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Stifel Reports Record Fourth Quarter and Full-Year Results

January 29, 2021 7:00 AM

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

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

Chairman’s Comments

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

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

Fourth Quarter Review

Quarterly Highlights

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

Net Revenues

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

Brokerage Revenues

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

Three Months Ended
($ in 000s) 12/31/20 12/31/19 % Change 9/30/20 % Change
Global Wealth Management $185,719 $174,000 6.7 $162,627 14.2
Institutional brokerage:
Equity capital markets 69,201 45,989 50.5 54,204 27.7
Fixed income capital markets 87,664 69,563 26.0 96,706 (9.3)
Total institutional brokerage 156,865 115,552 35.8 150,910 3.9
Total brokerage revenues $342,584 $289,552 18.3 $313,537 9.3

Investment Banking Revenues

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

Three Months Ended
($ in 000s) 12/31/20 12/31/19 % Change 9/30/20 % Change
Capital raising:
Global Wealth Management $9,562 $9,278 3.1 $8,113 17.9
Equity capital markets 104,097 64,384 61.7 78,462 32.7
Fixed income capital markets 50,613 48,181 5.0 50,717 (0.2)
Institutional Group 154,710 112,565 37.4 129,179 19.8
Total capital raising (6) 164,272 121,843 34.8 137,292 19.7
Advisory fees 173,395 155,331 11.6 80,842 114.5
Total investment banking (6) $337,667 $277,174 21.8 $218,134 54.8

Asset Management and Service Fee Revenues

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

Net Interest Income

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

Annual Review

Annual Highlights

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

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

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

Net Revenues

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

Brokerage Revenues

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

Year Ended
($ in 000s) 12/31/20 12/31/19 % Change
Global Wealth Management $687,348 $649,699 5.8
Institutional brokerage:
Equity capital markets 256,793 166,577 54.2
Fixed income capital markets 404,789 255,969 58.1
Total institutional brokerage 661,582 422,546 56.6
Total brokerage revenues $1,348,930 $1,072,245 25.8

Investment Banking Revenues

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

Year Ended
($ in 000s) 12/31/20 12/31/19 % Change
Capital raising:
Global Wealth Management 36,005 37,915 (5.0)
Equity capital markets 306,031 204,405 49.7
Fixed income capital markets 182,121 127,122 43.3
Institutional Group 488,152 331,527 47.2
Total capital raising (6) 524,157 369,442 41.9
Advisory fees 428,147 447,979 (4.4)
Total investment banking (6) $952,304 $817,421 16.5

Asset Management and Service Fee Revenues

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

Net Interest Income

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

Fourth Quarter & Full Year 2020

Compensation and Benefits Expenses

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

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

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

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

Non-Compensation Operating Expenses

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

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

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

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

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

Provision for Income Taxes

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

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

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

Conference Call Information

Stifel Financial Corp. will host its fourth quarter 2020 financial results conference call on Friday, January 29, 2021, at 9:30 a.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifel’s Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID 1145988. A live audio webcast of the call, as well as a presentation highlighting the Company’s results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated, including its Eaton Partners business division; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc. The Company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank and Stifel Bank & Trust offer a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company’s website at www.stifel.com. For global disclosures, please visit www.stifel.com/investor-relations/press-releases.

Forward-Looking Statements

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

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

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

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

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

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

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

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

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

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

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

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

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

Non-GAAP Financial Measures

The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Company’s financial results for the three months ended December 31, 2020, December 31, 2019, and September 30, 2020 and the years ended December 31, 2020 and 2019. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company’s core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company’s current financial performance. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP measures primarily exclude expenses which management believes are, in some instances, non-recurring and not representative of on-going business.

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

The following table provides details with respect to reconciling net income and earnings per diluted common share on a GAAP basis for the three months ended December 31, 2020, December 31, 2019, and September 30, 2020, and the years ended December 31, 2020 and 2019 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

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

Footnotes

(1)All share and per share information has been retroactively adjusted to reflect the December 2020 three-for-two stock split.
(2)Annualized return on average tangible common shareholders’ equity (“ROTE”) is calculated by dividing annualized net income applicable to common shareholders by average tangible shareholders’ equity or, in the case of non-GAAP ROTE, calculated by dividing non-GAAP net income applicable to common shareholders by average tangible shareholders’ equity. Tangible common shareholders’ equity equals total Stifel Financial common shareholders’ equity less goodwill and identifiable intangible assets and the deferred taxes on goodwill and intangible assets. Average deferred taxes on goodwill and intangible assets was $50.7 million, $46.5 million, and $49.6 million, as of December 31, 2020 and 2019, and September 30, 2020, respectively. Historical periods have been restated to conform with the current period presentation.
(3)Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”
(4)Non-GAAP pre-tax margin for the three months ended December 31, 2020 of 23.8% is calculated by adding non-GAAP adjustments of $17.7 million to GAAP income before income taxes of $234.7 million and dividing it by non-GAAP net revenues for the quarter of $1.1 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(5)Non-GAAP pre-tax margin for the year ended December 31, 2020 of 19.0% is calculated by adding non-GAAP adjustments of $60.5 million to GAAP income before income taxes of $651.2 million and dividing it by non-GAAP net revenues of $3.8 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(6)Excludes revenue included in the Other segment.
(7)See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”
(8)In the first quarter of 2020, the Company adopted ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments,” which amends several aspects of the measurement of credit losses on certain financial instruments, including replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (CECL) model. For further information about ASU No. 2016-13, see Note 2 “Summary of Significant Accounting Policies” in Part II, Item 8 “Financial Statements and Supplementary Data” in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
(9)Book value per common share represents shareholders’ equity (excluding preferred stock and non-controlling interests) divided by period end common shares outstanding.
(10)Annualized return on average common shareholders’ equity (“ROE”) is calculated by dividing annualized net income applicable to common shareholders by average Stifel Financial common shareholders’ equity or, in the case of non-GAAP ROE, calculated by dividing non-GAAP net income applicable to commons shareholders by average Stifel Financial common shareholders’ equity.
(11) Capital ratios are estimates at time of the Company’s earnings release.
(12) On March 27, 2020, the Company sold Ziegler Capital Management LLC, which had approximately $10.5 billion of fee-based client assets at December 31, 2019.
(13) Includes client margin balances held by the Company’s broker-dealer subsidiaries and securities-based loans held at the Company’s bank subsidiaries.
(14) Includes Private Client Group and Trust Business.
(15) Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.
(16) Asset management assets managed in Private Client Group or Trust accounts.
(17) Return on assets (ROA) is calculated based on prior period-end balances for Private Client Group, period-end balances for Asset Management, and average quarterly balances for Individual Program Banks.
(18) Includes Stifel Bank & Trust, Stifel Bank, Stifel Trust Company, N.A, and Stifel Trust Company Delaware, N.A.
(19) Includes capital raising and advisory fees.
(20) Includes net interest, asset management and service fees, and other income.
(21) Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company’s on-going business.
(22) Primarily related to costs associated with Company’s legal matters.
(23) See details of non-GAAP adjustments under “Provision for Income Taxes.”

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

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Source: Stifel Financial Corporation

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