STIFEL FINANCIAL CORP.
Form 8-K Dated November 6, 2006
Exhibit 99.1: Press Release
[Stifel Financial Corp. logo]Stifel Financial NewsOne Financial Plaza | 501 North Broadway | St. Louis, MO 63102 | (314) 342-2000
For further information contact:
James M. Zemlyak, Chief Financial Officer
(314) 342-2228 zemlyakj@stifel.com
For Immediate Release
Stifel Financial Corp. Reports Third Quarter Results
Record Quarterly Revenue of $115 Million, up 76%
Core diluted EPS $0.69, up 77%
GAAP diluted EPS $0.39
St. Louis, Missouri - November 6, 2006- Stifel Financial Corp. (NYSE: "SF") today reported unaudited quarterly net income of $5.4 million, or $0.39 per diluted share, on record revenue of $115 million for the quarter ended September 30, 2006. For the comparable quarter of 2005, net income was $4.9 million, or $0.39 per diluted share, on revenue of $65 million. For the nine months ended September 30, 2006, we posted net income of $8.2 million, or $0.59 per diluted share, on record revenue of $336 million, compared with $14.9 million, or $1.19 per diluted share, on revenue of $192 million, for the same period one year earlier.
At September 30, 2006, our equity was $211 million, resulting in book value per share of $18.39.
After adjusting for acquisition related charges, principally compensation expense recorded for stock-based awards offered to key associates of LM Capital Markets, non-GAAP net income and non-GAAP earnings per diluted share, our "Core earnings", were $9.6 million and $0.69 for the third quarter of 2006 and $27.7 million and $1.99 for the first nine months of 2006. As compared to the prior year, Core earnings increased 97% and 86% for the quarter and nine months ended, respectively. A reconciliation between our GAAP results and Core earnings is discussed below.
Business Highlights
- Our Private Client Group ("PCG"), Equity Capital Markets ("ECM"), and Fixed Income Capital Markets ("FICM") achieved record revenue and profits for quarter and nine-months ended September 30, 2006.
- Our third quarter revenue grew to a record $115.2 million, a 76% increase over the prior year third quarter.
- Our nine month revenue grew to a record $336.2 million, a 75% increase over the prior year.
- Our combined capital markets revenue (sales, trading, and investment banking) grew to a record $56.7 million, up 383%, over the prior year third quarter. For the nine months, capital market revenue totaled $155.2 million, up 296%, over the prior year.
- We continued our expansion of the PCG opening 3 branch offices during the quarter for a total of 100.
- Our number of PCG investment executives that we employ, including independent contractors, has increased to 680 at September 30, 2006.
- For the nine months ending September 30, 2006, utilizing Core earnings, pretax margin was 15% and annualized return on average equity totaled 19%.
- Asset management and service fees increased 27% to $14.6 million over the prior year third quarter, and increased 36% for the nine months as compared to 2005.
Chairman and Chief Executive Officer, Ronald J. Kruszewski, commented, "Our third quarter results begin to demonstrate the earnings power of our Company. While pleased with these results, we see opportunity to significantly increase market share in all of our business segments."
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Revenue
As a result of our Legg Mason Capital Markets ("LM Capital Markets") acquisition we added 429 associates and 22 offices on December 1, 2005. Unless noted otherwise, our increase in revenue and non-interest expenses for the quarter and year-to-date for the total company and segment can be attributed principally to the acquisition and increased number of PCG offices and increased number of PCG investment executives.
Commission and Principal Transactions
Third Quarter
Commission and principal transaction revenue increased 87% to $70.0 million from $37.4 million in the same period last year with increases of 5%, 1,255% and 851% in PCG, ECM, and FICM, respectively.
First Nine Months
Commission and principal transaction revenue increased 95% to $208.7 million from $107.0 million in the same period last year with increases of 13%, 1,082% and 465% in PCG, ECM, and FICM, respectively.
Investment Banking Revenue
Third Quarter
Investment banking revenue increased to $19.7 million from $11.7 million in the same period last year. Capital raising revenue increased 7% to $10.5 million compared to $9.8 million in the third quarter of 2005. Strategic advisory revenue increased 388% as compared to the same period last year.
First Nine Months
Investment banking revenue have increased 25% to $51.2 million from $41.1 million from the same period last year. Capital raising revenue decreased 37% to $22.2 million from $35.6 million in the prior year, offset by an increase in strategic advisory fees of 420% to $28.9 million from $5.6 million in the same prior year period.
Asset Management and Service Fees
Third Quarter
Asset management and service fees increased 27% to $14.6 million from $11.4 million in the third quarter of last year due to a 37% increase in the number of our managed accounts and a 52% increase in the value of assets under management in those accounts.
First Nine Months
Year to date asset management and service fees increased 36% to $42.3 million from $31.0 million in the prior year as a result of a 38% increase in the number of our managed accounts and a 77% increase in the value of assets under management in those accounts.
Net Interest Revenue
Third Quarter
Net interest revenue increased 43% to $4.5 million from $3.1 million in the same period last year due principally to increased interest charged on customer margin accounts and increased interest earned on fixed income inventory held for sale to customers offset by increased costs to carry higher levels of firm inventory, increased rates charged for bank borrowings and stock loans to finance customer borrowings, and increased interest expense on debenture issued in the third quarter of calendar 2005. Weighted average effective external rates increased 39% over the prior year to 4.16% resulting from the Federal Reserve Board's increase in the Fed funds rate.
