EX-99.1 2 sf-ex991_7.htm EX-99.1 sf-ex991_7.htm

Exhibit 99.1

 

February 1, 2019

FOR IMMEDIATE RELEASE

Media Contact:  Neil Shapiro  (212) 895-1891

Investor Contact:  Joel Jeffrey  (212) 271-3610

www.stifel.com/investor-relations

 

STIFEL REPORTS FOURTH QUARTER AND FULL-YEAR 2018 FINANCIAL RESULTS

 

•

23rd consecutive year of record net revenues.

 

•

Annual net revenues of $3.0 billion, increased 3.4% compared with 2017.

 

•

Record quarterly net income available to common shareholders of $111.7 million, or $1.38 per diluted common share.

 

•

Record non-GAAP net income available to common shareholders of $126.8 million, or $1.57 per diluted common share.

 

•

Non-GAAP return on tangible common equity of 27.0%.

 

•

Announced an increase in quarterly dividend by 25% to $0.15 per common share starting in first quarter of 2019.

ST. LOUIS, MO – Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $111.7 million, or $1.38 per diluted common share on net revenues of $793.4 million for the three months ended December 31, 2018, compared with net loss attributable to common shareholders of $4.3 million, or $0.06 per diluted common share, on net revenues of $804.1 million for the fourth quarter of 2017.

For the three months ended December 31, 2018, the Company reported record non-GAAP net income available to common shareholders of $126.8 million, or $1.57 per diluted common share. The Company’s reported GAAP net income for the three months ended December 31, 2018 was primarily impacted by merger-related expenses. Details are discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“We had a great year. 2018 represented our 23rd consecutive year of record net revenues as our wealth management segment generated record results and our institutional business posted its second strongest year. Additionally, our focus on expense management contributed to our record pre-tax income and net income available to shareholders. Our non-GAAP return on common and tangible equity was 14.9% and 24.4%, respectively, and we returned approximately $215 million to shareholders through dividends and share repurchases,” stated Ronald J. Kruszewski, Chairman & CEO of Stifel.

Mr. Kruszewski continued, “As I look forward, I’m highly optimistic about our ability to grow and add value to our clients and our shareholders. We continue to expand our wealth management business through successful recruiting of financial advisors as well as through our bank. In our institutional business, our growth will continue to be driven by the addition of high quality talent through selective hires and strategic acquisitions. While market conditions can be volatile, our long term strategy remains focused on growth and deploying our capital with a focus on generating the best risk adjusted returns.”


 

1

 

Fourth Quarter Review

Quarterly Highlights

 

•

Net revenues of $793.4 million, decreased 1.3% compared with the year-ago quarter, increased 7.5% sequentially.

 

•

Record net revenues and pre-tax operating income in Global Wealth Management.

 

•

Record net income available to common shareholders of $111.7 million, or $1.38 per diluted common share.

 

•

Record non-GAAP net income available to common shareholders of $126.8 million, or $1.57 per diluted common share.

 

•

Bank net interest margin of 2.89% increased 2 basis points sequentially.

 

•

Repurchased approximately 2.3 million shares of the Company’s common stock at an average price of $46.64  per share.

 

Financial Highlights (Unaudited)

 

Three Months Ended

 

(in 000s, except per share data)

 

GAAP 12/31/18

 

 

GAAP (1) 12/31/17

 

 

% Change

 

 

GAAP  9/30/18

 

 

% Change

 

 

 

Non-GAAP (2) 12/31/18

 

 

Non-GAAP (2) 12/31/17

 

 

% Change

 

Net revenues

 

$

793,449

 

 

$

804,085

 

 

 

(1.3

)

 

$

738,342

 

 

 

7.5

 

 

 

$

793,449

 

 

$

804,085

 

 

 

(1.3

)

Net income/(loss)

 

$

114,062

 

 

$

(1,988

)

 

n/m

 

 

$

103,858

 

 

 

9.8

 

 

 

$

129,134

 

 

$

122,969

 

 

 

5.0

 

Preferred dividend

 

 

2,344

 

 

 

2,344

 

 

 

—

 

 

 

2,343

 

 

n/m

 

 

 

 

2,344

 

 

 

2,344

 

 

 

—

 

Net income/(loss) available to common shareholders

 

$

111,718

 

 

$

(4,332

)

 

n/m

 

 

$

101,515

 

 

 

10.1

 

 

 

$

126,790

 

 

$

120,625

 

 

 

5.1

 

Earnings per diluted common share

 

$

1.41

 

 

$

(0.03

)

 

n/m

 

 

$

1.27

 

 

 

11.0

 

 

 

$

1.60

 

 

$

1.49

 

 

 

7.4

 

Earnings per diluted common share available to common shareholders

 

$

1.38

 

 

$

(0.06

)

 

n/m

 

 

$

1.25

 

 

 

10.4

 

 

 

$

1.57

 

 

$

1.47

 

 

 

6.8

 

Compensation ratio

 

 

56.5

%

 

 

77.1

%

 

 

 

 

 

 

57.2

%

 

 

 

 

 

 

 

56.0

%

 

 

60.0

%

 

 

 

 

Non-compensation ratio

 

 

23.8

%

 

 

23.0

%

 

 

 

 

 

 

23.8

%

 

 

 

 

 

 

 

22.1

%

 

 

19.9

%

 

 

 

 

Pre-tax operating margin (3)

 

 

19.7

%

 

 

(0.1

%)

 

 

 

 

 

 

19.0

%

 

 

 

 

 

 

 

21.9

%

 

 

20.1

%

 

 

 

 

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $248.5 million, a 6.6% decrease compared with the fourth quarter of 2017 and a 3.0% increase compared with the third quarter of 2018.

 

 

Three Months Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

 

9/30/18

 

 

% Change

 

Global Wealth Management brokerage revenues

 

$

157,331

 

 

$

163,421

 

 

 

(3.7

)

 

$

158,818

 

 

 

(0.9

)

Institutional brokerage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity capital markets

 

 

48,705

 

 

 

49,628

 

 

 

(1.9

)

 

 

43,904

 

 

 

10.9

 

Fixed income capital markets

 

 

42,463

 

 

 

52,961

 

 

 

(19.8

)

 

 

38,446

 

 

 

10.4

 

Total institutional brokerage

 

 

91,168

 

 

 

102,589

 

 

 

(11.1

)

 

 

82,350

 

 

 

10.7

 

Total brokerage revenues

 

$

248,499

 

 

$

266,010

 

 

 

(6.6

)

 

$

241,168

 

 

 

3.0

 

 

•

Global Wealth Management brokerage revenues were $157.3 million, a 3.7% decrease compared with the fourth quarter of 2017 and a 0.9% decrease compared with the third quarter of 2018.

 

•

Institutional equity brokerage revenues were $48.7 million, a 1.9% decrease compared with the fourth quarter of 2017 and a 10.9% increase compared with the third quarter of 2018.

 

•

Institutional fixed income brokerage revenues were $42.5 million, a 19.8% decrease compared with the fourth quarter of 2017 and a 10.4% increase compared with the third quarter of 2018.


