FOR IMMEDIATE RELEASE
STIFEL REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS
Highlights for the three months ended June 30, 2016:
| · | Net revenues of $652.1 million, increased 9.1% compared with the year-ago quarter. |
| · | Net income of $9.8 million, or $0.13 per diluted common share. |
| · | Non-GAAP net income of $52.3 million, or $0.69 per diluted common share. |
Highlights for the six months ended June 30, 2016:
| · | Net revenues of $1.3 billion, increased 9.8% compared with the year-ago quarter. |
| · | Net income of $36.8 million, or $0.48 per diluted common share. |
| · | Non-GAAP net income of $95.6 million, or $1.26 per diluted common share. |
ST. LOUIS, August 2, 2016 – Stifel Financial Corp. (NYSE: SF) today reported net income of $9.8 million, or $0.13 per diluted common share on record net revenues of $652.1 million for the three months ended June 30, 2016, compared with net income of $20.9 million, or $0.27 per diluted common share, on net revenues of $597.8 million for the second quarter of 2015.
For the three months ended June 30, 2016, the Company reported non-GAAP net income of $52.3 million, or $0.69 per diluted common share. These non-GAAP results primarily exclude merger-related expenses associated with the Company’s acquisitions.
For the six months ended June 30, 2016, the Company reported net income of $36.8 million, or $0.48 per diluted common share on record net revenues of $1.3 billion, compared with net income of $64.0 million, or $0.82 per diluted share, on net revenues of $1.2 billion for the comparable period in 2015.
For the six months ended June 30, 2016, the Company reported non-GAAP net income of $95.6 million, or $1.26 per diluted share. A reconciliation of the Company’s GAAP results to these non-GAAP measures is discussed below under “Non-GAAP Financial Measures.”
Summary Results of Operations (Unaudited) | |
| | Three Months Ended | | | Six Months Ended | |
(in 000s) | | 6/30/16 | | | 6/30/15 | | | % Change | | | 3/31/16 | | | % Change | | | 6/30/16 | | | 6/30/15 | | | % Change | |
Net revenues | | $ | 652,145 | | | $ | 597,751 | | | | 9.1 | | | $ | 619,974 | | | | 5.2 | | | $ | 1,272,119 | | | $ | 1,158,733 | | | | 9.8 | |
Net income | | $ | 9,771 | | | $ | 20,888 | | | | (53.2 | ) | | $ | 27,055 | | | | (63.9 | ) | | $ | 36,826 | | | $ | 63,985 | | | | (42.4 | ) |
Non-GAAP net income1 | | $ | 52,292 | | | $ | 55,091 | | | | (5.1 | ) | | $ | 43,354 | | | | 20.6 | | | $ | 95,645 | | | $ | 105,031 | | | | (8.9 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.15 | | | $ | 0.31 | | | $ | (51.6 | ) | | $ | 0.40 | | | | (62.5 | ) | | $ | 0.55 | | | $ | 0.94 | | | | (41.5 | ) |
Diluted | | $ | 0.13 | | | $ | 0.27 | | | $ | (51.9 | ) | | $ | 0.36 | | | | (63.9 | ) | | $ | 0.48 | | | $ | 0.82 | | | | (41.5 | ) |
Non-GAAP net income1 | | $ | 0.69 | | | $ | 0.71 | | | $ | (2.8 | ) | | $ | 0.57 | | | | 21.1 | | | $ | 1.26 | | | $ | 1.35 | | | | (6.7 | ) |
Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 66,792 | | | | 68,370 | | | | (2.3 | ) | | | 67,579 | | | | (1.2 | ) | | | 67,186 | | | | 68,189 | | | | (1.5 | ) |
Diluted | | | 75,982 | | | | 77,856 | | | | (2.4 | ) | | | 76,086 | | | | (0.1 | ) | | | 76,084 | | | | 77,624 | | | | (2.0 | ) |
1 | A reconciliation of the Company’s GAAP results to these non-GAAP measures is discussed under “Non-GAAP Financial Measures.” |
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Chairman’s Comments
“We are pleased with the results from the second quarter as we posted a second consecutive quarter of record revenue and increased adjusted EPS by 21% sequentially, despite a less than ideal market environment. The diversity of our business model was again illustrated by a rebound in investment banking activity and growth in our bank, which more than offset the sequential decline in brokerage revenue from the first quarter’s record levels. Although the market environment remains challenged, as macro level events in the first half of 2016 led to spikes in volatility that weighed on investor and corporate activity, we believe that Stifel remains well positioned to capitalize as the markets improve,” stated Ronald J. Kruszewski, Chairman and CEO of Stifel.
