EX-99.1 2 d817351dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

STIFEL REPORTS THIRD QUARTER 2014 FINANCIAL RESULTS

Highlights for the three months ended September 30, 2014:

 

  •   Net revenues of $523.5 million, increased 9% compared with the year-ago quarter.

 

  •   Record Global Wealth Management revenues of $317.2 million

Highlights for the nine months ended September 30, 2014:

 

  •   Record net revenues of $1.6 billion, increased 16% compared with the year-ago period.

 

  •   Net income of $130.9 million, or $1.72 per diluted common share, increased 15% compared with the year-ago period.

ST. LOUIS, November 6, 2014 – Stifel Financial Corp. (NYSE: SF) today reported net income of $39.9 million, or $0.52 per diluted common share on net revenues of $523.5 million for the three months ended September 30, 2014, compared with net income of $69.7 million, or $0.93 per diluted common share, on net revenues of $478.6 million for the third quarter of 2013. Included in net income for the three months ended September 30, 2013 is a tax benefit related to discontinuing the business operations of SN Canada and merger-related expenses. The after tax impact of these items was $0.47 per diluted common share.

For the three months ended September 30, 2014, the Company reported non-GAAP net income from continuing operations of $48.7 million, or $0.64 per diluted common share, compared with non-GAAP net income from continuing operations of $39.6 million, or $0.53 per diluted common share for the third quarter of 2013. These non-GAAP results exclude merger-related expenses associated with the Company’s acquisitions. The after-tax impact is $0.12 per diluted common share.

For the nine months ended September 30, 2014, the Company reported net income of $130.9 million, or $1.72 per diluted common share on record net revenues of $1.6 billion, compared with net income of $113.7 million, or $1.56 per diluted common share, on net revenues of $1.4 billion for the comparable period in 2013.

For the nine months ended September 30, 2014, the Company reported non-GAAP net income from continuing operations of $152.0 million, or $2.00 per diluted common share, compared with non-GAAP net income from continuing operations of $124.8 million, or $1.71 per diluted common share for the comparable period in 2013. A reconciliation of the Company’s GAAP results to these non-GAAP measures is discussed below under “Non-GAAP Financial Measures.”

 

     Three Months Ended     Nine Months Ended  
(in 000s)    9/30/14      9/30/13     %
Change		     6/30/14     %
Change		     9/30/14     9/30/13     %
Change		  

Net revenues

    $ 523,455       $ 478,639        9.4      $ 560,147        (6.6 )    $ 1,630,348      $ 1,410,921        15.6   

Net income from continuing operations

    $ 40,093       $ 74,929        (46.5 )    $ 45,577        (12.0 )    $ 133,643      $ 120,782        10.6   

Net income

    $ 39,903       $ 69,690        (42.7 )    $ 43,601        (8.5 )    $ 130,886      $ 113,745        15.1   

Non-GAAP net income from continuing operations1

    $ 48,698       $ 39,649        22.8      $ 51,266        (5.0 )    $ 151,992      $ 124,840        21.7   

Earnings per basic common share:

                  

Income from continuing operations

    $ 0.60       $ 1.16        (48.3 )    $ 0.69        (13.0 )    $ 2.01      $ 1.91        5.2   

Loss from discontinued operations

      —           (0.08 )      (100.0 )      (0.03 )      (100.0 )      (0.04 )      (0.11 )      (63.6 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per basic common share

    $ 0.60       $ 1.08        (44.4 )    $ 0.66        (9.1 )    $ 1.97      $ 1.80        9.4   

Earnings per diluted common share:

                  

Income from continuing operations

    $ 0.52       $ 1.00        (48.0 )    $ 0.60        (13.3 )    $ 1.76      $ 1.66        6.0   

Loss from discontinued operations

      —           (0.07 )      (100.0 )      (0.02 )      (100.0 )      (0.04 )      (0.10 )      (60.0 ) 
  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per diluted common share

    $ 0.52       $ 0.93        (44.1 )    $ 0.58        (10.3 )    $ 1.72      $ 1.56        10.3   

Non-GAAP net income from continuing operations1

    $ 0.64       $ 0.53        20.8      $ 0.68        (5.9 )    $ 2.00      $ 1.71        17.0   

Weighted average number of common shares outstanding:

  

    

Basic

      66,691         64,706        3.1        66,302        0.6        66,344        63,133        5.1   

Diluted

      76,681         75,191        2.0        75,641        1.4        76,011        72,851        4.3   

 

1  A reconciliation of the Company’s GAAP results to these non-GAAP measures is discussed under “Non-GAAP Financial Measures.”