 

2

 

Investment Banking Revenues

Investment banking revenues were $201.2 million, a 13.5% decrease compared with the fourth quarter of 2017 and a 19.1% increase compared with the third quarter of 2018.

 

Three Months Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

 

9/30/18

 

 

% Change

 

Capital raising:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

$

7,915

 

 

$

8,899

 

 

 

(11.1

)

 

$

7,722

 

 

 

2.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity capital markets

 

 

51,839

 

 

 

57,800

 

 

 

(10.3

)

 

 

65,000

 

 

 

(20.2

)

Fixed income capital markets

 

 

30,390

 

 

 

42,820

 

 

 

(29.0

)

 

 

20,553

 

 

 

47.9

 

Institutional Group

 

 

82,229

 

 

 

100,620

 

 

 

(18.3

)

 

 

85,553

 

 

 

(3.9

)

Total capital raising (4)

 

 

90,144

 

 

 

109,519

 

 

 

(17.7

)

 

 

93,275

 

 

 

(3.4

)

Advisory fees (4)

 

 

111,089

 

 

 

123,227

 

 

 

(9.9

)

 

 

75,717

 

 

 

46.7

 

Total investment banking

 

$

201,233

 

 

$

232,746

 

 

 

(13.5

)

 

$

168,992

 

 

 

19.1

 

 

•

Global Wealth Management capital raising revenues were $7.9 million, an 11.1% decrease compared with the fourth quarter of 2017 and a 2.5% increase compared with the third quarter of 2018.

 

•

Institutional equity capital raising revenues were $51.8 million, a 10.3% decrease compared with the fourth quarter of 2017 and a 20.2% decrease compared with the third quarter of 2018.

 

•

Institutional fixed income capital raising revenues were $30.4 million, a 29.0% decrease compared with the fourth quarter of 2017 and a 47.9% increase compared with the third quarter of 2018.

 

•

Advisory fee revenues were $111.1 million, a 9.9% decrease compared with the fourth quarter of 2017 and a 46.7% increase compared with the third quarter of 2018.

Effective January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers, which provides accounting guidance on the recognition of revenues from contracts and requires gross presentation of certain costs that were previously offset against revenue. This change was applied prospectively from January 1, 2018 and there is no impact on our previously presented results. With our adoption of the new revenue recognition standard on January 1, 2018, capital raising and advisory fee revenues are no longer presented net of the related reimbursable out-of-pocket deal expenses. As a result, capital raising and advisory fee revenues and other operating expenses are higher in the fourth quarter of 2018 by an identical $7.9 million, with no impact to net income.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $210.1 million, a 12.6% increase compared with the fourth quarter of 2017 and a 4.6% increase compared with the third quarter of 2018. The increase from the comparative period in 2017 is primarily attributable to the growth in fee-based accounts. See Asset Management and Service Fee Break-down table.

Net Interest Income

Record net interest income of $126.7 million, an 18.6% increase compared with the fourth quarter of 2017 and a 4.4% increase compared with the third quarter of 2018. The increase is primarily due to growth of interest-earning assets and interest-bearing liabilities, as well as higher interest rates.

 

•

Interest income was $184.5 million, a 45.7% increase compared with the fourth quarter of 2017 and an 8.7% increase compared with the third quarter of 2018.

 

•

Interest expense was $57.9 million, a 191.3% increase compared with the fourth quarter of 2017 and a 19.4% increase compared with the third quarter of 2018.


 

3

 

Annual Review

Annual Highlights

 

•

Record net revenues of $3.0 billion, increased 3.4% compared with 2017.

 

•

Record net revenues and pre-tax operating income in Global Wealth Management.

 

•

Record net income available to common shareholders of $384.6 million, or $4.73 per diluted common share.

 

•

Record non-GAAP net income available to common shareholders of $429.4 million, or $5.28 per diluted common share.

 

For the year ended December 31, 2018, the Company reported net income available to common shareholders of $384.6 million, or $4.73 per diluted common share on record net revenues of $3.0 billion, compared with net income available to common shareholders of $173.5  million, or $2.14 per diluted share, on net revenues of $2.9 billion for the comparable period in 2017.

For the year ended December 31, 2018, the Company reported record non-GAAP net income available to common shareholders of $429.4 million, or $5.28 per diluted common share. The Company’s reported GAAP net income for the year ended December 31, 2018 was primarily impacted by merger-related and litigation-related expenses. Details are discussed below and in the “Non-GAAP Financial Matters” section.

Financial Highlights (Unaudited)

 

Year Ended

 

(in 000s, except per share data)

 

GAAP 12/31/18

 

 

GAAP 12/31/17

 

 

% Change

 

 

 

Non-GAAP (2) 12/31/18

 

 

Non-GAAP (2) 12/31/17

 

 

% Change

 

Net revenues

 

$

3,024,881

 

 

$

2,926,432

 

 

 

3.4

 

 

 

$

3,024,906

 

 

$

2,928,416

 

 

 

3.3

 

Net income

 

$

393,968

 

 

$

182,871

 

 

 

115.4

 

 

 

$

438,817

 

 

$

332,758

 

 

 

31.9

 

Preferred dividend

 

 

9,375

 

 

 

9,375

 

 

 

—

 

 

 

 

9,375

 

 

 

9,375

 

 

 

—

 

Net income available to common shareholders

 

$

384,593

 

 

$

173,496

 

 

 

121.7

 

 

 

$

429,442

 

 

$

323,383

 

 

 

32.8

 

Earnings per diluted common share

 

$

4.84

 

 

$

2.26

 

 

 

114.2

 

 

 

$

5.40

 

 

$

4.11

 

 

 

31.4

 

Earnings per diluted common share available to common shareholders

 

$

4.73

 

 

$

2.14

 

 

 

121.0

 

 

 

$

5.28

 

 

$

3.99

 

 

 

32.3

 

Compensation ratio

 

 

58.5

%

 

 

66.9

%

 

 

 

 

 

 

 

58.0

%

 

 

61.2

%

 

 

 

 

Non-compensation ratio

 

 

23.8

%

 

 

23.9

%

 

 

 

 

 

 

 

22.4

%

 

 

21.7

%

 

 

 

 

Pre-tax operating margin (5)

 

 

17.7

%

 

 

9.2

%

 

 

 

 

 

 

 

19.6

%

 

 

17.1

%

 

 

 

 

 

Brokerage Revenues

Brokerage revenues for the year ended December 31, 2018 were $1.0 billion, a 6.2% decrease compared with 2017.

 

 

Year Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

Global Wealth Management brokerage revenues

 

$

638,173

 

 

$

661,334

 

 

 

(3.5

)

Institutional brokerage:

 

 

 

 

 

 

 

 

 

 

 

 

Equity capital markets

 

 

185,960

 

 

 

199,526

 

 

 

(6.8

)

Fixed income capital markets

 

 

184,977

 

 

 

214,870

 

 

 

(13.9

)

Total institutional brokerage

 

 

370,937

 

 

 

414,396

 

 

 

(10.5

)

Total brokerage revenues

 

$

1,009,110

 

 

$

1,075,730

 

 

 

(6.2

)

 

•

Global Wealth Management brokerage revenues were $638.2 million, a 3.5% decrease compared with 2017.