First Nine Months
Net interest revenue increased 35% to $11.6 million from $8.6 million in the same period last year due principally to increased revenue from stock borrow activities, increased interest charged on customer margin accounts and increased interest earned on fixed income inventory held for sale to customers offset by increased costs to carry higher levels of firm inventory, increased rates charged for bank borrowings and stock loans to finance customer borrowings, and increased interest expense on debenture issued in the third quarter of calendar 2005.
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Non-Interest Expenses
Employee Compensation and Benefits
Third Quarter
Employee compensation and benefits increased 83% to $77.5 million from $42.4 million in the prior year third quarter. As a percentage of net revenue, compensation and benefits totaled 70.5% in the third quarter of 2006, and 66.3% in the 2005 comparable quarter. A portion of compensation and benefits includes transition pay of $3.7 million in the third quarter of 2006 and $2.7 million in the 2005 comparable quarter, in connection with the Company's continuing expansion efforts. In addition, compensation and benefits includes $7.1 million for the quarter ended September 30, 2006, primarily stock based compensation, in acquisition related charges for payments in connection with the LM Capital Markets acquisition. Excluding the acquisition related charges, compensation and benefits as a percentage of net revenue totaled 64.1% in the third quarter of 2006 and 66.3% in the 2005 comparable quarter. The Company excludes acquisition related expenses in its analysis of compensation and benefits, a non-GAAP measure, because it believes exclusion of acquisition related compensation is a more useful tool in measuring compensation as a percentage of net revenue.
First Nine Months
Employee compensation and benefits increased 91% to $238.5 million from $124.7 million in the same period last year. As a percentage of net revenue, compensation and benefits totaled 74.1% in the first nine months of 2006 compared to 66.3% in the first nine months of 2005. A portion of compensation and benefits includes transition pay of $10.2 million and $7.4 million for the nine months ended September 30, 2006 and September 30, 2005 respectively, in connection with the Company's continuing expansion efforts. In addition, compensation and benefits includes $32.3 million for the nine months ended September 30, 2006, primarily stock based compensation, in acquisition related charges for payments in connection with the LM Capital Markets acquisition. Excluding the acquisition related charges, compensation and benefits as a percentage of net revenue totaled 64.0% for the first nine months of 2006 and 66.3% in the same period last year. The Company excludes acquisition related expenses in its analysis of compensation and benefits, a non-GAAP measure, because it believes exclusion of acquisition related compensation is a more useful tool in measuring compensation as a percentage of net revenue.
Operating Expenses
Third Quarter
Excluding compensation and benefits and non-compensation acquisition related charges, non-interest expenses increased 72% from the prior year third quarter. As a percentage of net revenue, operating expenses were 21% in both the third quarter of 2006 and 2005.
First Nine Months
Excluding compensation and benefits and non-compensation acquisition related charges, non-interest expenses increased 77% from the first nine months of 2005. As a percentage of net revenue, operating expenses were 22% in the first nine months of 2006 and 21% in the comparable period in 2005.
Business Segment Results
Private Client Group
Third Quarter
PCG net revenue for the third quarter of 2006 were $56.5 million, an increase of 10% from the third quarter of 2005 principally due to increased commissions and principal transactions and increased asset management and service fees. Asset management and service fees increased as previously noted (See Asset Management and Service Fees-Third Quarter discussion). PCG net revenue increased 3% from the second quarter of 2006. PCG recorded an operating contribution of $12.8 million, up slightly from the third quarter of 2005, and a 9% increase from the second quarter of this year.
First Nine Months
PCG net revenue for the first nine months of 2006 were $167.5 million, an increase of 14% from the same period of 2005, principally due to increased commissions and principal transactions and increased asset management and service fees offset by a decrease in investment banking. Asset management and service fees increased as previously noted (See Asset Management and Service Fees-First Nine Months discussion). PCG recorded an operating contribution of $36.9 million, a 4% increase from 2005.
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Equity Capital Markets
Third Quarter
ECM recorded record net revenue of $36.7 million, an increase of 343% from the same quarter last year, principally due to increased commissions and principal transactions and increased investment banking revenue. Investment banking fees increased principally due to a $7.4 million increase in advisory fees. ECM net revenue increased 4% from the second quarter of 2006. ECM operating contribution totaled $8.1 million, a 247% increase from the third quarter of 2005 and a 2% increase from the second quarter of 2006.
First Nine Months
ECM recorded record net revenue of $105.8 million, an increase of 303% from the last year's first nine months, principally due to increased commissions and principal transactions and increased investment banking revenue. Investment banking revenue increased 86% to $38.4 million due principally to increased advisory fees of $23.2 million offset by decreased underwriting fee revenue of $5.5 million resulting from decreased banking calendars for lead or co-managed offerings. As a result of the 303% increase in net revenue and the leverage in increased production, operating contribution increased 181% to $23.6 million.
Fixed Income Capital Markets
Third Quarter
FICM posted record net revenue of $13.8 million, an increase of 363% from the prior year third quarter, principally due to increased commissions and principal transactions. FICM net revenue increased 30% from the previous quarter. During the 2006 third quarter, FICM recorded an operating contribution of $3.1 million, an increase of $3.2 million from the prior year third quarter, and an increase of 204% from the previous quarter.
First Nine Months
FICM posted record net revenue of $35.9 million, an increase of 208% from the same period last year, principally due to an increase in commissions and principal transactions offset by a decrease in investment banking. Investment banking revenue decreased as a result of decreased municipal refinancings resulting from increased interest rates. As a result of the 208% increase in net revenue and the leverage in increased production, operating contribution increased 322% to $5.9 million.