 

1

Chairman’s Comments

“In the third quarter, we had record results in Global Wealth Management and solid results in Investment Banking. Our equity and fixed income brokerage businesses were impacted in the quarter by lower volumes, particularly in the month of August. On the positive side, market volumes have strengthened in the month of October,” stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

“Our results reflect two months of our partnership with Oriel Securities, our U.K. investment bank. The initial integration is going well and we look forward to their future contributions. Looking ahead, we expect to close the acquisition of Legg Mason Investment Counsel in November, which will add $9 billion in client assets.”

Brokerage Revenues

Brokerage revenues, defined as commissions plus principal transactions revenues were $261.0 million, a 3% decrease compared with the third quarter of 2013 and an 6% decrease compared with the second quarter of 2014.

 

•   Global wealth management brokerage revenues were $159.4 million, a 1% increase compared with the third quarter of 2013 and a 2% decrease compared with the second quarter of 2014.

 

•   Institutional equity brokerage revenues were $58.2 million, a 1% decrease compared with the third quarter of 2013 and a 6% decrease compared with the second quarter of 2014.

 

•   Institutional fixed income brokerage revenues were $43.4 million, a 16% decrease compared with the third quarter of 2013 and a 20% decrease compared with the second quarter of 2014.

Investment Banking Revenues

Investment banking revenues were $120.1 million, a 29% increase compared with the third quarter of 2013 and a 15% decrease compared with the second quarter of 2014.

 

•   Equity capital raising revenues were $44.1 million, a 14% increase compared with the third quarter of 2013 and a 28% decrease compared with the second quarter of 2014.

 

•   Fixed income capital raising revenues were $25.1 million, a 65% increase compared with the third quarter of 2013 and a 24% increase compared with the second quarter of 2014.

 

•   Advisory fee revenues were $50.9 million, a 31% increase compared with the third quarter of 2013 and an 16% decrease compared with the second quarter of 2014.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $96.6 million, a 26% increase compared with the third quarter of 2013 and a 3% increase compared with the second quarter of 2014. The increase is due to the higher value of fee-based accounts, as a result of market appreciation and new client assets.

Compensation and Benefits Expenses

For the quarter ended September 30, 2014, compensation and benefits expenses were $331.4 million, which included $7.2 million of merger-related expenses. This compares with $326.0 million in the third quarter of 2013, which includes merger-related expenses of $28.6 million, and $355.3 million in the second quarter of 2014, which includes merger-related expenses of $1.5 million.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 61.8% in the third quarter of 2014, compared with 62.0% in the third quarter of 2013 and 63.0% in the second quarter of 2014.

Transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, as a percentage of net revenues was 5.1% in the third quarter of 2014, compared with 4.6% in the third quarter of 2013 and 4.5% in the second quarter of 2014.

 

2

Non-Compensation Operating Expenses

For the quarter ended September 30, 2014, non-compensation operating expenses were $126.2 million, which included merger-related expenses of $3.7 million. This compares with $121.6 million in the third quarter of 2013, which includes merger-related expenses of $4.8 million, and $127.4 million in the second quarter of 2014, which includes merger-related expenses of $4.5 million.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2014 was 23.3%, compared with 24.4% in the third quarter of 2013 and 21.9% in the second quarter of 2014.

Provision for Income Taxes

The effective income tax rate for the quarter ended September 30, 2014 was 39.0%. The provision for income taxes for the quarter ended September 30, 2013 was impacted by the U.S. tax benefit of $58.2 million as a result of the Company’s investment in SN Canada. The effective income tax rate was 41.2% in the second quarter of 2014.

Assets and Capital

Assets

 

•   Assets increased 7% to $9.3 billion as of September 30, 2014 from $8.7 billion as of September 30, 2013. The increase is primarily attributable to growth of Stifel Bank, the Company’s bank subsidiary, which as of September 30, 2014 has grown its assets to $5.0 billion from $4.5 billion as of September 30, 2013.