 

•

Institutional equity brokerage revenues were $186.0 million, a 6.8% decrease compared with 2017.

 

•

Institutional fixed income brokerage revenues were $185.0 million, a 13.9% decrease compared with 2017.


 

4

 

Investment Banking

Investment banking revenues were $707.7 million, a 2.6% decrease compared with 2017.

 

Year Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

Capital raising:

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

 

31,293

 

 

 

40,466

 

 

 

(22.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity capital markets

 

 

213,633

 

 

 

182,728

 

 

 

16.9

 

Fixed income capital markets

 

 

91,262

 

 

 

142,963

 

 

 

(36.2

)

Institutional Group

 

 

304,895

 

 

 

325,691

 

 

 

(6.4

)

Total capital raising (4)

 

 

336,188

 

 

 

366,157

 

 

 

(8.2

)

Advisory fees (4)

 

 

371,482

 

 

 

360,606

 

 

 

3.0

 

Total investment banking

 

$

707,670

 

 

$

726,763

 

 

 

(2.6

)

 

•

Global Wealth Management capital raising revenues were $31.3 million, a 22.7% decrease compared with 2017.

 

•

Institutional equity capital raising revenues were $213.6 million, a 16.9% increase compared with 2017.

 

•

Institutional fixed income capital raising revenues were $91.3 million, a 36.2% decrease compared with 2017.

 

•

Advisory fee revenues were $371.5 million, a 3.0% increase compared with 2017.

Effective January 1, 2018, the Company adopted ASU 2014-09, which provides accounting guidance on the recognition of revenues from contracts and requires gross presentation of certain costs that were previously offset against revenue. This change was applied prospectively from January 1, 2018 and there is no impact on our previously presented results. With our adoption of the new revenue recognition standard on January 1, 2018, capital raising and advisory fee revenues are no longer presented net of the related reimbursable out-of-pocket deal expenses. As a result, capital raising and advisory fee revenues and other operating expenses are higher in 2018 by an identical $33.8 million, with no impact to net income.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $806.2 million, a 14.8% increase compared with 2017. The increase from the comparative period in 2017 is primarily attributable to the growth in fee-based accounts.

Net Interest Income

Record net interest income of $476.4 million, a 23.9% increase compared with 2017. The increase is primarily due to growth of interest-earning assets and interest-bearing liabilities, as well as higher interest rates.

 

•

Interest income was $646.4 million, a 42.3% increase compared with 2017.

 

•

Interest expense was $170.1 million, a 142.9% increase compared with 2017.

Fourth Quarter &Full Year 2018

Compensation and Benefits Expenses

For the quarter ended December 31, 2018, compensation and benefits expenses were $448.4 million, which included $4.0 million of merger-related and severance expenses (collectively, non-GAAP adjustments). This compares with $620.3 million in the fourth quarter of 2017 and $422.3 million in the third quarter of 2018. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 56.0% in the fourth quarter of 2018 (non-GAAP measure).

For the year ended December 31, 2018, compensation and benefits expenses were $1.8 billion, which included $17.3 million of merger-related and severance expenses, (collectively, non-GAAP adjustments) compared to $2.0 billion in 2017. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 58.0% in the year ended December 31, 2018 (non-GAAP measure).  

 

 

Three Months Ended

 

 

Year Ended

 

 

 

12/31/18

 

 

12/31/17

 

 

12/31/18

 

 

12/31/17

 

GAAP compensation and benefits

 

$

448,375

 

 

$

620,256

 

 

$

1,770,762

 

 

$

1,958,929

 

As a percentage of net revenues

 

 

56.5

%

 

 

77.1

%

 

 

58.5

%

 

 

66.9

%

Non-GAAP adjustments: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related and severance

 

 

(4,044

)

 

 

(4,161

)

 

 

(17,333

)

 

 

(34,528

)

Tax reform

 

 

—

 

 

 

(133,319

)

 

 

—

 

 

 

(133,319

)

 

 

 

(4,044

)

 

 

(137,480

)

 

 

(17,333

)

 

 

(167,847

)

Non-GAAP compensation and benefits

 

$

444,331

 

 

$

482,776

 

 

$

1,753,429

 

 

$

1,791,082

 

As a percentage of non-GAAP net revenues

 

 

56.0

%

 

 

60.0

%

 

 

58.0

%

 

 

61.2

%

 

 

5

 

Non-Compensation Operating Expenses

For the quarter ended December 31, 2018, non-compensation operating expenses were $189.1 million, which included merger-related and litigation-related expenses (collectively, non-GAAP adjustments) of $13.7 million. This compares with $184.6 million in the fourth quarter of 2017 and $175.5 million in the third quarter of 2018. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2018 were 22.1% (non-GAAP measure).

For the year ended December 31, 2018, non-compensation operating expenses were $719.8 million, which included merger-related and litigation-related expenses (collectively, non-GAAP adjustments) of $40.7 million, compared with $698.0 million in 2017. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2018 were 22.4% (non-GAAP measure).

 

 

Three Months Ended

 

 

Year Ended

 

 

 

12/31/18

 

 

12/31/17

 

 

12/31/18

 

 

12/31/17

 

GAAP non-compensation expenses

 

$

189,143

 

 

$

184,649

 

 

$

719,757

 

 

$

697,967

 

As a percentage of net revenues

 

 

23.8

%

 

 

23.0

%

 

 

23.8

%

 

 

23.9

%

Non-GAAP adjustments: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related

 

 

(13,670

)

 

 

(6,718

)

 

 

(33,862

)

 

 

(23,617

)

Litigation-related

 

 

(18

)

 

 

(15,961

)

 

 

(6,792

)

 

 

(35,961

)

Tax reform

 

 

—

 

 

 

(2,206

)

 

 

—

 

 

 

(2,206

)

 

 

 

(13,688

)

 

 

(24,885

)

 

 

(40,654

)

 

 

(61,784

)

Non-GAAP non-compensation expenses

 

$

175,455

 

 

$

159,764

 

 

$

679,103

 

 

$

636,183

 

As a percentage of non-GAAP net revenues

 

 

22.1

%

 

 

19.9

%

 

 

22.4

%

 

 

21.7

%

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended December 31, 2018 was 26.9%. This compares with an effective income tax rate of (142.4%) for the fourth quarter of 2017 and 26.1% for the third quarter of 2018. The adjusted non-GAAP effective income tax rate for the quarter ended December 31, 2018 was 25.6%.

The GAAP effective income tax rate for the year ended December 31, 2018 was 26.3%, compared with 32.2% in 2017. The adjusted non-GAAP effective income tax rate for the year ended December 31, 2018 was 25.9%.

The provision for income taxes for the three and twelve months ended December 31, 2018 was primarily impacted by the tax reform enacted in the fourth quarter of 2017 that, among other things, lowered the federal corporate income tax rate from 35% to 21%.

