.0 0.2 1.85 73.6 0.4 1.98 50.1 0.3 2.38
Total Investments 6,942.3 61.7 3.56 7,724.2 63.5 3.29 7,234.9 65.5 3.62
Loans:
Commercial and industrial 3,337.4 41.3 4.95 2,641.2 28.8 4.36 3,419.8 40.8 4.78
Residential real estate 2,953.7 22.5 3.05 2,703.4 18.8 2.78 2,927.9 22.5 3.07
Securities-based loans 1,916.3 20.2 4.21 1,835.4 17.2 3.74 1,799.5 19.1 4.25
Commercial real estate 354.3 5.0 5.63 103.8 1.1 4.33 336.5 4.7 5.60
Loans held for sale 178.6 1.8 4.02 189.6 1.9 3.94 179.0 1.8 4.09
Other 377.9 5.1 5.38 59.7 0.6 4.51 319.0 4.4 5.36
Total Loans 9,118.2 95.9 4.21 7,533.1 68.4 3.63 8,981.7 93.3 4.15
Other interest-bearing assets 831.6 5.9 2.86 810.9 3.1 1.54 736.3 4.8 2.61
Total interest-earning assets/interest income 20,254.5 187.9 3.71 19,005.5 154.4 3.25 20,613.7 191.1 3.71
Interest-bearing liabilities:
Short-term borrowings 29.8 0.2 3.16 101.4 0.7 2.71 68.2 0.5 3.10
Senior notes 1,016.2 11.1 4.38 1,015.5 11.1 4.38 1,016.1 11.1 4.38
Deposits 14,660.7 29.3 0.80 13,441.3 15.3 0.46 15,282.3 28.1 0.73
FHLB 550.2 2.9 2.12 844.6 3.1 1.47 461.4 1.7 1.45
Other interest-bearing liabilities 1,764.4 9.4 2.10 1,678.0 7.1 1.68 1,588.3 8.0 2.03
Total interest-bearing liabilities/interest expense $18,021.3 $52.9 1.17% $17,080.8 $37.3 0.87% $18,416.3 $49.4 1.07%
Net interest income/margin $135.0 2.67% $117.1 2.47% $141.7 2.75%

Stifel Bancorp, Inc. (16) Net Interest Income Analysis (Unaudited):
Three Months Ended
June 30, 2019 June 30, 2018 March 31, 2019
($ in millions, except percentages) AverageBalance InterestIncome/Expense AverageInterestRate AverageBalance InterestIncome/Expense AverageInterestRate AverageBalance InterestIncome/Expense AverageInterestRate
Interest-earning assets:
Cash and federal funds sold $330.6 $1.8 2.15% $35.4 $0.2 1.96% $732.6 $4.6 2.49%
Investments 6,942.3 61.7 3.56 7,724.2 63.5 3.29 7,234.9 65.5 3.62
Loans 9,118.2 95.9 4.21 7,533.1 68.4 3.63 8,981.7 93.3 4.15
Other interest-bearing assets 57.2 0.6 4.38 64.5 0.7 4.43 52.3 1.0 8.45
Total interest-earning assets/interest income 16,448.3 160.0 3.89 15,357.2 132.8 3.46 17,001.5 164.4 3.87
Interest-bearing liabilities:
Deposits 14,660.7 29.3 0.80 13,441.3 15.3 0.46 15,282.3 28.1 0.73
FHLB 550.2 2.9 2.12 844.6 3.1 1.47 461.4 1.7 1.45
Other interest-bearing liabilities 1.7 0.1 6.73 16.1 0.2 4.35 1.7 — 9.16
Total interest-bearing liabilities/interest expense $15,212.6 32.3 0.85% $14,302.0 18.6 0.52% $15,745.4 29.8 0.76%
Net interest income/margin $127.7 3.11% $114.2 2.97% $134.6 3.17%

Stifel Bancorp, Inc. - a component of Global Wealth Management
Selected operating data (unaudited):Three Months Ended Six Months Ended
($ in 000s, except percentages)6/30/19 6/30/18 % Change 3/31/19 % Change 6/30/19 6/30/18 % Change
Net interest income$127,714 $114,200 11.8 $134,564 (5.1) $262,278 $221,827 18.2
Bank loan loss provision 2,353 4,277 (45.0) 2,283 3.1 4,636 6,320 (26.6)
Charge-offs 54 — n/m 56 (3.6) 110 14 685.7
Net interest margin 3.11% 2.97% 14 bps 3.17% (6) bps 3.14% 2.93% 21 bps