Other Segment
Third Quarter
Other Segment, which includes acquisition charges related to the LM Capital Markets acquisition, posted net revenue of $2.8 million, an increase of 114% from the prior year third quarter and an increase of 59% from the second quarter of 2006. During the third quarter, the Other Segment recorded an operating loss of $14.8 million which included acquisition related charges, primarily stock based compensation, of $7.3 million (discussed in the Core Earnings section), compared to the prior year quarter operating loss of $6.9 million.
First Nine Months
Other Segment, which includes acquisition charges related to the LM Capital Markets acquisition, posted net revenue of $12.8 million, an increase of 276% from 2005, principally as a result of an increase in gains on investments, primarily from a $5.0 million gain on our NYSE membership seat. During the first nine months, the Other Segment recorded an operating loss of $52.3 million which included acquisition related charges, primarily stock based compensation, of $33.4 million related to the acquisition charges of the LM Capital Markets business.
Stock Based Compensation
In connection with the LM Capital Markets acquisition, the Company granted 1,807,610 restricted stock units to key associates of the LM Capital Markets on January 2, 2006. The units were granted with a fair value of $37.59 per unit. The majority of the units vest ratably over a three-year period and accordingly the Company incurred a non-cash compensation charge of $5.4 million and $16.7 million, net of estimated forfeitures, for the three and nine months ended September 30, 2006, respectively.
On January 23, 2006, the Company completed its private placement of 1,052,220 shares of its common stock at $25.00 per share. The shares were purchased by key associates of the LM Capital Markets. The Company is required to charge to compensation the difference of $25.00 per share and the fair value, as determined in accordance with Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share Based Payments" ("SFAS No. 123R"), of $34.27 per share. As a result, the Company incurred a non-cash compensation charge of $9.8 million in the quarter ended March 31, 2006.
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Core Earnings
After adjusting for acquisition related charges, principally compensation expense recorded for stock based awards offered to key associates of LM Capital Markets and accounted for under SFAS No. 123R, non-GAAP net income and non-GAAP earnings per diluted share, our Core earnings, for the quarter ended September 30, 2006 were $9.6 million and $0.69, respectively. We believe Core earnings provides investors, rating agencies, and financial analysts with a more meaningful measure of the Company's operating performance. Core Earnings for the quarter excludes acquisition charges of approximately $7.3 million or $0.30 per diluted share. Included in these acquisition related charges are: 1) compensation charges of $7.1 million for amortization of units awarded to LM Capital Markets associates, severance, and contractually based compensation above standard performance based compensation; and 2) other non-compensation acquisition charges of $212,000.
Core Earnings, for the nine months ended September 30, 2006, were $27.7 million or $1.99 per diluted share. Included in Core Earnings is $0.15 per diluted share for the gain resulting from the merger of the New York Stock Exchange and Archipelago Holdings Inc. Year to date Core Earnings excludes acquisition charges of approximately $33.4 million or $1.40 per diluted share. Included in these acquisition related charges are: 1) a compensation charge of approximately $9.8 million for the difference between the $25.00 per share offering price and the grant date fair value of $34.27 per share for the private placement of its common stock to key associates of the LM Capital Markets business; 2) compensation
Statement of Financial Condition
Total assets increased 34% to $1.1 billion principally as a result of increased levels of firm inventory for sale to customers. Total stockholders' equity increased $55.6 million, or 35%, to $210.7 million. The increase in equity exceeded net income due to the amortization of stock-based awards and private placement of its common stock to the key associates of the LM Capital Markets business and partially offset by repurchase of common stock.
Conference Call Information
Stifel Financial Corp. will hold a conference call November 7, 2006, at 11:00 a.m. EDT. This call will be Web cast and slides can be accessed on the Investor Relations portion of the Stifel Financial Corp. website at www.stifel.com, as well as on all sites within Thomson/CCBN's Investor Distribution Network. To participate on the call, please dial 888-676-3684 and request the Stifel Financial Corp. earnings call.
Company Information
Stifel Financial Corp. operates 121 offices in 27 states and the District of Columbia through its principal subsidiary, Stifel Nicolaus and Company, Inc., and 3 European offices through Stifel Nicolaus Limited. Stifel Nicolaus provides securities brokerage, investment banking, trading, investment advisory, and related financial services, primarily, to individual investors, professional money managers, businesses, and municipalities. To learn more about Stifel, please visit the Company's web site at www.stifel.com.
Forward-Looking Statements
Statements in this news release contain forward-looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to the Company and those specific to the industry, which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, general economic conditions, actions of competitors, regulatory actions, changes in legislation, and technology changes. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this news release. The Company does not undertake any obligation to publicly update any forward-looking statements.