 

 

Three Months Ended

 

 

Year Ended

 

 

 

12/31/18

 

 

12/31/17

 

 

12/31/18

 

 

12/31/17

 

GAAP provision for income taxes

 

$

41,869

 

 

$

1,168

 

 

$

140,394

 

 

$

86,665

 

GAAP effective tax rate

 

 

26.9

%

 

 

(142.4

%)

 

 

26.3

%

 

 

32.2

%

Non-GAAP adjustments: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related, litigation-related, and severance

 

 

4,262

 

 

 

5,379

 

 

 

15,242

 

 

 

32,248

 

Other

 

 

(1,602

)

 

 

—

 

 

 

(2,079

)

 

 

—

 

Excess tax benefits from stock-based compensation (7)

 

 

—

 

 

 

21,144

 

 

 

—

 

 

 

38,596

 

Tax reform

 

 

—

 

 

 

53,328

 

 

 

—

 

 

 

53,328

 

Revaluation of deferred tax assets

 

 

—

 

 

 

(42,443

)

 

 

—

 

 

 

(42,443

)

 

 

 

2,660

 

 

 

37,408

 

 

 

13,163

 

 

 

81,729

 

Non-GAAP provision for income taxes

 

$

44,529

 

 

$

38,576

 

 

$

153,557

 

 

$

168,394

 

Non-GAAP effective tax rate

 

 

25.6

%

 

 

23.9

%

 

 

25.9

%

 

 

33.6

%

 


 

6

 

Conference Call Information

Stifel Financial Corp. will host its fourth quarter 2018 financial results conference call on Friday, February 1, 2019, at 8:00 a.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifel’s Chairman and CEO, Ronald J. Kruszewski, by dialing (800) 651-2240 and referencing conference ID #8264278. A live audio webcast of the call, as well as a presentation highlighting the Company’s results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated, including its Eaton Partners business division; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; 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 and Stifel Bank & Trust offer a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company’s 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.

 

 

7

 

Summary Results of Operations (Unaudited)

 

 

 

Three Months Ended

 

 

 

 

Year Ended

 

(in 000s, except per share amounts)

 

12/31/18

 

 

 

 

12/31/17

 

 

 

 

% Change

 

 

 

 

9/30/18

 

 

 

 

% Change

 

 

 

 

12/31/18

 

 

 

 

12/31/17

 

 

 

 

% Change

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

167,039

 

 

 

 

$

168,754

 

 

 

 

 

(1.0

)

 

 

 

$

158,016

 

 

 

 

 

5.7

 

 

 

 

$

657,732

 

 

 

 

$

678,904

 

 

 

 

 

(3.1

)

Principal transactions

 

 

81,460

 

 

 

 

 

97,256

 

 

 

 

 

(16.2

)

 

 

 

 

83,152

 

 

 

 

 

(2.0

)

 

 

 

 

351,378

 

 

 

 

 

396,826

 

 

 

 

 

(11.5

)

Brokerage revenues

 

 

248,499

 

 

 

 

 

266,010

 

 

 

 

 

(6.6

)

 

 

 

 

241,168

 

 

 

 

 

3.0

 

 

 

 

 

1,009,110

 

 

 

 

 

1,075,730

 

 

 

 

 

(6.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital raising

 

 

90,144

 

 

 

 

 

109,509

 

 

 

 

 

(17.7

)

 

 

 

 

93,295

 

 

 

 

 

(3.4

)

 

 

 

 

336,188

 

 

 

 

 

366,147

 

 

 

 

 

(8.2

)

Advisory fees

 

 

111,089

 

 

 

 

 

123,237

 

 

 

 

 

(9.9

)

 

 

 

 

75,717

 

 

 

 

 

46.7

 

 

 

 

 

371,482

 

 

 

 

 

360,616

 

 

 

 

 

3.0

 

Investment banking

 

 

201,233

 

 

 

 

 

232,746

 

 

 

 

 

(13.5

)

 

 

 

 

169,012

 

 

 

 

 

19.1

 

 

 

 

 

707,670

 

 

 

 

 

726,763

 

 

 

 

 

(2.6

)

Asset management and service fees

 

 

210,063

 

 

 

 

 

186,563

 

 

 

 

 

12.6

 

 

 

 

 

200,743

 

 

 

 

 

4.6

 

 

 

 

 

806,175

 

 

 

 

 

702,064

 

 

 

 

 

14.8

 

Other income

 

 

6,996

 

 

 

 

 

12,016

 

 

 

 

 

(41.8

)

 

 

 

 

6,127

 

 

 

 

 

14.2

 

 

 

 

 

25,553

 

 

 

 

 

37,524

 

 

 

 

 

(31.9

)

Operating revenues

 

 

666,791

 

 

 

 

 

697,335

 

 

 

 

 

(4.4

)

 

 

 

 

617,050

 

 

 

 

 

8.1

 

 

 

 

 

2,548,508

 

 

 

 

 

2,542,081

 

 

 

 

 

0.3

 

Interest revenue

 

 

184,534

 

 

 

 

 

126,615

 

 

 

 

 

45.7

 

 

 

 

 

169,760

 

 

 

 

 

8.7

 

 

 

 

 

646,449

 

 

 

 

 

454,381

 

 

 

 

 

42.3

 

Total revenues

 

 

851,325

 

 

 

 

 

823,950

 

 

 

 

 

3.3

 

 

 

 

 

786,810

 

 

 

 

 

8.2

 

 

 

 

 

3,194,957

 

 

 

 

 

2,996,462

 

 

 

 

 

6.6

 

Interest expense

 

 

57,876

 

 

 

 

 

19,865

 

 

 

 

 

191.3

 

 

 

 

 

48,468

 

 

 

 

 

19.4

 

 

 

 

 

170,076

 

 

 

 

 

70,030

 

 

 

 

 

142.9

 

Net revenues

 

 

793,449

 

 

 

 

 

804,085

 

 

 

 

 

(1.3

)

 

 

 

 

738,342

 

 

 

 

 

7.5

 

 

 

 

 

3,024,881

 

 

 

 

 

2,926,432

 

 

 

 

 

3.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

448,375

 

 

 

 

 

620,256

 

 

 

 

 

(27.7

)

 

 

 

 

422,324

 

 

 

 

 

6.2

 

 

 

 

 

1,770,762

 

 

 

 

 

1,958,929

 

 

 

 

 

(9.6

)

Occupancy and equipment rental

 

 

57,158

 

 

 

 

 

54,844

 

 

 

 

 

4.2

 

 

 

 

 

54,035

 

 

 

 

 

5.8

 

 

 

 

 

222,384

 

 

 

 

 

222,708

 

 

 

 

 

(0.1

)

Communication and office supplies

 

 

36,786

 

 

 

 

 

30,807

 

 

 

 

 

19.4

 

 

 

 

 

33,330

 

 

 

 

 

10.4

 

 

 

 

 

140,254

 

 

 

 

 

133,493

 

 