Financial Metrics (unaudited): As of
($ in 000s, except percentages) 6/30/19 6/30/18 3/31/19
Total assets $16,645,984 $15,859,681 $16,822,599
Total shareholders' equity 1,236,318 1,103,625 1,242,760
Total loans, net (includes loans held for sale) 9,127,836 7,557,982 8,850,905
Total deposits 14,901,061 13,890,849 15,049,877
Available-for-sale securities, at fair value 2,702,211 3,473,366 3,002,751
Held-to-maturity securities, at amortized cost 3,957,629 4,516,441 4,100,357
Commercial and industrial 3,338,127 2,677,096 3,314,564
Residential real estate 2,984,725 2,703,935 2,928,228
Securities-based loans 1,962,528 1,845,592 1,860,989
Commercial real estate 367,283 127,253 361,950
Loans held for sale 163,511 210,611 144,216
Stifel Bank & Trust:
Common equity tier 1 capital ratio (9) 13.4% 14.4% 13.7%
Tier 1 capital ratio (9) 13.4% 14.4% 13.8%
Total capital ratio (9) 14.5% 15.4% 14.9%
Tier 1 leverage ratio (9) 7.2% 7.2% 7.1%
Stifel Bank:
Common equity tier 1 capital ratio (9) 17.7% n/a 17.5%
Tier 1 capital ratio (9) 17.7% n/a 17.5%
Total capital ratio (9) 18.9% n/a 18.6%
Tier 1 leverage ratio (9) 7.3% n/a 7.5%
Credit Metrics:
Allowance for loan losses $90,472 $73,775 $88,172
Allowance as a percentage of retained loans 1.00% 0.99% 1.00%
Net charge-offs as a percentage of average loans 0.00% 0.00% 0.00%
Total nonperforming assets $21,111 $18,696 $21,276
Nonperforming assets as % of total assets 0.13% 0.12% 0.13%

Global Wealth Management Summary Results of Operations (Unaudited)
Three Months Ended Six Months Ended
($ in 000s) 6/30/19 6/30/18 %Change 3/31/19 %Change 6/30/19 6/30/18 %Change
Revenues:
Commissions $120,284 $118,129 1.8 $109,927 9.4 $230,211 $237,334 (3.0)
Principal transactions 42,104 41,161 2.3 43,267 (2.7) 85,371 84,690 0.8
Brokerage revenues 162,388 159,290 1.9 153,194 6.0 315,582 322,024 (2.0)
Asset management and service fees 211,156 199,557 5.8 195,253 8.1 406,409 395,346 2.8
Net interest 137,599 124,987 10.1 145,295 (5.3) 282,894 243,442 16.2
Investment banking 10,559 8,049 31.2 8,223 28.4 18,782 15,737 19.3
Other income 10,731 5,444 97.1 8,645 24.1 19,376 6,353 205.0
Net revenues 532,433 497,327 7.1 510,610 4.3 1,043,043 982,902 6.1
Non-interest expenses:
Compensation and benefits 262,321 237,879 10.3 247,473 6.0 509,794 479,639 6.3
Non-compensation operating expenses 77,760 71,553 8.7 68,647 13.3 146,407 138,597 5.6
Total non-interest expenses 340,081 309,432 9.9 316,120 7.6 656,201 618,236 6.1
Income before income taxes $192,352 $187,895 2.4 $194,490 (1.1) $386,842 $364,666 6.1
As a percentage of net revenues:
Compensation and benefits 49.3 47.8 48.5 48.9 48.8
Non-compensation operating expenses 14.6 14.4 13.4 14.0 14.1
Income before income taxes 36.1 37.8 38.1 37.1 37.1

Institutional Group Summary Results of Operations (Unaudited)
Three Months Ended Six Months Ended
($ in 000s) 6/30/19 6/30/18 %Change 3/31/19 %Change 6/30/19 6/30/18 %Change
Revenues:
Commissions $44,697 $48,773 (8.4) $45,522 (1.8) $90,219 $95,343 (5.4)
Principal transactions 54,360 47,823 13.7 60,765 (10.5) 115,125 102,076 12.8
Brokerage revenues 99,057 96,596 2.5 106,287 (6.8) 205,344 197,419 4.0
Advisory fees 82,905 86,922 (4.6) 104,895 (21.0) 187,800 184,595 1.7
Capital raising 86,153 66,112 30.3 48,722 76.8 134,875 137,113 (1.6)
Investment banking 169,058 153,034 10.5 153,617 10.1 322,675 321,708 0.3
Other (17) 2,487 3,195 (22.2) 1,382 80.0 3,869 3,776 2.5
Net revenues 270,602 252,825 7.0 261,286 3.6 531,888 522,903 1.7
Non-interest expenses:
Compensation and benefits 155,779 149,984 3.9 159,411 (2.3) 315,190 309,328 1.9
Non-compensation operating expenses 75,521 66,817 13.0 69,671 8.4 145,192 132,981 9.2
Total non-interest expenses 231,300 216,801 6.7 229,082 1.0 460,382 442,309 4.1
Income before income taxes $39,302 $36,024 9.1 $32,204 22.0 $71,506 $80,594 (11.3)
As a percentage of net revenues:
Compensation and benefits 57.6 59.3 61.0 59.3 59.2
Non-compensation operating expenses 27.9 26.5 26.7 27.3 25.4
Income before income taxes 14.5 14.2 12.3 13.4 15.4

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 June 30, 2019 and 2018, and March 31, 2019. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company’s core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company’s current financial performance. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP measures primarily exclude expenses which management believes are, in some instances, non-recurring and not representative of on-going business.