“In the past month, we have sold off the lower margin legacy businesses from the Sterne Agee acquisition, raised preferred equity, and refinanced higher cost debt. These actions have further strengthened our already strong balance sheet and will facilitate our continued efforts to optimize our capital base and increase shareholder returns.”
Brokerage Revenues
Brokerage revenues, defined as commissions plus principal transactions, were $308.5 million, a 14.6% increase compared with the second quarter of 2015 and an 3.2% decrease compared with the first quarter of 2016.
· | Global wealth management brokerage revenues were $172.2 million, an 8.4% increase compared with the second quarter of 2015 and a 0.5% decrease compared with the first quarter of 2016. |
· | Institutional equity brokerage revenues were $55.0 million, a 6.1% decrease compared with the second quarter of 2015 and an 11.7% decrease compared with the first quarter of 2016. |
· | Institutional fixed income brokerage revenues were $81.3 million, a 56.6% increase compared with the second quarter of 2015 and a 2.7% decrease compared with the first quarter of 2016. |
Investment Banking Revenues
Investment banking revenues were $133.1 million, a 17.3% decrease compared with the second quarter of 2015 and a 32.3% increase compared with the first quarter of 2016.
· | Equity capital raising revenues were $37.6 million, a 32.1% decrease compared with the second quarter of 2015 and a 47.3% increase compared with the first quarter of 2016. |
· | Fixed income capital raising revenues were $28.8 million, a 27.8% decrease compared with the second quarter of 2015 and a 3.7% increase compared with the first quarter of 2016. |
· | Advisory fee revenues were $66.7 million, a 4.8% increase compared with the second quarter of 2015 and a 40.9% increase compared with the first quarter of 2016. |
Asset Management and Service Fee Revenues
Asset management and service fee revenues were $144.6 million, a 20.5% increase compared with the second quarter of 2015 and consistent with the first quarter of 2016.
Compensation and Benefits Expenses
For the quarter ended June 30, 2016, compensation and benefits expenses were $460.0 million, which included $50.1 million of merger-related expenses. This compares with $410.0 million in the second quarter of 2015 and $411.1 million in the first quarter of 2016.
Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 62.8% in the second quarter of 2015, compared with 62.0% in the second quarter of 2015 and 63.6% in the first quarter of 2016.
Non-Compensation Operating Expenses
For the quarter ended June 30, 2016, non-compensation operating expenses were $176.3 million, which included merger-related expenses of $18.4 million. This compares with $149.7 million in the second quarter of 2015 and $164.9 million in the first quarter of 2016.
Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2016 was 24.2%, compared with 22.5% in the second quarter of 2015 and 25.0% in the first quarter of 2016.
Provision for Income Taxes
The effective income tax rate for the quarter ended June 30, 2016 was 38.1% compared with 45.1% in the second quarter of 2015.
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Assets and Capital
Assets
· | Assets increased 50.5% to $15.2 billion as of June 30, 2016 from $10.1 billion as of June 30, 2015. |
· | At June 30, 2016, the Company’s Level 3 assets measured at fair value on a recurring basis of $60.0 million, or 0.4% of total assets, consisted of $52.1 million of auction rate securities and $7.9 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 1.6% at June 30, 2016. At June 30, 2016, the Company had $562.8 million of held-to-maturity securities classified as Level 3 assets not measured at fair value on a recurring basis. |
· | Non-performing assets as a percentage of total assets as of June 30, 2016 was 0.37%. |
Capital
· | Shareholders’ equity as of June 30, 2016 decreased 1.0% to $2.49 billion from $2.52 billion as of June 30, 2015. |
· | During the six months ended June 30, 2016, the Company repurchased 2.8 million shares of the Company’s common stock for approximately $95.1 million. |
· | At June 30, 2016, book value per common share was $37.41 based on 66.6 million common shares outstanding. This represents a 2.9% increase from June 30, 2015. |
· | At June 30, 2016, the Company’s Tier 1 leverage capital and Tier 1 risk-based capital ratios were 11.5% and 20.9%, respectively, compared to 18.3% and 29.4%, respectively, at June 30, 2015. |
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Conference Call Information
Stifel Financial Corp. will host its second quarter 2016 financial results conference call on Tuesday, August 2, 2016, 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 #89108255. A live audio webcast of the call, as well as a presentation highlighting the Company’s results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.