 

 

 

5.1

 

Commissions and floor brokerage

 

 

11,169

 

 

 

 

 

10,945

 

 

 

 

 

2.0

 

 

 

 

 

11,338

 

 

 

 

 

(1.5

)

 

 

 

 

41,967

 

 

 

 

 

44,132

 

 

 

 

 

(4.9

)

Provision for loan losses

 

 

5,122

 

 

 

 

 

5,340

 

 

 

 

 

(4.1

)

 

 

 

 

6,924

 

 

 

 

 

(26.0

)

 

 

 

 

18,366

 

 

 

 

 

25,320

 

 

 

 

 

(27.5

)

Other operating expenses

 

 

78,908

 

 

 

 

 

82,713

 

 

 

 

 

(4.6

)

 

 

 

 

69,861

 

 

 

 

 

13.0

 

 

 

 

 

296,786

 

 

 

 

 

272,314

 

 

 

 

 

9.0

 

Total non-interest expenses

 

 

637,518

 

 

 

 

 

804,905

 

 

 

 

 

(20.8

)

 

 

 

 

597,812

 

 

 

 

 

6.6

 

 

 

 

 

2,490,519

 

 

 

 

 

2,656,896

 

 

 

 

 

(6.3

)

Income/(loss) before income taxes

 

 

155,931

 

 

 

 

 

(820

)

 

 

 

n/m

 

 

 

 

 

140,530

 

 

 

 

 

11.0

 

 

 

 

 

534,362

 

 

 

 

 

269,536

 

 

 

 

 

98.3

 

Provision for income taxes

 

 

41,869

 

 

 

 

 

1,168

 

 

 

 

n/m

 

 

 

 

 

36,672

 

 

 

 

 

14.2

 

 

 

 

 

140,394

 

 

 

 

 

86,665

 

 

 

 

 

62.0

 

Net income/(loss)

 

 

114,062

 

 

 

 

 

(1,988

)

 

 

 

n/m

 

 

 

 

 

103,858

 

 

 

 

 

9.8

 

 

 

 

 

393,968

 

 

 

 

 

182,871

 

 

 

 

 

115.4

 

Preferred dividends

 

 

2,344

 

 

 

 

 

2,344

 

 

 

 

 

—

 

 

 

 

 

2,343

 

 

 

 

n/m

 

 

 

 

 

9,375

 

 

 

 

 

9,375

 

 

 

 

 

—

 

Net income/(loss) available to common shareholders

 

$

111,718

 

 

 

 

$

(4,332

)

 

 

 

n/m

 

 

 

 

$

101,515

 

 

 

 

 

10.1

 

 

 

 

$

384,593

 

 

 

 

$

173,496

 

 

 

 

 

121.7

 

Earnings per common share: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.56

 

 

 

 

$

(0.06

)

 

 

 

n/m

 

 

 

 

$

1.41

 

 

 

 

 

10.6

 

 

 

 

$

5.36

 

 

 

 

$

2.53

 

 

 

 

 

111.9

 

Diluted

 

$

1.38

 

 

 

 

$

(0.06

)

 

 

 

n/m

 

 

 

 

$

1.25

 

 

 

 

 

10.4

 

 

 

 

$

4.73

 

 

 

 

$

2.14

 

 

 

 

 

121.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

71,666

 

 

 

 

 

68,782

 

 

 

 

 

4.2

 

 

 

 

 

71,919

 

 

 

 

 

(0.4

)

 

 

 

 

71,786

 

 

 

 

 

68,562

 

 

 

 

 

4.7

 

Diluted

 

 

80,706

 

 

 

 

 

68,782

 

 

 

 

 

17.3

 

 

 

 

 

81,484

 

 

 

 

 

(1.0

)

 

 

 

 

81,321

 

 

 

 

 

81,035

 

 

 

 

 

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.12

 

 

 

 

$

0.10

 

 

 

 

 

20.0

 

 

 

 

$

0.12

 

 

 

 

 

—

 

 

 

 

$

0.48

 

 

 

 

$

0.20

 

 

 

 

 

140.0

 


 

8

 

Summary Business Segment Results (Unaudited)

 

 

 

Three Months Ended

 

 

Year Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

 

 

% Change

 

 

9/30/18

 

 

% Change

 

 

12/31/18

 

 

12/31/17

 

 

% Change

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

$

509,256

 

 

$

473,938

 

 

 

 

 

7.5

 

 

$

498,161

 

 

 

2.2

 

 

$

1,990,319

 

 

$

1,822,218

 

 

 

9.2

 

Institutional Group

 

 

286,640

 

 

 

332,401

 

 

 

 

 

(13.8

)

 

 

245,952

 

 

 

16.5

 

 

 

1,055,495

 

 

 

1,110,768

 

 

 

(5.0

)

Other

 

 

(2,447

)

 

 

(2,254

)

 

 

 

 

(8.6

)

 

 

(5,771

)

 

 

57.6

 

 

 

(20,933

)

 

 

(6,554

)

 

 

(219.4

)

Total net revenues

 

$

793,449

 

 

$

804,085

 

 

 

 

 

(1.3

)

 

$

738,342

 

 

 

7.5

 

 

$

3,024,881

 

 

$

2,926,432

 

 

 

3.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

$

320,296

 

 

$

304,077

 

 

 

 

 

5.3

 

 

$

314,784

 

 

 

1.8

 

 

$

1,253,316

 

 

$

1,195,312

 

 

 

4.9

 

Institutional Group

 

 

244,488

 

 

 

258,901

 

 

 

 

 

(5.6

)

 

 

211,647

 

 

 

15.5

 

 

 

898,444

 

 

 

892,787

 

 

 

0.6

 

Other

 

 

72,734

 

 

 

241,927

 

 

 

 

 

(69.9

)

 

 

71,381

 

 

 

1.9

 

 

 

338,759

 

 

 

568,797

 

 

 

(40.4

)

Total operating expenses

 

$

637,518

 

 

$

804,905

 

 

 

 

 

(20.8

)

 

$

597,812

 

 

 

6.6

 

 

$

2,490,519

 

 

$

2,656,896

 

 

 

(6.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating contribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

$

188,960

 

 

$

169,861

 

 

 

 

 

11.2

 

 

$

183,377

 

 

 

3.0

 

 

$

737,003

 

 

$

626,906

 

 

 

17.6

 

Institutional Group

 

 

42,152

 

 

 

73,500

 

 

 

 

 

(42.7

)

 

 

34,305

 

 

 

22.9

 

 

 

157,051

 

 

 

217,981

 

 

 

(28.0

)

Other

 

 

(75,181

)

 

 

(244,181

)

 

 

 

 

(69.2

)

 

 

(77,152

)

 

 

(2.6

)

 

 

(359,692

)

 

 

(575,351

)

 

 

(37.5

)

Income/(loss) before income taxes

 

$

155,931

 

 

$

(820

)

 

 

 

n/m

 

 

$

140,530

 

 

 

11.0

 

 

$

534,362

 

 

$

269,536

 

 

 