# # # # # #
(Tables attached)
Page 5
Stifel Financial Corp. |
Summary of Results of Operations (Unaudited) |
($ In Thousands, Except Per Share Amounts) |
| | | | | | | | | | | |
| Three Months Ended | | Percent Change From | |
| 9/30/2006 | % of Net Revenues | 6/30/2006 | % of Net Revenues | 9/30/2005 | % of Net Revenues | 6/30/2006 | | 9/30/2005 | |
Revenues | | | | | | | | | | | |
Commissions | $ 48,571 | 44.2% | $ 48,064 | 46.8% | $ 26,421 | 41.4% | | 1% | | 84% | |
Principal transactions | 21,470 | 19.6% | 20,754 | 20.2% | 10,974 | 17.2% | | 3% | | 96% | |
Investment banking | 19,672 | 17.9% | 15,757 | 15.4% | 11,707 | 18.3% | | 25% | | 68% | |
Asset management and service fees | 14,560 | 13.2% | 14,239 | 13.9% | 11,445 | 17.9% | | 2% | | 27% | |
Other | 1,047 | 1.0% | (98) | -0.1% | 174 | 0.3% | | n/a | | 502% | |
| Total operating revenues | 105,320 | 95.9% | 98,716 | 96.2% | 60,721 | 95.1% | | 7% | | 73% | |
Interest revenue | 9,918 | 9.0% | 8,635 | 8.4% | 4,679 | 7.3% | | 15% | | 112% | |
| Total revenues | 115,238 | 104.9% | 107,351 | 104.6% | 65,400 | 102.4% | | 7% | | 76% | |
Less: Interest expense | 5,422 | 4.9% | 4,684 | 4.6% | 1,542 | 2.4% | | 16% | | 252% | |
| Net revenues | 109,816 | 100.0% | 102,667 | 100.0% | 63,858 | 100.0% | | 7% | | 72% | |
Non-Interest Expenses | | | | | | | | | | | |
Employee compensation and benefits | 77,466 | 70.5% | 74,385 | 72.5% | 42,369 | 66.3% | | 4% | | 83% | |
Occupancy and equipment rental | 7,785 | 7.1% | 7,267 | 7.0% | 5,443 | 8.5% | | 7% | | 43% | |
Communication and office supplies | 6,532 | 6.0% | 6,483 | 6.3% | 2,677 | 4.2% | | 1% | | 144% | |
Commissions and floor brokerage | 1,866 | 1.7% | 1,838 | 1.8% | 946 | 1.5% | | 2% | | 97% | |
Other operating expenses | 6,926 | 6.3% | 8,721 | 8.5% | 4,274 | 6.7% | | -21% | | 62% | |
| Total non-interest expenses | 100,575 | 91.6% | 98,694 | 96.1% | 55,709 | 87.2% | | 2% | | 81% | |
Income before income taxes | 9,241 | 8.4% | 3,973 | 3.9% | 8,149 | 12.8% | | 133% | | 13% | |
Provision for income taxes | 3,817 | 3.5% | 1,675 | 1.7% | 3,253 | 5.1% | | 128% | | 17% | |
| Net income | $ 5,424 | 4.9% | $ 2,298 | 2.2% | $ 4,896 | 7.7% | | 136% | | 11% | |
Per Share Information |
| Three Months Ended | |
| 9/30/2006 | | 6/30/2006 | | 9/30/2005 | | | 6/30/2006 | | 9/30/2005 | |
Earnings Per Share: | | | | | | | | | | | |
| Basic | $ 0.47 | | $ 0.20 | | $ 0.50 | | | 135% | | -6% | |
| Diluted | $ 0.39 | | $ 0.16 | | $ 0.39 | | | 144% | | 0% | |
Number of Shares for Earnings Per Share Computations: | | | | | | | | | | | |
| Basic shares | 11,582 | | 11,729 | | 9,768 | | | -1% | | 19% | |
| Diluted shares | 13,931 | | 14,132 | | 12,544 | | | -1% | | 11% | |
| | | | | | | | | |
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Stifel Financial Corp. |
Summary of Results of Operations (Unaudited) |
($ In Thousands, Except Per Share Amounts) |
| | | | | | | |
| Nine Months Ended | | Change |
| 9/30/2006 | % of Net Revenues | 9/30/2005 | % of Net Revenues | | Amount | Percent |
Revenues | | | | | | | |
Commissions | $ 144,811 | 45.0% | $ 74,313 | 39.5% | | $ 70,498 | 95% |
Principal transactions | 63,850 | 19.8% | 32,716 | 17.4% | | 31,134 | 95% |
Investment banking | 51,177 | 15.9% | 41,104 | 21.9% | | 10,073 | 25% |
Asset management and service fees | 42,297 | 13.1% | 31,042 | 16.5% | | 11,255 | 36% |
Other | 8,307 | 2.6% | 292 | 0.2% | | 8,015 | 2,745% |
| Total operating revenues | 310,442 | 96.4% | 179,467 | 95.5% | | 130,975 | 73% |
Interest revenue | 25,744 | 8.0% | 12,437 | 6.6% | | 13,307 | 107% |
| Total revenues | 336,186 | 104.4% | 191,904 | 102.1% | | 144,282 | 75% |
Less: Interest expense | 14,169 | 4.4% | 3,887 | 2.1% | | 10,282 | 265% |
| Net revenues | 322,017 | 100.0% | 188,017 | 100.0% | | 134,000 | 71% |
Non-Interest Expenses | | | | | | | |
Employee compensation and benefits | 238,545 | 74.1% | 124,651 | 66.3% | | 113,894 | 91% |
Occupancy and equipment rental | 22,547 | 7.0% | 16,065 | 8.6% | | 6,482 | 40% |
Communication and office supplies | 19,428 | 6.0% | 8,129 | 4.3% | | 11,299 | 139% |