Company Information
Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. The Company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company’s web site at www.stifel.com.
Forward-Looking Statements
This earnings release contains certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies’ operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
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Summary Results of Operations (Unaudited) | |
| | Three Months Ended | | | | | Six Months Ended | |
(in thousands, except per share amounts) | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | | | | | 3/31/16 | | | | | % Change | | | | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commissions | | $ | 182,104 | | | | | $ | 183,770 | | | | | | (0.9 | ) | | | | $ | 197,930 | | | | | | (8.0 | ) | | | | $ | 380,034 | | | | | $ | 364,073 | | | | | | 4.4 | |
Principal transactions | | | 126,426 | | | | | | 85,543 | | | | | | 47.8 | | | | | | 120,948 | | | | | | 4.5 | | | | | | 247,374 | | | | | | 186,275 | | | | | | 32.8 | |
Brokerage Revenues | | | 308,530 | | | | | | 269,313 | | | | | | 14.6 | | | | | | 318,878 | | | | | | (3.2 | ) | | | | | 627,408 | | | | | | 550,348 | | | | | | 14.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital raising | | | 66,412 | | | | | | 97,368 | | | | | | (31.8 | ) | | | | | 53,304 | | | | | | 24.6 | | | | | | 119,716 | | | | | | 172,486 | | | | | | (30.6 | ) |
Advisory fees | | | 66,713 | | | | | | 63,639 | | | | | | 4.8 | | | | | | 47,354 | | | | | | 40.9 | | | | | | 114,067 | | | | | | 113,082 | | | | | | 0.9 | |
Investment banking | | | 133,125 | | | | | | 161,007 | | | | | | (17.3 | ) | | | | | 100,658 | | | | | | 32.3 | | | | | | 233,783 | | | | | | 285,568 | | | | | | (18.1 | ) |
Asset management and service fees | | | 144,567 | | | | | | 119,936 | | | | | | 20.5 | | | | | | 144,532 | | | | | | 0.0 | | | | | | 289,099 | | | | | | 233,805 | | | | | | 23.6 | |
Other income | | | 17,405 | | | | | | 13,742 | | | | | | 26.7 | | | | | | 7,231 | | | | | | 140.7 | | | | | | 24,595 | | | | | | 25,541 | | | | | | (3.7 | ) |
Operating Revenue | | | 603,627 | | | | | | 563,998 | | | | | | 7.0 | | | | | | 571,299 | | | | | | 5.7 | | | | | | 1,174,885 | | | | | | 1,095,262 | | | | | | 7.3 | |
Interest Revenue | | | 65,780 | | | | | | 43,851 | | | | | | 50.0 | | | | | | 62,786 | | | | | | 4.8 | | | | | | 128,607 | | | | | | 86,588 | | | | | | 48.5 | |
Total Revenue | | | 669,407 | | | | | | 607,849 | | | | | | 10.1 | | | | | | 634,085 | | | | | | 5.6 | | | | | | 1,303,492 | | | | | | 1,181,850 | | | | | | 10.3 | |
Interest Expense | | | 17,262 | | | | | | 10,098 | | | | | | 70.9 | | | | | | 14,111 | | | | | | 22.3 | | | | | | 31,373 | | | | | | 23,117 | | | | | | 35.7 | |
Net Revenue | | | 652,145 | | | | | | 597,751 | | | | | | 9.1 | | | | | | 619,974 | | | | | | 5.2 | | | | | | 1,272,119 | | | | | | 1,158,733 | | | | | | 9.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-interest Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 460,023 | | | | | | 409,998 | | | | | | 12.2 | | | | | | 411,113 | | | | | | 11.9 | | | | | | 871,136 | | | | | | 765,691 | | | | | | 13.8 | |