 

•   At September 30, 2014, the Company’s Level 3 assets of $177.8 million, or 2% of total assets, consisted of $101.8 million of auction rate securities and $76.0 million of partnership interests, private company investments, private equity, and fixed income securities. The Company’s Level 3 assets as a percentage of total assets measured at fair value was 6% at September 30, 2014.

 

•   Non-performing assets as a percentage of total assets as of September 30, 2014 was 0.07%.

Capital

 

•   The Company’s Tier 1 leverage capital ratio was 16.0% at September 30, 2014 and Tier 1 risk-based capital ratio was 27.9% at September 30, 2014.

 

•   At September 30, 2014, book value per common share was $33.92 based on 66.0 million common shares outstanding.

 

•   Stockholders’ equity as of September 30, 2014 increased $244.1 million, or 12%, to $2.2 billion from $2.0 billion as of September 30, 2013.

 

3

Conference Call Information

Stifel Financial Corp. will host its third quarter 2014 financial results conference call on Thursday, November 6, 2014, at 5:00 p.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifel’s Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID #28188942. A live audio webcast of the call, as well as a presentation highlighting the Company’s results, will be available through the Company’s web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited; Keefe, Bruyette & Woods Limited; and Oriel Securities Limited. The Company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. offers 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.

 

4

Summary Results of Operations (Unaudited)

 

     Three Months Ended     Nine Months Ended  
(in thousands, except per share amounts)    9/30/14     9/30/13     %
Change		     6/30/14     %
Change		     9/30/14     9/30/13     %
Change		  

Revenues:

                 

Commissions

    $ 151,621      $ 145,837        4.0      $ 152,712        (0.7 )    $ 463,749      $ 446,498        3.9   

Principal transactions

      109,378        122,583        (10.8 )      125,676        (13.0 )      361,515        341,153        6.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Brokerage revenues

      260,999        268,420        (2.8 )      278,388        (6.2 )      825,264        787,651        4.8   

Investment banking

      120,147        92,851        29.4        141,515        (15.1 )      393,966        289,199        36.2   

Asset management and service fees

      96,638        76,710        26.0        94,231        2.6        280,039        221,711        26.3   

Other income

      4,803        13,063        (63.2 )      8,742        (45.1 )      18,745        45,269        (58.6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating revenues

      482,587        451,044        7.0        522,876        (7.7 )      1,518,014        1,343,830        13.0   

Interest revenue

      52,096        39,130        33.1        46,113        13.0        141,035        101,829        38.5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

      534,683        490,174        9.1        568,989        (6.0 )      1,659,049        1,445,659        14.8   

Interest expense

      11,228        11,535        (2.7 )      8,842        27.0        28,701        34,738        (17.4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net revenues

      523,455        478,639        9.4        560,147        (6.6 )      1,630,348        1,410,921        15.6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-interest expenses:

                 

Compensation and benefits

      331,440        326,020        1.7        355,267        (6.7 )      1,033,478        958,179        7.9   

Occupancy and equipment rental

      41,611        41,288        0.8        42,967        (3.2 )      125,110        116,090        7.8   

Communications and office supplies

      27,464        26,122        5.1        25,869        6.2        78,151        74,034        5.6   

Commission and floor brokerage

      9,971        10,150        (1.8 )      9,248        7.8        28,247        28,777        (1.8 ) 

Other operating expenses

      47,203        44,051        7.2        49,273        (4.2 )      143,945        126,600        13.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total non-interest expenses

      457,689        447,631        2.2        482,624        (5.2 )      1,408,931        1,303,680        8.1   

Income from continuing operations before income taxes

      65,766        31,008        112.1        77,523        (15.2 )      221,417        107,241        106.5   

Provision for income taxes

      25,673        (43,921 )      *        31,946        (19.6 )      87,774        (13,541 )      *   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income from continuing operations

      40,093        74,929        (46.5 )      45,577        (12.0 )      133,643        120,782        10.6   

Discontinued operations:

                 

Loss from discontinued operations, net of tax

      (190 )      (5,239 )      (96.4 )      (1,976 )      (90.4 )      (2,757 )      (7,037 )      (60.8 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

    $ 39,903      $ 69,690        (42.7 )    $ 43,601        (8.5 )    $ 130,886      $ 113,745        15.1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per basic common share:

                 

Income from continuing operations

    $ 0.60      $ 1.16        (48.3 )    $ 0.69        (13.0 )    $ 2.01      $ 1.91        5.2   