Commissions and floor brokerage | 4,971 | 1.6% | 2,784 | 1.5% | | 2,187 | 79% |
Other operating expenses | 22,529 | 7.0% | 11,670 | 6.2% | | 10,859 | 93% |
| Total non-interest expenses | 308,020 | 95.7% | 163,299 | 86.9% | | 144,721 | 89% |
Income before income taxes | 13,997 | 4.3% | 24,718 | 13.1% | | (10,721) | -43% |
Provision for income taxes | 5,799 | 1.8% | 9,844 | 5.2% | | (4,045) | -41% |
| Net income | $ 8,198 | 2.5% | $ 14,874 | 7.9% | | $ (6,676) | -45% |
Per Share Information |
| Nine Months Ended | | | Change | |
| 9/30/2006 | | 9/30/2005 | | | Amount | Percent |
Earnings Per Share: | | | | | | | |
| Basic | $ 0.71 | | $ 1.52 | | | $ (0.81) | -53% |
| Diluted | $ 0.59 | | $ 1.19 | | | $ (0.60) | -50% |
Number of Shares for Earnings Per Share Computations: | | | | | |
| Basic shares | 11,514 | | 9,774 | | | 1,740 | 18% |
| Diluted shares | 13,901 | | 12,452 | | | 1,449 | 12% |
| | | | | | | |
| |
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Stifel Financial Corp. |
Summary of Core Earnings (Unaudited)(1) |
($ In Thousands, Except Per Share Amounts) |
| | | | | | | | | | |
| Three Months Ended | | | Percent Change From |
| 9/30/2006 | % of Net Revenues | 6/30/2006 | % of Net Revenues | 9/30/2005 | % of Net Revenues | | 6/30/2006 | | 9/30/2005 |
Revenues | | | | | | | | | | |
| Net revenues | $ 109,817 | 100.0% | $ 102,819 | ,/u>100.0% | $ 63,858 | 100.0% | | 7% | | 72% |
Non-Interest Expenses | | | | | | | | | | |
Employee compensation and benefits | 70,412 | 64.1% | 66,566 | 64.7% | 42,369 | 66.3% | | 6% | | 66% |
Occupancy and equipment rental | 7,618 | 6.9% | 7,082 | 6.9% | 5,443 | 8.5% | | 8% | | 40% |
Communication and office supplies | 6,522 | 6.0% | 6,343 | 6.2% | 2,677 | 4.2% | | 3% | | 144% |
Commissions and floor brokerage | 1,866 | 1.7% | 1,838 | 1.8% | 946 | 1.5% | | 2% | | 97% |
Other operating expenses | 6,891 | 6.3% | 8,539 | 8.3% | 4,274 | 6.7% | | -19% | | 61% |
| Total non-interest expenses | 93,309 | 85.0% | 90,368 | 87.9% | 55,709 | 87.2% | | 3% | | 67% |
Income before income taxes | 16,508 | 15.0% | 12,451 | 12.1% | 8,149 | 12.8% | | 33% | | 103% |
Provision for income taxes | 6,887 | 6.2% | 5,453 | 5.3% | 3,253 | 5.1% | | 26% | | 112% |
| Core Earnings | $ 9,621 | 8.8% | $ 6,998 | 6.8% | $ 4,896 | 7.7% | | 37% | | 97% |
Per Share Information |
| Three Months Ended | | | Percent Change From |
| 9/30/2006 | | 6/30/2006 | | 9/30/2005 | | | 6/30/2006 | | 9/30/2005 |
Earnings Per Share: | | | | | | | | | | |
| Basic | $ 0.83 | | $ 0.60 | | $ 0.50 | | | 38% | | 66% |
| Diluted | $ 0.69 | | $ 0.50 | | $ 0.39 | | | 38% | | 77% |
| | | | | | | | | | |
Number of Shares for Earnings Per Share Computations: | | | | | | | | |
| Basic shares | 11,582 | | 11,729 | | 9,768 | | | -1% | | 19% |
| Diluted shares | 13,931 | | 14,132 | | 12,544 | | | -1% | | 11% |
| | | | | | | | | | |
| | | | | |
(1) See "Reconciliation of Core Earnings" table
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Stifel Financial Corp. |
Summary of Core Earnings (Unaudited)(1) |
($ In Thousands, Except Per Share Amounts) |
| | | | | | |
| Nine Months Ended | | Percent Change From |
| 9/30/2006 | % of Net Revenues | 9/30/2005 | % of Net Revenues | | 9/30/2005 |
Revenues | | | | | | |
| Net revenues | $ 322,170 | 100.0% | $ 188,017 | 100.0% | | 71% |
Non-Interest Expenses | | | | | | |
Employee compensation and benefits | 206,224 | 64.0% | 124,651 | 66.3% | | 65% |
Occupancy and equipment rental | 22,068 | 6.9% | 16,065 | 8.6% | | 37% |
Communication and office supplies | 19,152 | 5.9% | 8,129 | 4.3% | | 136% |
Commissions and floor brokerage | 4,971 | 1.5% | 2,784 | 1.5% | | 79% |
Other operating expenses | 22,218 | 6.9% | 11,670 | 6.2% | | 90% |
| Total non-interest expenses | 274,633 | 85.2% | 163,299 | 86.9% | | 68% |
Income before income taxes | 47,537 | 14.8% | 24,718 | 13.1% | | 92% |
Provision for income taxes | 19,814 | 6.2% | 9,844 | 5.2% | | 101% |
| Core Earnings | $ 27,723 | 8.6% | $ 14,874 | 7.9% | | 86% |
Per Share Information |
| Nine Months Ended | | Percent Change From |
| 9/30/2006 | | 9/30/2005 | | | 9/30/2005 |
Earnings Per Share: | | | | | | |