Occupancy and equipment rental | | | 58,746 | | | | | | 48,346 | | | | | | 21.5 | | | | | | 57,255 | | | | | | 2.6 | | | | | | 116,002 | | | | | | 92,516 | | | | | | 25.4 | |
Communication and office supplies | | | 37,426 | | | | | | 31,114 | | | | | | 20.3 | | | | | | 36,660 | | | | | | 2.1 | | | | | | 74,086 | | | | | | 60,348 | | | | | | 22.8 | |
Commissions and floor brokerage | | | 12,145 | | | | | | 9,124 | | | | | | 33.1 | | | | | | 11,732 | | | | | | 3.5 | | | | | | 23,876 | | | | | | 19,193 | | | | | | 24.4 | |
Other operating expenses | | | 68,012 | | | | | | 61,098 | | | | | | 11.3 | | | | | | 59,301 | | | | | | 14.7 | | | | | | 127,313 | | | | | | 112,848 | | | | | | 12.8 | |
Total non-interest expenses | | | 636,352 | | | | | | 559,680 | | | | | | 13.7 | | | | | | 576,061 | | | | | | 10.5 | | | | | | 1,212,413 | | | | | | 1,050,596 | | | | | | 15.4 | |
Income before income taxes | | | 15,793 | | | | | | 38,071 | | | | | | (58.5 | ) | | | | | 43,913 | | | | | | (64.0 | ) | | | | | 59,706 | | | | | | 108,137 | | | | | | (44.8 | ) |
Provision for income taxes | | | 6,022 | | | | | | 17,183 | | | | | | (65.0 | ) | | | | | 16,858 | | | | | (64.3 | ) | | | | | 22,880 | | | | | | 44,152 | | | | | | (48.2 | ) |
Net income | | $ | 9,771 | | | | | $ | 20,888 | | | | | | (53.2 | ) | | | | $ | 27,055 | | | | | | (63.9 | ) | | | | $ | 36,826 | | | | | $ | 63,985 | | | | | | (42.4 | ) |
Earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.15 | | | | | $ | 0.31 | | | | | | (51.6 | ) | | | | | 0.40 | | | | | | (62.5 | ) | | | | $ | 0.55 | | | | | $ | 0.94 | | | | | | (41.5 | ) |
Diluted | | $ | 0.13 | | | | | $ | 0.27 | | | | | | (51.9 | ) | | | | $ | 0.36 | | | | | | (63.9 | ) | | | | $ | 0.48 | | | | | $ | 0.82 | | | | | | (41.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 66,792 | | | | | | 68,370 | | | | | | (2.3 | ) | | | | | 67,579 | | | | | | (1.2 | ) | | | | | 67,186 | | | | | | 68,189 | | | | | | (1.5 | ) |
Diluted | | | 75,982 | | | | | | 77,856 | | | | | | (2.4 | ) | | | | | 76,086 | | | | | | (0.1 | ) | | | | | 76,084 | | | | | | 77,624 | | | | | | (2.0 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Statistical Information
| | (in thousands, except per share amounts) | | | | | | |
| | 6/30/16 | | | 6/30/15 | | | % Change | | | 3/31/16 | | | % Change | | |
Statistical Information: | | | | | | | | | | | | | | | | | | | | | |
Book value per share | | $ | 37.41 | | | $ | 36.35 | | | | 2.9 | | | $ | 36.37 | | | | 2.9 | | |
Financial advisors 2 | | | 2,838 | | | | 2,823 | | | | 0.5 | | | | 2,849 | | | | (0.4 | ) | |
Full-time associates | | | 7,185 | | | | 6,952 | | | | 3.4 | | | | 7,100 | | | | 1.2 | | |
Locations | | | 400 | | | | 398 | | | | 0.5 | | | | 401 | | | | (0.2 | ) | |
Total client assets 3 | | $ | 237,510,000 | | | $ | 190,241,000 | | | | 24.9 | | | $ | 232,013,000 | | | | 2.4 | | |