98.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As a percentage of net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

 

48.5

 

 

 

48.9

 

 

 

 

 

 

 

 

 

48.5

 

 

 

 

 

 

 

48.6

 

 

 

50.0

 

 

 

 

 

Institutional Group

 

 

62.0

 

 

 

59.7

 

 

 

 

 

 

 

 

 

59.4

 

 

 

 

 

 

 

60.0

 

 

 

59.9

 

 

 

 

 

Non-compensation operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

 

14.4

 

 

 

15.3

 

 

 

 

 

 

 

 

 

14.7

 

 

 

 

 

 

 

14.4

 

 

 

15.6

 

 

 

 

 

Institutional Group

 

 

23.3

 

 

 

18.2

 

 

 

 

 

 

 

 

 

26.7

 

 

 

 

 

 

 

25.1

 

 

 

20.5

 

 

 

 

 

Income before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Wealth Management

 

 

37.1

 

 

 

35.8

 

 

 

 

 

 

 

 

 

36.8

 

 

 

 

 

 

 

37.0

 

 

 

34.4

 

 

 

 

 

Institutional Group

 

 

14.7

 

 

 

22.1

 

 

 

 

 

 

 

 

 

13.9

 

 

 

 

 

 

 

14.9

 

 

 

19.6

 

 

 

 

 

Consolidated pre-tax margin

 

 

19.7

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

19.0

 

 

 

 

 

 

 

17.7

 

 

 

9.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Stifel Financial Corp.

 

 

 

 

 

 

 

 

 

 

 

Financial metrics (unaudited):

As of and For the Three Months Ended

 

(in 000s, except percentages and per share amounts)

12/31/18

 

12/31/17

 

9/30/18

 

Total assets

$

24,519,598

 

$

21,383,953

 

$

23,760,048

 

Total equity

 

3,197,593

 

 

2,861,576

 

 

3,161,569

 

Book value per common share

$

43.04

 

$

38.26

 

$

41.25

 

Return on common equity (8)

 

14.8

%

 

(0.6

%)

 

14.0

%

Non-GAAP return on common equity (2) (8)

 

16.7

%

 

17.6

%

 

15.1

%

Return on tangible common equity (9)

 

23.8

%

 

(1.0

%)

 

22.7

%

Non-GAAP return on tangible common equity (2) (9)

 

27.0

%

 

28.9

%

 

24.7

%

Tier 1 common capital ratio (10)

 

16.8

%

 

16.9

%

 

16.7

%

Tier 1 risk based capital ratio (10)

 

18.2

%

 

19.0

%

 

18.0

%

Tier 1 leverage capital ratio (10)

 

9.3

%

 

9.5

%

 

9.6

%

Pre-tax margin on net revenues

 

19.7

%

 

(0.1

%)

 

19.0

%

Non-GAAP pre-tax margin on net revenues (2)

 

21.9

%

 

20.1

%

 

20.6

%

Effective tax rate

 

26.9

%

 

(142.4

%)

 

26.1

%

Non-GAAP effective tax rate (2)

 

25.6

%

 

23.9

%

 

26.1

%

 

Statistical Information (unaudited):

 

As of and For the Three Months Ended

 

(in 000s, except financial advisors and locations)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

 

9/30/18

 

 

% Change

 

Financial advisors (11)

 

 

2,301

 

 

 

2,244

 

 

 

2.5

 

 

 

2,298

 

 

 

0.1

 

Locations

 

 

404

 

 

 

391

 

 

 

3.3

 

 

 

404

 

 

 

—

 

Total client assets

 

$

269,862,000

 

 

$

272,591,000

 

 

 

(1.0

)

 

$

289,136,000

 

 

 

(6.7

)

Fee-based client assets

 

$

90,174,000

 

 

$

87,560,000

 

 

 

3.0

 

 

$

96,008,000

 

 

 

(6.1

)

Client money market and insured product

 

$

16,109,000

 

 

$

17,286,000

 

 

 

(6.8

)

 

$

15,121,000

 

 

 

6.5

 

Secured client lending (12)

 

$

2,893,074

 

 

$

3,079,737

 

 

 

(6.1

)

 

$

3,185,710

 

 

 

(9.2

)

  

 

 

Asset Management and Service Fee Break-down (unaudited)

 

Asset Management and Service Fee Revenues:

 

Three Months Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

 

9/30/18

 

 

% Change

 

Private Client Group (13)

 

$

159,775

 

 

$

137,622

 

 

 

16.1

 

 

$

152,021

 

 

 

5.1

 

Asset Management

 

 

28,670

 

 

 

27,328

 

 

 

4.9

 

 

 

27,555

 

 

 

4.0

 

Third-party Bank Sweep Program

 

 

11,062

 

 

 

11,437

 

 

 

(3.3

)

 

 

11,029

 

 

 

0.3

 

Other (14)

 

 

10,556

 

 

 

10,176

 

 

 

3.7

 

 

 

10,138

 

 

 

4.1

 

Total asset management and service fee revenues

 

$

210,063

 

 

$

186,563

 

 

 

12.6

 

 

$

200,743

 

 

 

4.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-based Assets:

 

Three Months Ended

 

(in millions)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

 

9/30/18

 

 

% Change

 

Private Client Group (13)

 

$

66,097

 

 

$

64,613

 

 

 

2.3

 

 

$

71,463

 

 

 

(7.5

)

Asset Management

 

 

30,269

 

 

 

29,349

 

 

 

3.1

 

 

 

31,091

 

 

 

(2.6

)

Elimination (15)

 

 

(6,192

)

 

 

(6,402

)

 

 

(3.3

)

 

 

(6,546

)

 

 

(5.4

)

Total fee-based assets

 

$

90,174

 

 

$

87,560

 

 

 

3.0

 

 

$

96,008

 

 

 

(6.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual Program Banks

 

$

2,569

 

 

$

3,879

 

 

 

(33.8

)

 

$

2,953

 

 

 

(13.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROA (bps) (16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private Client Group (13)

 

 

89.4

 

 

 

89.4

 

 

 

 

 

 

 

89.7

 

 

 

 

 

Asset Management

 

 

37.9

 

 

 

37.2

 

 

 

 

 

 

 

35.5

 

 

 

 

 

Individual Program Banks

 

 

159.3

 

 

 

112.4

 

 

 

 

 

 

 

134.0

 

 

 

 

 

 

 

10

 

Stifel Bancorp, Inc. (17) - a component of Global Wealth Management

 

 

 

Selected operating data (unaudited):

Three Months Ended

 

 

Year Ended

 

(in 000s, except percentages)

12/31/18

 

 

12/31/17

 

 

% Change

 

 

9/30/18

 

 

% Change

 

 

12/31/18

 

 

12/31/17

 

 

% Change

 

Net Interest Income

$

121,790

 

 

$

103,985

 

 

 

17.1

 

 

$

116,204

 

 

 

4.8

 

 

$

459,549

 

 

$

376,099

 

 

 

22.2

 

Bank loan loss provision

 

5,122

 

 

 

5,340

 