A limitation of utilizing these non-GAAP measures is that the GAAP accounting effects of these charges do, in fact, reflect the underlying financial results of the Company’s business and these effects should not be ignored in evaluating and analyzing its financial results. Therefore, the Company believes that GAAP measures and the same respective non-GAAP measures of the Company’s financial performance should be considered together.

The following table provides details with respect to reconciling net income and earnings per diluted common share on a GAAP basis for the three and six months ended June 30, 2019 and 2018, and the three months ended March 31, 2019 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) 6/30/19 6/30/18 3/31/19 6/30/19 6/30/18
GAAP net income applicable to Stifel Financial Corp. $109,085 $87,287 $99,207 $208,292 $176,048
Preferred dividend 5,288 2,344 2,344 7,632 4,688
Net income available to common shareholders 103,797 84,943 96,863 200,660 171,360
Non-GAAP adjustments:
Merger-related and severance (18) 6,721 12,776 8,191 14,912 22,729
Litigation-related (19) 3,507 6,000 — 3,507 6,000
Provision for income taxes (20) (2,654) (4,932) (534) (3,188) (7,499)
Total non-GAAP adjustments 7,574 13,844 7,657 15,231 21,230
Non-GAAP net income available to common shareholders $111,371 $98,787 $104,520 $215,891 $192,590
Weighted average diluted shares outstanding 79,079 81,299 79,210 79,160 81,548
GAAP earnings per diluted common share $1.38 $1.07 $1.25 $2.63 $2.16
Non-GAAP adjustments 0.10 0.17 0.10 0.19 0.26
Non-GAAP earnings per diluted common share $1.48 $1.24 $1.35 $2.82 $2.42
GAAP earnings per diluted common share available to common shareholders $1.31 $1.04 $1.22 $2.53 $2.10
Non-GAAP adjustments 0.10 0.18 0.10 0.20 0.26
Non-GAAP earnings per diluted common share available to common shareholders $1.41 $1.22 $1.32 $2.73 $2.36

Footnotes
(1) Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”
(2) Non-GAAP pre-tax margin for the three months ended June 30, 2019 of 19.8% is calculated by adding non-GAAP adjustments of $10.2 million to our GAAP income before income taxes of $148.0 million and dividing it by non-GAAP net revenues for the quarter of $800.8 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(3) Non-GAAP pre-tax margin for the six months ended June 30, 2019 of 19.4% is calculated by adding non-GAAP adjustments of $18.4 million to our GAAP income before income taxes of $285.8 million and dividing it by non-GAAP net revenues for the quarter of $1.6 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(4) Excludes revenue included in the Other segment.
(5) See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”
(6) Book value per common share represents shareholders’ equity (excluding preferred stock and non-controlling interests) divided by period end common shares outstanding.
(7) Computed by dividing annualized net income by average common shareholders’ equity or, in the case of non-GAAP return on common equity, computed by dividing non-GAAP net income by average common shareholders’ equity.
(8) Computed by dividing annualized net income by average tangible shareholders' equity or, in the case of non-GAAP return on tangible common equity, computed by dividing non-GAAP net income by average tangible shareholders' equity. Tangible common shareholders' equity equals total common shareholders' equity less goodwill and identifiable intangible assets.
(9) Capital ratios are estimates at time of the Company’s earnings release.
(10) Reflects change in the definition of producing brokers as of January 1, 2019. Prior period amounts have been restated to conform with current period presentation.
(11) Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at our bank subsidiaries.
(12) Includes Private Client Group and Trust Business.
(13) Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.
(14) Asset management assets included in Private Client Group or Trust accounts.
(15) Return on assets (ROA) is calculated based on prior period-end balances for Private Client Group, period-end balances for Asset Management, and average quarterly balances for Individual Program Banks.
(16) Includes Stifel Bank & Trust and Stifel Bank, formerly known as The Business Bank of St. Louis, which was acquired on August 31, 2018, and Stifel Trust Company, N.A.
(17) Includes net interest, asset management and service fees, and other income.
(18) Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company’s on-going business.
(19) Primarily related to costs associated with Company’s legal matters.
(20) See details of non-GAAP adjustments under “Provision for Income Taxes.”

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

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Source: Stifel Financial Corporation

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