2 Includes 667, 736, and 688 independent contractors at June 30, 2016, June 30, 2015, and March 31, 2016, respectively.
3 | On July 1, 2016, we sold the independent contractor business acquired with the Sterne Agee transaction in June 2015. As of June 30, 2016, there were 540 independent contractors included in the disposed business unit and $11.5 billion of total client assets. |
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Business Segment Results
Summary Segment Results (Unaudited) | |
| | Three Months Ended | | | Six Months Ended | |
(in 000s) | | 6/30/16 | | | 6/30/15 | | | | | % Change | | | 3/31/16 | | | % Change | | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global Wealth Management | | $ | 386,039 | | | $ | 343,382 | | | | | | 12.4 | | | $ | 379,805 | | | | 1.6 | | | $ | 765,843 | | | | | $ | 672,792 | | | | | | 13.8 | |
Institutional Group | | | 260,920 | | | | 258,538 | | | | | | 0.9 | | | | 241,276 | | | | 8.1 | | | | 502,196 | | | | | | 497,145 | | | | | | 1.0 | |
Other | | | 5,186 | | | | (4,169 | ) | | | | | 224.4 | | | | (1,107 | ) | | | (568.4 | ) | | | 4,080 | | | | | | (11,204 | ) | | | | | 136.4 | |
| | $ | 652,145 | | | $ | 597,751 | | | | | | 9.1 | | | $ | 619,974 | | | | 5.2 | | | $ | 1,272,119 | | | | | $ | 1,158,733 | | | | | | 9.8 | |
Operating contribution: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global Wealth Management | | $ | 105,053 | | | $ | 93,975 | | | | | | 11.8 | | | $ | 93,335 | | | | 12.6 | | | $ | 198,387 | | | | | $ | 192,823 | | | | | | 2.9 | |
Institutional Group | | | 42,414 | | | | 41,942 | | | | | | 1.1 | | | | 29,194 | | | | 45.3 | | | | 71,705 | | | | | | 74,273 | | | | | | (3.5 | ) |
Other | | | (131,674 | ) | | | (97,846 | ) | | | | | 34.6 | | | | (78,616 | ) | | | 67.5 | | | | (210,386 | ) | | | | | (158,959 | ) | | | | | 32.4 | |
| | $ | 15,793 | | | $ | 38,071 | | | | | | (58.5 | ) | | $ | 43,913 | | | | (64.0 | ) | | $ | 59,706 | | | | | $ | 108,137 | | | | | | (44.8 | ) |
As a percentage of net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global Wealth Management | | | 56.6 | | | | 57.1 | | | | | | | | | | 58.3 | | | | | | | | 57.4 | | | | | | 56.4 | | | | | | | |
Institutional Group | | | 58.8 | | | | 61.9 | | | | | | | | | | 62.4 | | | | | | | | 60.5 | | | | | | 62.3 | | | | | | | |
Non-comp. operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global Wealth Management | | | 16.2 | | | | 15.5 | | | | | | | | | | 17.1 | | | | | | | | 16.7 | | | | | | 14.9 | | | | | | | |
Institutional Group | | | 25.0 | | | | 21.9 | | | | | | | | | | 25.5 | | | | | | | | 25.2 | | | | | | 22.8 | | | | | | | |
Income before income taxes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global Wealth Management | | | 27.2 | | | | 27.4 | | | | | | | | | | 24.6 | | | | | | | | 25.9 | | | | | | 28.7 | | | | | | | |
Institutional Group | | | 16.2 | | | | 16.2 | | | | | | | | | | 12.1 | | | | | | | | 14.3 | | | | | | 14.9 | | | | | | | |
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Global Wealth Management Summary Results of Operations (Unaudited) | | |
| | Three Months Ended | | | | | Six Months Ended | | |
(in 000s) | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | | | | | 3/31/16 | | | % Change | | | | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commissions | | $ | 127,241 | | | | | $ | 125,121 | | | | | | 1.7 | | | | | $ | 131,554 | | | | (3.3) | | | | | $ | 258,794 | | | | | $ | 241,335 | | | | | | 7.2 | | |
Principal transactions | | | 44,938 | | | | | | 33,682 | | | | | | 33.4 | | | | | | 41,411 | | | | 8.5 | | | | | | 86,349 | | | | | | 75,689 | | | | | | 14.1 | | |