 

 

(4.1

)

 

 

6,924

 

 

 

(26.0

)

 

 

18,366

 

 

 

25,320

 

 

 

(27.5

)

Charge-offs

 

—

 

 

 

105

 

 

n/m

 

 

 

—

 

 

n/m

 

 

 

14

 

 

 

3,058

 

 

 

(99.5

)

Net Interest Margin

 

2.89

%

 

 

2.85

%

 

 

1.4

 

 

 

2.87

%

 

 

0.7

 

 

 

2.90

%

 

 

2.77

%

 

 

4.7

 

 

Financial Metrics (unaudited):

 

As of

 

(in 000s, except percentages)

 

12/31/18

 

 

12/31/17

 

 

9/30/18

 

Total Assets

 

$

17,818,887

 

 

$

14,995,795

 

 

$

16,989,337

 

Total Equity

 

 

1,233,243

 

 

 

1,058,488

 

 

 

1,185,935

 

Total Loans, net (includes loans held for sale)

 

 

8,723,172

 

 

 

7,173,827

 

 

 

8,516,052

 

Total Deposits

 

 

15,863,613

 

 

 

13,411,935

 

 

 

14,502,952

 

Available-for-sale securities, at fair value

 

 

3,064,257

 

 

 

3,766,372

 

 

 

3,343,170

 

Held-to-maturity securities, at amortized cost

 

 

4,215,533

 

 

 

3,694,377

 

 

 

4,562,021

 

Commercial and industrial

 

 

3,304,234

 

 

 

2,437,938

 

 

 

3,127,435

 

Residential real estate

 

 

2,875,014

 

 

 

2,593,576

 

 

 

2,792,269

 

Securities-based loans

 

 

1,786,966

 

 

 

1,819,206

 

 

 

1,836,450

 

Commercial real estate

 

 

318,961

 

 

 

116,258

 

 

 

328,814

 

Loans held for sale

 

 

205,557

 

 

 

226,068

 

 

 

262,063

 

Stifel Bank & Trust:

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio (10)

 

 

14.4

%

 

 

14.3

%

 

 

14.2

%

Tier 1 capital ratio (10)

 

 

14.6

%

 

 

14.3

%

 

 

14.2

%

Total capital ratio (10)

 

 

15.6

%

 

 

15.3

%

 

 

15.2

%

Tier 1 leverage ratio (10)

 

 

7.1

%

 

 

7.1

%

 

 

7.0

%

Stifel Bank:

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio (10)

 

 

12.3

%

 

n/a

 

 

 

13.8

%

Tier 1 capital ratio (10)

 

 

12.3

%

 

n/a

 

 

 

13.8

%

Total capital ratio (10)

 

 

13.5

%

 

n/a

 

 

 

15.0

%

Tier 1 leverage ratio (10)

 

 

9.9

%

 

n/a

 

 

 

12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

85,833

 

 

$

67,466

 

 

$

80,700

 

Allowance as a percentage of retained loans

 

 

1.00

%

 

 

0.96

%

 

 

0.97

%

Net charge-offs as a percentage of average loans

 

 

0.00

%

 

 

0.00

%

 

 

0.00

%

Total nonperforming assets

 

 

24,455

 

 

 

27,030

 

 

 

24,352

 

Nonperforming assets as % of total assets

 

 

0.14

%

 

 

0.18

%

 

 

0.14

%


 

11

 

Global Wealth Management Summary Results of Operations (Unaudited)

 

 

 

Three Months Ended

 

 

 

 

Year Ended

 

(in 000s)

 

12/31/18

 

 

 

 

12/31/17

 

 

 

 

% Change

 

 

 

 

9/30/18

 

 

% Change

 

 

 

 

12/31/18

 

 

 

 

12/31/17

 

 

 

 

% Change

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

117,006

 

 

 

 

$

118,292

 

 

 

 

 

(1.1

)

 

 

 

$

117,795

 

 

 

(0.7

)

 

 

 

$

472,135

 

 

 

 

$

474,623

 

 

 

 

 

(0.5

)

Principal transactions

 

 

40,325

 

 

 

 

 

45,129

 

 

 

 

 

(10.6

)

 

 

 

 

41,023

 

 

 

(1.7

)

 

 

 

 

166,038

 

 

 

 

 

186,711

 

 

 

 

 

(11.1

)

    Brokerage revenues

 

 

157,331

 

 

 

 

 

163,421

 

 

 

 

 

(3.7

)

 

 

 

 

158,818

 

 

 

(0.9

)

 

 

 

 

638,173

 

 

 

 

 

661,334

 

 

 

 

 

(3.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset management and service fees

 

 

210,051

 

 

 

 

 

186,373

 

 

 

 

 

12.7

 

 

 

 

 

200,735

 

 

 

4.6

 

 

 

 

 

806,132

 

 

 

 

 

701,756

 

 

 

 

 

14.9

 

Net interest

 

 

132,402

 

 

 

 

 

112,190

 

 

 

 

 

18.0

 

 

 

 

 

127,341

 

 

 

4.0

 

 

 

 

 

503,185

 

 

 

 

 

400,414

 

 

 

 

 

25.7

 

Investment banking

 

 

7,915

 

 

 

 

 

8,899

 

 

 

 

 

(11.1

)

 

 

 

 

7,722

 

 

 

2.5

 

 

 

 

 

31,374

 

 

 

 

 

40,466

 

 

 

 

 

(22.5

)

Other income

 

 

1,557

 

 

 

 

 

3,055

 

 

 

 

 

(49.0

)

 

 

 

 

3,545

 

 

 

(56.1

)

 

 

 

 

11,455

 

 

 

 

 

18,248

 

 

 

 

 

(37.2

)

Net revenues

 

 

509,256

 

 

 

 

 

473,938

 

 

 

 

 

7.5

 

 

 

 

 

498,161

 

 

 

2.2

 

 

 

 

 

1,990,319

 

 

 

 

 

1,822,218

 

 

 

 

 

9.2

 

Non-interest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

246,750

 

 

 

 

 

231,736

 

 

 

 

 

6.5

 

 

 

 

 

241,713

 

 

 

2.1

 

 

 

 

 

968,102

 

 

 

 

 

911,986

 

 

 

 

 

6.2

 

Non-compensation operating expenses

 

 

73,546

 

 

 

 

 

72,341

 

 

 

 

 

1.7

 

 

 

 

 

73,071

 

 

 

0.7

 

 

 

 

 

285,214

 

 

 

 

 

283,326

 

 

 

 

 

0.7

 

Total non-interest expenses

 

 

320,296

 

 

 

 

 

304,077

 

 

 

 

 

5.3

 

 

 

 

 

314,784

 

 

 

1.8

 

 

 

 

 

1,253,316

 

 

 

 

 

1,195,312

 

 

 

 

 

4.9

 

Income before income taxes

 

$

188,960

 

 

 

 

$

169,861

 

 

 

 

 

11.2

 

 

 

 

$

183,377

 

 

 

3.0

 

 

 

 

$

737,003

 

 

 