| Basic | $ 2.41 | | $ 1.52 | | | 59% |
| Diluted | $ 1.99 | | $ 1.19 | | | 67% |
Number of Shares for Earnings Per Share Computations: | | | | |
| Basic shares | 11,514 | | 9,774 | | | 18% |
| Diluted shares | 13,901 | | 12,452 | | | 12% |
| | | | | | |
|
(1) See "Reconciliation of Core Earnings" table
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Stifel Financial Corp. |
Reconciliation of Core Earnings (1) |
Three Months Ended 9/30/06 |
($ In Thousands, Except Per Share Amounts) |
| GAAP | Acquisition Related | Core Business |
| $ | $ | $ | % Net Rev |
Revenue | | | | |
Net Revenue | $109,816 | ($1) | $109,817 | 100% |
Non-Interest Expenses | | | | |
Compensation and benefits | 77,466 | 7,054 | 70,412 | 64% |
Operating Expenses | 23,109 | 212 | 22,897 | 21% |
| Total non-interest expenses | 100,575 | 7,266 | 93,309 | 85% |
Income/(loss) before income taxes | 9,241 | (7,267) | 16,508 | 15% |
Provision (benefit) for income taxes | 3,817 | (3,070) | 6,887 | 6% |
| Net Income/(Loss) | $5,424 | ($4,197) | $9,621 | 9% |
Earnings per Share: | | | | |
| Basic | $0.47 | ($0.36) | $0.83 | |
| Diluted | $0.39 | ($0.30) | $0.69 | |
Nine Months Ended 9/30/06 |
($ In Thousands, Except Per Share Amounts) |
| GAAP | Acquisition Related | Core Business |
| $ | $ | $ | % Net Rev |
Revenue | | | | |
Net Revenue | $322,017 | ($153) | $322,170 | 100% |
Non-Interest Expenses | | | | |
Compensation and benefits | 238,545 | 32,321 | 206,224 | 64% |
Operating Expenses | 69,475 | 1,066 | 68,409 | 21% |
| Total non-interest expenses | 308,020 | 33,387 | 274,633 | 85% |
Income/(loss) before income taxes | 13,997 | (33,540) | 47,537 | 15% |
Provision (benefit) for income taxes | 5,799 | (14,015) | 19,814 | 6% |
| Net Income/(Loss) | $8,198 | ($19,525) | $27,723 | 9% |
Earnings per Share: | | | | |
| Basic | $0.71 | ($1.70) | $2.41 | |
| Diluted | $0.59 | ($1.40) | $1.99 | |
Annualized return on average equity | 6% | (13%) | 19% | |
- Core Earnings excludes acquisition related charges incurred in the three and nine months ended September 30, 2006. A reconciliation of Core Earnings to Net Income, the most directly comparable measure under GAAP, is included in the tables above. The Company believes that Core Earnings is a useful measure of financial performance because of its focus on the Company's results from operations. The Company also believes that this measure is an alternative financial measure of performance used by investors, rating agencies, and financial analysts to estimate the value of a company and evaluate its ability to meet debt service requirements.
Page 10
Stifel Financial Corp. |
Summary of Segment Data & Statistical Information (Unaudited) |
($ In Thousands, Except Per Share Amounts) |
| | | | | | | | | | | | | |
Segment Data | |
| | | | | | | | | | | | | |
| Three Months Ended | | Percent Change From | | | Nine Months Ended | | Change |
Net Revenues | 9/30/2006 | 6/30/2006 | 9/30/2005 | | 6/30/2006 | | 9/30/2005 | | | 9/30/2006 | 9/30/2005 | | Percent |
Private client | $ 56,461 | $ 54,942 | $ 51,260 | | 3% | | 10% | | | $ 167,461 | $ 146,680 | | 14% |
Equity capital markets | 36,692 | 35,311 | 8,284 | | 4% | | 343% | | | 105,801 | 26,252 | | 303% |
Fixed income capital markets | 13,829 | 10,636 | 2,990 | | 30% | | 363% | | | 35,934 | 11,679 | | 208% |
Other | 2,834 | 1,778 | 1,324 | | 59% | | 114% | | | 12,821 | 3,406 | | 276% |
| Total net revenues | $ 109,816 | $ 102,667 | $ 63,858 | | 7% | | 72% | | | $ 322,017 | $ 188,017 | | 71% |
| | | | | | | | | | | | | |
Operating Contribution | | | | | | | | | | | | | |
Private client | $ 12,750 | $ 11,690 | $ 12,724 | | 9% | | 0% | | | $ 36,875 | $ 35,483 | | 4% |
Equity capital markets | 8,123 | 7,932 | 2,344 | | 2% | | 247% | | | 23,557 | 8,396 | | 181% |
Fixed income capital markets | 3,127 | 1,028 | (36) | | 204% | | n/a | | | 5,875 | 1,391 | | 322% |
Other / unallocated overhead | (14,759) | (16,677) | (6,883) | | n/a | | n/a | | | (52,310) | (20,552) | | n/a |
| Income before income taxes | $ 9,241 | $ 3,973 | $ 8,149 | | 133% | | 13% | | | $ 13,997 | $ 24,718 | | -43% |