Brokerage revenues | | | 172,179 | | | | | | 158,803 | | | | | | 8.4 | | | | | | 172,965 | | | | (0.5) | | | | | | 345,143 | | | | | | 317,024 | | | | | | (8.9 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset management and service fees | | | 144,360 | | | | | | 119,734 | | | | | | 20.6 | | | | | | 144,352 | | | | 0.0 | | | | | | 288,712 | | | | | | 233,400 | | | | | | 23.7 | | |
Net interest | | | 54,246 | | | | | | 37,454 | | | | | | 44.8 | | | | | | 51,767 | | | | 4.8 | | | | | | 106,055 | | | | | | 75,378 | | | | | | 40.7 | | |
Investment banking | | | 9,502 | | | | | | 15,128 | | | | | | (37.2 | ) | | | | | 8,410 | | | | 13.0 | | | | | | 17,911 | | | | | | 25,228 | | | | | | (29.0 | ) | |
Other income | | | 5,752 | | | | | | 12,263 | | | | | | (53.1 | ) | | | | | 2,311 | | | 148.9 | | | | | | 8,022 | | | | | | 21,762 | | | | | | (63.1 | ) | |
Net revenues | | | 386,039 | | | | | | 343,382 | | | | | | 12.4 | | | | | | 379,805 | | | | 1.6 | | | | | | 765,843 | | | | | | 672,792 | | | | | | 13.8 | | |
Non-interest expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 218,553 | | | | | | 196,234 | | | | | | 11.4 | | | | | | 221,416 | | | | (1.3) | | | | | | 439,968 | | | | | | 379,477 | | | | | | 15.9 | | |
Non-compensation operating expenses | | | 62,433 | | | | | | 53,173 | | | | | | 17.4 | | | | | | 65,054 | | | | (4.0) | | | | | | 127,488 | | | | | | 100,492 | | | | | | 26.9 | | |
Total non-interest expenses | | | 280,986 | | | | | | 249,407 | | | | | | 12.7 | | | | | | 286,470 | | | | (1.9) | | | | | | 567,456 | | | | | | 479,969 | | | | | | 18.2 | | |
Income before income taxes | | $ | 105,053 | | | | | $ | 93,975 | | | | | | 11.8 | | | | | $ | 93,335 | | | | 12.6 | | | | | $ | 198,387 | | | | | $ | 192,823 | | | | | | 2.9 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As a percentage of net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 56.6 | | | | | | 57.1 | | | | | | | | | | | | 58.3 | | | | | | | | | | 57.4 | | | | | | 56.4 | | | | | | | | |
Non-compensation operating expenses | | | 16.2 | | | | | | 15.5 | | | | | | | | | | | | 17.1 | | | | | | | | | | 16.7 | | | | | | 14.9 | | | | | | | | |
Income before income taxes | | | 27.2 | | | | | | 27.4 | | | | | | | | | | | | 24.6 | | | | | | | | | | 25.9 | | | | | | 28.7 | | | | | | | | |
| | Stifel Bank & Trust (Unaudited) | |
| | Key Statistical Information | | | | | | | | |
(in 000s, except percentages) | | 6/30/16 | | | | | 6/30/15 | | | % Change | | | 3/31/16 | | | % Change | | | | |
Other information: | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets | | $ | 9,430,534 | | | | | $ | 4,786,248 | | | | 97.0 | | | $ | 8,310,224 | | | | 13.5 | | | | |
Investment securities | | | 4,579,752 | | | | | | 1,907,282 | | | | 140.1 | | | | 4,147,647 | | | | 10.4 | | | | |
Retained loans, net | | | 4,588,600 | | | | | | 2,626,508 | | | | 74.7 | | | | 3,737,209 | | | | 22.8 | | | | |
Loans held for sale | | | 250,725 | | | | | | 183,911 | | | | 36.3 | | | | 132,900 | | | | 88.7 | | | | |
Deposits | | | 7,881,219 | | | | | | 4,313,940 | | | | 82.7 | | | | 7,218,100 | | | | 9.2 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance as a percentage of loans | | | 0.86 | % | | | | | 0.98 | % | | | | | | | 0.94 | % | | | | | | | |
Non-performing assets as a percentage of total assets | | | 0.37 | % | | | | | 0.13 | % | | | | | | | 0.28 | % | | | | | | | |
7
Institutional Group Summary Results of Operations (Unaudited) | |
| | Three Months Ended | | | | | Six Months Ended | |
(in 000s) | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | | | | | 3/31/16 | | | % Change | | | | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commissions | | $ | 54,864 | | | | | $ | 58,649 | | | | | | (6.5 | ) | | | | $ | 66,376 | | | | (17.3 | ) | | | | $ | 121,240 | | | | | $ | 122,738 | | | | | | (1.2 | ) |
Principal transactions | | | 81,488 | | | | | | 51,861 | | | | | | 57.1 | | | | | | 79,537 | | | | 2.5 | | | | | | 161,026 | | | | | | 110,587 | | | | | | 45.6 | |