Loss from discontinued operations

      —          (0.08 )      (100.0 )      (0.03 )      (100.0 )      (0.04 )      (0.11 )      (63.6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per basic common share

    $ 0.60      $ 1.08        (44.4 )    $ 0.66        (9.1 )    $ 1.97      $ 1.80        9.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per diluted common share:

                 

Income from continuing operations

    $ 0.52      $ 1.00        (48.0 )    $ 0.60        (13.3 )    $ 1.76      $ 1.66        6.0   

Loss from discontinued operations

      —          (0.07 )      (100.0 )      (0.02 )      (100.0 )      (0.04 )      (0.10 )      (60.0 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per diluted common share

    $ 0.52      $ 0.93        (44.1 )    $ 0.58        (10.3 )    $ 1.72      $ 1.56        10.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average number of common shares outstanding:

                 

Basic

      66,691        64,706        3.1        66,302        0.6        66,344        63,133        5.1   

Diluted

      76,681        75,191        2.0        75,641        1.4        76,011        72,851        4.3   

 

* Percentage not meaningful.

 

5

Statistical Information

(in thousands, except per share, employee and location amounts)

     9/30/14      9/30/13      % Change      6/30/14      % Change  

Statistical Information:

               

Book value per share

    $ 33.92      $ 31.46         7.8       $ 33.18         2.2   

Financial advisors 2

      2,096        2,075         1.0         2,085         0.5   

Full-time associates

      6,083        5,780         5.2         5,881         3.4   

Locations

      360         354         1.7         360         —     

Total client assets

    $ 172,742,000       $ 153,901,000         12.2       $ 173,383,000         (0.4 ) 

Business Segment Results

Summary Segment Results (Unaudited)

 

     Three Months Ended     Nine Months Ended  
(in 000s)    9/30/14     9/30/13     %
Change		     6/30/14     %
Change		     9/30/14     9/30/13     %
Change		  

Net revenues:

                 

Global Wealth Management

    $ 317,241      $ 274,669        15.5      $ 307,247        3.3      $ 921,671      $ 824,344        11.8   

Institutional Group

      215,160        205,132        4.9        255,712        (15.9 )      720,849        593,875        21.4   

Other

      (8,946 )      (1,162 )      (669.9 )      (2,812 )      (218.1 )      (12,172 )      (7,298 )      (66.8 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   $ 523,455      $ 478,639        9.4      $ 560,147        (6.6 )    $ 1,630,348      $ 1,410,921        15.6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating contribution: 3

                 

Global Wealth Management

    $ 94,026      $ 72,128        30.4      $ 89,098        5.5      $ 262,800      $ 220,551        19.2   

Institutional Group

      29,500        34,986        (15.7 )      42,690        (30.9 )      117,812        94,298        24.9   

Other

      (45,495 )      (41,669 )      9.2        (46,858 )      (2.9 )      (133,079 )      (110,192 )      20.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   $ 78,031      $ 65,443        19.2      $ 84,930        (8.1 )    $ 247,553      $ 204,657        21.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

As a percentage of net revenues:

                 

Compensation and benefits

                 

Global Wealth Management

      55.9        58.2          55.9          56.8        58.3     

Institutional Group

      61.2        58.4          61.6          61.5        60.5     

Non-comp. operating expenses

                 

Global Wealth Management

      14.5        15.5          15.1          14.7        14.9     

Institutional Group

      25.1        24.5          21.7          22.2        23.6     

Income before income taxes

                 

Global Wealth Management

      29.6        26.3          29.0          28.5        26.8     

Institutional Group

      13.7        17.1          16.7          16.3        15.9     
  

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    
     14.9        13.6          15.1          15.1        14.5     
  

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

 

2  Includes 139, 145, and 140 independent contractors at September 30, 2014, September 30, 2013, and June 30, 2014, respectively.
3  A reconciliation of the Company’s GAAP results to these non-GAAP measures is discussed under “Non-GAAP Financial Measures.”