| | | | | | | | | | | | | |
Statistical Information | |
| | | | | | | | | | | | | |
Stockholders' Equity | $ 210,694 | $ 205,440 | $ 146,443 | | 3% | | 44% | | | | | | |
Book Value Per Share | $ 18.39 | $ 17.57 | $ 14.89 | | 5% | | 24% | | | | | | |
Total Assets | $ 1,134,194 | $ 1,060,953 | $ 448,025 | | 7% | | 153% | | | | | | |
Investment Executives | 500 | 485 | 458 | | 3% | | 9% | | | | | | |
Full-Time Employees | 1,694 | 1,662 | 1,220 | | 2% | | 39% | | | | | | |
Locations | 124 | 121 | 92 | | 2% | | 35% | | | | | | |
Total Client Assets | $ 29,580,000 | $ 29,462,000 | $ 24,561,000 | | 0% | | 20% | | | | | | |
Page 11
Stifel Financial Corp. |
Statement of Operations |
Quarter ended 9/30/2006 |
($ In Thousands, Except Per Share Amounts) |
Private Client Group Segment |
| Three Months Ended | Amount Change From | Nine Months Ended | |
Revenues | 9/30/2006 | 6/30/2006 | 9/30/2005 | 6/30/2006 | 9/30/2005 | 9/30/2006 | 9/30/2005 | Change |
Commissions & principal transactions | 36,554 | 36,897 | 34,721 | -1% | 5% | 112,067 | 98,991 | 13% |
Investment banking | 2,652 | 2,154 | 2,880 | 23% | -8% | 6,677 | 10,773 | -38% |
Asset management and service fees | 14,553 | 14,205 | 11,438 | 2% | 27% | 42,250 | 31,021 | 36% |
Other | 198 | (58) | 111 | n/a | 78% | 506 | 170 | 198% |
| Operating Revenues | 53,957 | 53,198 | 49,150 | 1% | 10% | 161,500 | 140,955 | 15% |
Interest Income | 5,320 | 5,142 | 3,870 | 3% | 37% | 15,131 | 10,137 | 49% |
| Total Revenues | 59,277 | 58,340 | 53,020 | 2% | 12% | 176,631 | 151,092 | 17% |
Interest Expense | 2,816 | 3,398 | 1,760 | -17% | 60% | 9,170 | 4,412 | 108% |
| Net Revenues | 56,461 | 54,942 | 51,260 | 3% | 10% | 167,461 | 146,680 | 14% |
Non-Interest Expenses | | | | | | | | |
Employee compensation and benefits | 34,704 | 34,880 | 30,941 | -1% | 12% | 104,625 | 88,894 | 18% |
Operating expenses | 9,007 | 8,372 | 7,595 | 8% | 19% | 25,961 | 22,303 | 16% |
| Total non-interest expenses | 43,711 | 43,252 | 38,536 | 1% | 13% | 130,586 | 111,197 | 17% |
| Income before income taxes | 12,750 | 11,690 | 12,724 | 9% | 0% | 36,875 | 35,483 | 4% |
Ratios to Net Revenues | | | | | | | | |
| Compensation & Benefits | 61.5% | 63.5% | 60.4% | | | 62.5% | 60.6% | |
| Operating expenses | 16.0% | 15.2% | 14.8% | | | 15.5% | 15.2% | |
| Income before income taxes | 22.6% | 21.3% | 24.8% | | | 22.0% | 24.2% | |
Equity Capital Markets Segment |
| Three Months Ended | Amount Change From | Nine Months Ended | |
Revenues | 9/30/2006 | 6/30/2006 | 9/30/2005 | 6/30/2006 | 9/30/2005 | 9/30/2006 | 9/30/2005 | Change |
Commissions & principal transactions | 22,074 | 22,633 | 1,629 | -2% | 1255% | 66,429 | 5,619 | 1082% |
Investment banking | 14,313 | 12,177 | 6,684 | 18% | 114% | 38,390 | 20,676 | 86% |
Asset management and service fees | 6 | 33 | 2 | -82% | 200% | 44 | 10 | 340% |
Other | 210 | 383 | 38 | -45% | 453% | 695 | 143 | 386% |
| Operating Revenues | 36,603 | 35,226 | 8,353 | 4% | 338% | 105,558 | 26,448 | 299% |
Interest Income | 124 | 160 | - | -23% | n/a | 408 | 116 | 252% |
| Total Revenues | 36,727 | 35,386 | 8,353 | 4% | 340% | 105,966 | 26,564 | 299% |
Interest Expense | 35 | 75 | 69 | -53% | -49% | 165 | 312 | -47% |
| Net Revenues | 36,692 | 35,311 | 8,284 | 4% | 343% | 105,801 | 26,252 | 303% |
Non-Interest Expenses | | | | | |
Employee compensation and benefits | 20,898 | 19,267 | 4,528 | 8% | 362% | 59,862 | 13,531 | 342% |
Operating expenses | 7,671 | 8,112 | 1,412 | -5% | 443% | 22,382 | 4,325 | 418% |
| Total non-interest expenses | 28,569 | 27,379 | 5,940 | 4% | 381% | 82,244 | 17,856 | 361% |
| Income before income taxes | 8,123 | 7,932 | 2,344 | 2% | 247% | 23,557 | 8,396 | 181% |
Ratios to Net Revenues | | | | | | | | |
| Compensation & Benefits | 57.0% | 54.6% | 54.7% | | | 56.6% | 51.5% | |
| Operating expenses | 20.9% | 23.0% | 17.0% | | | 21.2% | 16.5% | |
Income before income taxes | 22.1% | 22.5% | 28.3% | | | 22.3% | 32.0% | |
Fixed Income Capital Market Segment |
| Three Months Ended | Amount Change From | Nine Months Ended |
Revenues | 9/30/2006 | 6/30/2006 | 9/30/2005 | 6/30/2006 | 9/30/2005 | 9/30/2006 | 9/30/2005 | Change |