Brokerage revenues | | | 136,352 | | | | | | 110,510 | | | | | | 23.4 | | | | | | 145,913 | | | | (6.6 | ) | | | | | 282,266 | | | | | | 233,325 | | | | | | 21.0 | |
Capital raising | | | 56,100 | | | | | | 82,690 | | | | | | (32.2 | ) | | | | | 44,895 | | | | 25.0 | | | | | | 100,995 | | | | | | 147,707 | | | | | | (31.6 | ) |
Advisory fees | | | 67,523 | | | | | | 63,189 | | | | | | 6.9 | | | | | | 47,354 | | | | 42.6 | | | | | | 114,876 | | | | | | 112,632 | | | | | | 2.0 | |
Investment banking | | | 123,623 | | | | | | 145,879 | | | | | | (15.3 | ) | | | | | 92,249 | | | | 34.0 | | | | | | 215,871 | | | | | | 260,339 | | | | | | (17.1 | ) |
Other 4 | | | 945 | | | | | | 2,149 | | | | | | (56.0 | ) | | | | | 3,114 | | | | (69.7 | ) | | | | | 4,059 | | | | | | 3,481 | | | | | | 16.6 | |
Net revenues | | | 260,920 | | | | | | 258,538 | | | | | | 0.9 | | | | | | 241,276 | | | | 8.1 | | | | | | 502,196 | | | | | | 497,145 | | | | | | 1.0 | |
Non-interest expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 153,371 | | | | | | 160,077 | | | | | | (4.2 | ) | | | | | 150,618 | | | | 1.8 | | | | | | 303,989 | | | | | | 309,488 | | | | | | (1.8 | ) |
Non-compensation operating expenses | | | 65,135 | | | | | | 56,519 | | | | | | 15.2 | | | | | | 61,464 | | | | 6.0 | | | | | | 126,502 | | | | | | 113,384 | | | | | | 11.6 | |
Total non-interest expenses | | | 218,506 | | | | | | 216,596 | | | | | | 0.9 | | | | | | 212,082 | | | | 3.0 | | | | | | 430,491 | | | | | | 422,872 | | | | | | 1.8 | |
Income before income taxes | | $ | 42,414 | | | | | $ | 41,942 | | | | | | 1.1 | | | | | $ | 29,194 | | | | 45.3 | | | | | $ | 71,705 | | | | | $ | 74,273 | | | | | | (3.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As a percentage of net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 58.8 | | | | | | 61.9 | | | | | | | | | | | | 62.4 | | | | | | | | | | 60.5 | | | | | | 62.3 | | | | | | | |
Non-compensation operating expenses | | | 25.0 | | | | | | 21.8 | | | | | | | | | | | | 25.5 | | | | | | | | | | 25.2 | | | | | | 22.8 | | | | | | | |
Income before income taxes | | | 16.2 | | | | | | 16.3 | | | | | | | | | | | | 12.1 | | | | | | | | �� | | 14.3 | | | | | | 14.9 | | | | | | | |
Institutional Group Brokerage & Investment Banking Revenues (Unaudited) | |
| | Three Months Ended | | | | | Six Months Ended | |
(in 000s) | | 6/30/16 | | | | | 6/30/15 | | | | | % Change | | | 3/31/16 | | | % Change | | | | | 6/30/16 | | | 6/30/15 | | | % Change | |
Institutional brokerage: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity | | $ | 55,008 | | | | | $ | 58,551 | | | | | | (6.1 | ) | | $ | 62,273 | | | | (11.7 | ) | | | | $ | 117,281 | | | $ | 120,548 | | | | (2.7 | ) |
Fixed income | | | 81,344 | | | | | | 51,959 | | | | | | 56.6 | | | | 83,640 | | | | (2.7 | ) | | | | | 164,985 | | | | 112,777 | | | | 46.3 | |
Institutional brokerage | | | 136,352 | | | | | | 110,510 | | | | | | 23.4 | | | | 145,913 | | | | (6.6 | ) | | | | | 282,266 | | | | 233,325 | | | | 21.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investment banking: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital raising: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity | | | 27,018 | | | | | | 49,550 | | | | | | (45.5 | ) | | | 18,930 | | | | 42.7 | | | | | | 45,947 | | | | 93,837 | | | | (51.0 | ) |
Fixed income | | | 29,082 | | | | | | 33,140 | | | | | | (12.2 | ) | | | 25,965 | | | | 12.0 | | | | | | 55,048 | | | | 53,870 | | | | 2.2 | |
Capital raising | | | 56,100 | | | | | | 82,690 | | | | | | (32.2 | ) | | | 44,895 | | | | 25.0 | | | | | | 100,995 | | | | 147,707 | | | | (31.6 | ) |
Advisory fees: | | | 67,523 | | | | | | 63,189 | | | | | | 6.9 | | | | 47,354 | | | | 42.6 | | | | | | 114,876 | | | | 112,632 | | | | 2.0 | |