 

6

Global Wealth Management Summary Results of Operations (Unaudited)

 

     Three Months Ended     Nine Months Ended  
(in 000s)    9/30/14      9/30/13      %
Change		     6/30/14      %
Change		     9/30/14      9/30/13      %
Change		  

Revenues:

                      

Commissions

    $ 108,154       $ 99,427         8.8      $ 107,438         0.7      $ 323,331       $ 306,089         5.6   

Principal transactions

      51,218         58,658         (12.7 )      54,342         (5.7 )      159,326         171,278         (7.0 ) 
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Brokerage revenues

      159,372         158,085         0.8        161,780         (1.5 )      482657         477367         1.1   

Asset management and service fees

      96,354         76,667         25.7        94,187         2.3        279,671         221,577         26.2   

Net interest

      43,357         27,665         56.6        35,839         21.0        114,458         73,657         55.4   

Investment banking

      11,666         9,394         24.2        9,892         17.9        31,484         35,832         (12.1 ) 

Other income

      6,492         2,858         127.2        5,549         17.0        13,401         15,911         (15.8 ) 
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Net revenues

      317,241         274,669         15.5        307,247         3.3        921,671         824,344         11.8   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Non-interest expenses:

                      

Compensation and benefits

      177,296         159,949         10.8        171,724         3.2        523,188         480,701         8.8   

Non-compensation operating expenses

      45,919         42,592         7.8        46,425         (1.1 )      135,683         123,092         10.2   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total non-interest expenses

      223,215         202,541         10.2        218,149         2.3        658,871         603,793         9.1   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Income before income taxes

    $ 94,026       $ 72,128         30.4      $ 89,098         5.5      $ 262,800       $ 220,551         19.2   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

As a percentage of net revenues:

                      

Compensation and benefits

      55.9         58.2           55.9           56.8         58.3      

Non-compensation operating expenses

      14.5         15.5           15.1           14.7         14.9      

Income before income taxes

      29.6         26.3           29.0           28.5         26.8      

Stifel Bank & Trust (Unaudited)

Key Statistical Information

 

(in 000s, except percentages)    9/30/14     9/30/13     %
Change		     6/30/14     %
Change		  

Other information:

           

Assets

    $ 4,960,572      $ 4,547,071        9.1      $ 5,050,036        (1.8 ) 

Investment securities

      2,720,860        2,949,080        (7.7 )      2,915,235        (6.7 ) 

Retained loans, net

      1,869,551        1,061,313        76.2        1,757,612        6.4   

Loans held for sale

      104,277        75,440        38.2        119,477        (12.7 ) 

Deposits

      4,552,522        4,228,405        7.7        4,653,656        (2.2 ) 

Allowance as a percentage of loans

      1.18 %      1.23 %        0.97 %   

Non-performing assets as a percentage of total assets

      0.07 %      0.32 %        0.10 %   

 

7

Institutional Group Summary Results of Operations (Unaudited)

 

     Three Months Ended     Nine Months Ended  
(in 000s)    9/30/14      9/30/13      %
Change		     6/30/14      %
Change		     9/30/14      9/30/13      %
Change		  

Revenues:

                      

Commissions

    $ 43,467       $ 46,410         (6.3 )    $ 45,274         (4.0 )    $ 140,418       $ 140,409         —     

Principal transactions

      58,160         63,925         (9.0 )      71,333         (18.5 )      202,188         169,875         19.0   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Brokerage revenues

      101,627         110,335         (7.9 )      116,607         (12.8 )      342,606         310,284         10.4   

Capital raising

      57,542         44,490         29.3        71,268         (19.3 )      192,415         139,205         38.2   

Advisory fees

      50,939         39,966         30.7        60,356         (15.6 )      170,068         114,162         49.0   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Investment banking

      108,481         83,456         29.3        131,624         (17.6 )      362,483         253,367         43.1   

Other 4

      5,052         11,341         (55.4 )      7,481         (32.5 )      15,760         30,224         (47.9 ) 
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Net revenues

      215,160         205,132         4.9        255,712         (15.9 )      720,849         593,875         21.4   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Non-interest expenses:

                      

Compensation and benefits

      131,589         119,874         9.8        157,499         (16.5 )      443,104         359,091         23.4   

Non-compensation operating expenses

      54,071         50,272         7.6        55,523         (2.6 )      159,933         140,486         13.8   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Total non-interest expenses

      185,660         170,146         9.1        213,022         (12.8 )      603,037         499,577         20.7   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Income before income taxes

    $ 29,500       $ 34,986         (15.7 )    $ 42,690         (30.9 )    $ 117,812       $ 94,298         24.9   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

As a percentage of net revenues:

                      