Commissions & principal transactions | 11,412 | 9,288 | 1,200 | 23% | 851% | 30,164 | 5,335 | 465% |
Investment banking | 2,707 | 1,426 | 1,977 | 90% | 37% | 6,110 | 6,715 | -9% |
Asset management and service fees | 1 | 1 | 7 | 0% | -86% | 3 | 11 | -73% |
Other | - | - | - | n/a | n/a | - | 6 | -100% |
| Operating Revenues | 14,120 | 10,715 | 3,184 | 32% | 343% | 36,277 | 12,067 | 201% |
Interest Income | 5,860 | 4,729 | 203 | 24% | 2787% | 12,910 | 546 | 2264% |
| Total Revenues | 19,980 | 15,444 | 3,387 | 29% | 490% | 49,187 | 12,613 | 290% |
Interest Expense | 6,151 | 4,808 | 397 | 28% | 1449% | 13,253 | 934 | 1319% |
| Net Revenues | 13,829 | 10,636 | 2,990 | 30% | 363% | 35,934 | 11,679 | 208% |
Non-Interest Expenses | | | | | | | | |
Employee compensation and benefits | 8,320 | 7,006 | 2,069 | 19% | 302% | 22,525 | 7,389 | 205% |
Operating expenses | 2,382 | 2,602 | 957 | -8% | 149% | 7,534 | 2,899 | 160% |
| Total non-interest expenses | 10,702 | 9,608 | 3,026 | 11% | 254% | 30,059 | 10,288 | 192% |
| Income before income taxes | 3,127 | 1,028 | (36) | 204% | n/a | 5,875 | 1,391 | 322% |
Ratios to Net Revenues | | | | | | | | |
| Compensation & Benefits | 60.2% | 65.9% | 69.2% | | | 62.7% | 63.3% | |
| Operating expenses | 17.2% | 24.5% | 32.0% | | | 21.0% | 24.8% | |
| Income before income taxes | 22.6% | 9.7% | -1.2% | | | 16.3% | 11.9% | |
Page 12
Stifel Financial Corp. |
Consolidated Statements of Financial Condition |
(In thousands) |
| | | | Increase/(Decrease) |
| | 9/30/2006 | 12/31/2005 | Amount | Percent |
| | (Unaudited) | (Audited) | | |
ASSETS | | | | |
Cash and cash equivalents | $ 48,120 | 12,529 | $ 35,591 | 284.1% |
Cash segregated under federal and other regulations | 27 | 6 | 21 | 350.0% |
Securities purchased under agreements to resell | 160,420 | 65,599 | 94,821 | 144.5% |
Receivables from brokers and dealers | 123,850 | 89,968 | 33,882 | 37.7% |
Receivables from customers | 265,546 | 259,389 | 6,157 | 2.4% |
Securities owned, at fair value | 382,374 | 240,725 | 141,649 | 58.8% |
Memberships in exchanges | 168 | 275 | (107) | -38.9% |
Office equipment and leasehold improvements | 13,203 | 11,422 | 1,781 | 15.6% |
Loans and advances to investment executives and
other employees | 24,960 | 21,105 | 3,855 | 18.3% |
Goodwill and intangible assets | 13,407 | 13,849 | (442) | -3.2% |
| Deferred tax asset | 12,234 | 10,336 | 1,898 | 18.4% |
| Misc. other assets | 89,885 | 116,798 | (26,913) | -23.0% |
Other Assets | 102,119 | 127,134 | (25,015) | -19.7% |
| Total Assets | $ 1,134,194 | $ 842,001 | $ 292,193 | 34.7% |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Liabilities | | | | |
Short-term borrowings from banks | $ 245,910 | 141,000 | $ 104,910 | 74.4% |
Payables to brokers and dealers | 144,729 | 98,630 | 46,099 | 46.7% |
Payables to customers | 68,166 | 78,456 | (10,290) | -13.1% |
Securities sold, but not yet purchased, at fair value | 281,412 | 146,914 | 134,498 | 91.5% |
Drafts payable | 22,652 | 29,697 | (7,045) | -23.7% |
Accrued employee compensation | 39,920 | 35,154 | 4,766 | 13.6% |
Accounts payable and accrued Expenses | 23,267 | 59,875 | (36,608) | -61.1% |
Debenture to Stifel Financial Capital Trust I | 34,500 | 34,500 | - | 0.0% |
Debenture to Stifel Financial Capital Trust II | 35,000 | 35,000 | - | 0.0% |
Other | 24,598 | 24,598 | - | 0.0% |
| Total Liabilities | 920,154 | 683,824 | 236,330 | 34.6% |
| | | | | |
Liabilities subordinated to claims of general creditors | 3,346 | 3,084 | 262 | 8.5% |
| | | | | |
Stockholders' Equity | | | | |
Common stock | 1,786 | 1,161 | 625 | 53.8% |
Additional paid-in capital | 131,897 | 75,225 | 56,672 | 75.3% |
Retained earnings | 88,044 | 80,279 | 7,765 | 9.7% |
| | 221,727 | 156,665 | 65,062 | 41.5% |
Less: Treasury stock, at cost | 9,626 | 9 | 9,617 | 106855.6% |
Less: Unearned ESOP Shares, at cost | 1,407 | 1,563 | (156) | -10.0% |
| Total Stockholders' Equity | 210,694 | 155,093 | 55,601 | 35.9% |
| Total Liabilities & Stockholders' Equity | $ 1,134,194 | $ 842,001 | $ 292,193 | 34.7% |
Page 13