Investment banking | | $ | 123,623 | | | | | $ | 145,879 | | | | | | (15.3 | ) | | $ | 92,249 | | | | 34.0 | | | | | $ | 215,871 | | | $ | 260,339 | | | | (17.1 | ) |
4 | Includes net interest, asset management and service fees, and other income. |
8
Non-GAAP Financial Measures
The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Company’s financial results for the three months ended June 30, 2016. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company’s core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company’s current financial performance. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP amounts primarily exclude acquisition related expenses which management believes are duplicative and will be eliminated and other expenses which in management’s view are not representative of on-going business.
A limitation of utilizing these non-GAAP measures 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 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 GAAP measures for the three months ended June 30, 2016 to the aforementioned expenses on a non-GAAP basis for the same period.
| | | | | | | |
| | | | | |
(000s) | | Three months ended June 30, 2016 | | Six months ended June 30, 2016 | |
GAAP net income | | $ | 9,771 | | $ | 36,826 | |
| | | | | | | |
Duplicative expenses: | | | | | | | |
Compensation and benefits | | | | | | | |
Cost synergies | | | 3,132 | | | 8,024 | |
Restructuring costs | | | 222 | | | 481 | |
Total duplicative expenses – compensation and benefits | | | 3,354 | | | 8,505 | |
Non-compensation operating expenses | | | | | | | |
Cost synergies | | | 11,378 | | | 19,512 | |
Total duplicative expenses - non-compensation operating expenses | | | 11,378 | | | 19,512 | |
Total duplicative expenses | | | 14,732 | | | 28,017 | |
Acquisition-related expenses: | | | | | | | |
Compensation and benefits | | | 10,806 | | | 22,084 | |
Non-compensation operating expenses | | | 1,298 | | | 2,721 | |
Total acquisition-related expenses | | | 12,104 | | | 24,805 | |
Stock-based compensation expense | | | 35,976 | | | 35,976 | |
Amortization of intangible assets | | | 5,854 | | | 6,563 | |
Total adjustments | | | 68,666 | | | 95,361 | |
Provision for income taxes | | | 26,145 | | | 36,542 | |
Non-GAAP net income | | $ | 52,292 | | $ | 95,645 | |
| | | | | | | |
Duplicative expenses – Expenses related to items that will run-off as we integrate the acquired business into the Company. These expenses included salaries and benefits, rent, licenses and subscriptions. Management considers these a cost of the acquisition and not representative of the costs of running the Company’s on-going business; therefore, the duplicative costs are included as adjustments to arrive at non-GAAP net income.
Acquisition-related expenses – Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees and legal costs. These costs were directly related to the acquisition and are not representative of the costs of running the Company’s on-going business.
Stock-based compensation expense – On June 30, 2016, the Company’s Board of Directors removed the continuing service requirements associated with restricted stock units that were granted to certain employees of Barclays in December 2015. As a result of the modification, there are no continuing service requirements associated with these restricted stock units, and accordingly, all unrecognized expense related to these awards were expensed in the second quarter of 2016. The Company views the expensing of restricted stock units related to the acquisition and not representative of the costs of running the Company’s on-going business.
Amortization of intangible assets – Amortization of intangible assets acquired.
9
Investor Relations
Joel Jeffrey
(212) 271-3610, investorrelations@stifel.com
10