Compensation and benefits

      61.2         58.4           61.6           61.5         60.5      

Non-compensation operating expenses

      25.1         24.5           21.7           22.2         23.6      

Income before income taxes

      13.7         17.1           16.7           16.3         15.9      

Institutional Group Brokerage & Investment Banking Revenues (Unaudited)

 

     Three Months Ended     Nine Months Ended  
(in 000s)    9/30/14      9/30/13      %
Change		     6/30/14      %
Change		     9/30/14      9/30/13      %
Change		  

Institutional brokerage:

                      

Equity

    $ 58,198       $ 58,677         (0.8 )    $ 62,087         (6.3 )    $ 186,053       $ 172,187         8.1   

Fixed income

      43,429         51,658         (15.9 )      54,520         (20.3 )      156,553         138,097         13.4   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Institutional brokerage

      101,627         110,335         (7.9 )      116,607         (12.8 )      342,606         310,284         10.4   

Investment banking:

                      

Capital raising:

                      

Equity

      34,312         30,679         11.8        51,903         (33.9 )      130,603         95,501         36.8   

Fixed income

      23,230         13,811         68.2        19,365         20.0        61,812         43,704         41.4   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Capital raising

      57,542         44,490         29.3        71,268         (19.3 )      192,415         139,205         38.2   

Advisory fees:

      50,939         38,966         30.7        60,356         (15.6 )      170,068         114,162         49.0   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

Investment banking

    $ 108,481       $ 83,456         29.3      $ 131,624         (17.6 )    $ 362,483       $ 253,367         43.1   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

     

 

 

  

 

4  Includes net interest and other income.

 

8

Non-GAAP Financial Measures

The Company utilized non-GAAP calculations of presented net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin, and basic and diluted earnings per share as additional measures to aid in understanding and analyzing the Company’s financial results for the three and nine months ended September 30, 2014. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company’s core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s current financial performance. These non-GAAP amounts exclude certain compensation and non-compensation operating expenses associated with the Company’s acquisitions.

A limitation of utilizing these non-GAAP measures of net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expenses ratios, pre-tax margin, and basic and diluted earnings per share is that the GAAP accounting effects of these merger-related charges do in fact reflect the underlying financial results of the Company’s business and these effects should not be ignored in evaluating and analyzing its financial results. Therefore, the Company believes that GAAP measures of net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin, and basic and diluted earnings per share and the same respective non-GAAP measures of the Company’s financial performance should be considered together.

The following table provides details with respect to reconciling net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin, and basic and diluted earnings per share on a GAAP basis for the three and nine months ended September 30, 2014 to the aforementioned expenses on a non-GAAP basis for the same period.

 

     Three Months Ended September 30, 2014      Nine Months Ended September 30, 2014  
(in 000s, except per share amounts)    Non-GAAP      Non-Core     GAAP      Non-GAAP      Non-Core     GAAP  

Net revenues

    $ 524,725       $ (1,270 )    $ 523,455       $ 1,634,655       $ (4,307 )    $ 1,630,348   
 

Non-interest expenses:

                  

Compensation and benefits

      324,193         7,247        331,440         1,022,434         11,044        1,033,478   

Non-compensation operating expenses

      122,501         3,748        126,249         364,688         10,765        375,453   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Total non-interest expenses

      446,694         10,995        457,689         1,387,122         21,809        1,408,931   

Income from continuing operations before income taxes

      78,031         (12,265 )      65,766         247,533         (26,116 )      221,417   

Provision for income taxes

      29,333         (3,660 )      25,673         95,541         (7,767 )      87,774   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Net income from continuing operations

    $ 48,698       $ (8,605 )    $ 40,093       $ 151,992       $ (18,349 )    $ 133,643   
  

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Earnings per share:

                  

Basic

    $ 0.73       $ (0.13 )    $ 0.60       $ 2.29       $ (0.28 )    $ 2.01   

Diluted

    $ 0.64       $ (0.12 )    $ 0.52       $ 2.00       $ (0.24 )    $ 1.76   
 

As a percentage of net revenues:

                  

Compensation and benefits

      61.8           63.3         62.5           63.4   

Non-compensation operating expenses

      23.3           24.1         22.4           23.0   

Income before income taxes

      14.9           12.6         15.1           13.6   

Investor Relations

Sarah Anderson

(415) 364-2500, investorrelations@stifel.com

 

9