 

$

626,906

 

 

 

 

 

17.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As a percentage of net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

48.5

 

 

 

 

 

48.9

 

 

 

 

 

 

 

 

 

 

 

48.5

 

 

 

 

 

 

 

 

 

48.6

 

 

 

 

 

50.0

 

 

 

 

 

 

 

Non-compensation operating expenses

 

 

14.4

 

 

 

 

 

15.3

 

 

 

 

 

 

 

 

 

 

 

14.7

 

 

 

 

 

 

 

 

 

14.4

 

 

 

 

 

15.6

 

 

 

 

 

 

 

Income before income taxes

 

 

37.1

 

 

 

 

 

35.8

 

 

 

 

 

 

 

 

 

 

 

36.8

 

 

 

 

 

 

 

 

 

37.0

 

 

 

 

 

34.4

 

 

 

 

 

 

 

 

 

Institutional Group Summary Results of Operations (Unaudited)

 

 

 

Three Months Ended

 

 

 

 

Year Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

% Change

 

 

 

 

9/30/18

 

 

% Change

 

 

 

 

12/31/18

 

 

12/31/17

 

 

% Change

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

50,034

 

 

$

50,462

 

 

 

(0.8

)

 

 

 

$

40,220

 

 

 

24.4

 

 

 

 

$

185,597

 

 

$

204,281

 

 

 

(9.1

)

Principal transactions

 

 

41,134

 

 

 

52,127

 

 

 

(21.1

)

 

 

 

 

42,130

 

 

 

(2.4

)

 

 

 

 

185,340

 

 

 

210,115

 

 

 

(11.8

)

Brokerage revenues

 

 

91,168

 

 

 

102,589

 

 

 

(11.1

)

 

 

 

 

82,350

 

 

 

10.7

 

 

 

 

 

370,937

 

 

 

414,396

 

 

 

(10.5

)

Capital raising

 

 

82,229

 

 

 

100,620

 

 

 

(18.3

)

 

 

 

 

85,553

 

 

 

(3.9

)

 

 

 

 

304,895

 

 

 

325,691

 

 

 

(6.4

)

Advisory fees

 

 

111,089

 

 

 

123,227

 

 

 

(9.9

)

 

 

 

 

75,717

 

 

 

46.7

 

 

 

 

 

371,401

 

 

 

360,606

 

 

 

3.0

 

Investment banking

 

 

193,318

 

 

 

223,847

 

 

 

(13.6

)

 

 

 

 

161,270

 

 

 

19.9

 

 

 

 

 

676,296

 

 

 

686,297

 

 

 

(1.5

)

Other (18)

 

 

2,154

 

 

 

5,965

 

 

 

(63.9

)

 

 

 

 

2,332

 

 

 

(7.6

)

 

 

 

 

8,262

 

 

 

10,075

 

 

 

(18.0

)

Net revenues

 

 

286,640

 

 

 

332,401

 

 

 

(13.8

)

 

 

 

 

245,952

 

 

 

16.5

 

 

 

 

 

1,055,495

 

 

 

1,110,768

 

 

 

(5.0

)

Non-interest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

177,782

 

 

 

198,416

 

 

 

(10.4

)

 

 

 

 

146,187

 

 

 

21.6

 

 

 

 

 

633,297

 

 

 

665,514

 

 

 

(4.8

)

Non-compensation operating expenses

 

 

66,706

 

 

 

60,485

 

 

 

10.3

 

 

 

 

 

65,460

 

 

 

1.9

 

 

 

 

 

265,147

 

 

 

227,273

 

 

 

16.7

 

Total non-interest expenses

 

 

244,488

 

 

 

258,901

 

 

 

(5.6

)

 

 

 

 

211,647

 

 

 

15.5

 

 

 

 

 

898,444

 

 

 

892,787

 

 

 

0.6

 

Income before income taxes

 

$

42,152

 

 

$

73,500

 

 

 

(42.7

)

 

 

 

$

34,305

 

 

 

22.9

 

 

 

 

$

157,051

 

 

$

217,981

 

 

 

(28.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As a percentage of net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

62.0

 

 

 

59.7

 

 

 

 

 

 

 

 

 

59.4

 

 

 

 

 

 

 

 

 

60.0

 

 

 

59.9

 

 

 

 

 

Non-compensation operating expenses

 

 

23.3

 

 

 

18.2

 

 

 

 

 

 

 

 

 

26.7

 

 

 

 

 

 

 

 

 

25.1

 

 

 

20.5

 

 

 

 

 

Income before income taxes

 

 

14.7

 

 

 

22.1

 

 

 

 

 

 

 

 

 

13.9

 

 

 

 

 

 

 

 

 

14.9

 

 

 

19.6

 

 

 

 

 

 


 

12

 

Non-GAAP Financial Measures

The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Company’s financial results for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017 and the years ended December 31, 2018 and 2017. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Company’s core operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company’s current financial performance. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP measures primarily exclude expenses which management believes are, in some instances, non-recurring and not representative of on-going business.

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

The following table provides details with respect to reconciling net income and earnings per diluted common share on a GAAP basis for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017 and the years ended December 31, 2018 and 2017 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

 

 

 

Three Months Ended

 

 

Year Ended

 

(in 000s)

 

12/31/18

 

 

12/31/17

 

 

9/30/18

 

 

12/31/18

 

 

12/31/17

 

GAAP net income/(loss)

 

$

114,062

 

 

$

(1,988

)

 

$

103,858

 

 

$

393,968

 

 

$

182,871

 

Preferred dividend

 

 

2,344

 

 

 

2,344

 

 

 

2,343

 

 

 

9,375

 

 

 

9,375

 

Net income/(loss) available to common shareholders

 

 

111,718

 

 

 

(4,332

)

 

 

101,515

 

 

 

384,593

 

 

 

173,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related and severance  (19)

 

 

17,714

 

 

 

10,879

 

 

 

10,777

 

 

 

51,220

 

 

 

60,130

 

Litigation-related (20)

 

 

18

 

 

 

15,961

 

 

 

774

 

 

 

6,792

 

 

 

35,961

 

Tax reform (21)

 

 

—

 

 

 

135,525

 

 

 

—

 

 

 

—

 

 

 

135,525

 

Provision for income taxes (22)

 

 

(2,660

)

 

 

(37,408

)

 

 

(3,004

)

 

 

(13,163

)

 

 

(81,729

)

Total non-GAAP adjustments

 

 

15,072

 

 

 

124,957

 

 

 

8,547

 

 

 

44,849

 

 

 

149,887

 

Non-GAAP net income available to common shareholders

 

$

126,790

 

 

$

120,625

 

 

$

110,062

 

 

$

429,442

 

 

$

323,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average diluted shares outstanding

 

 

80,706

 

 

 

82,267

 

 

 

81,484

 

 

 

81,321

 

 

 

81,035

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings per diluted common share (1)

 

$

1.41

 

 

$

(0.03

)

 

$

1.27

 

 

$

4.84

 

 

$

2.26

 

Non-GAAP adjustments

 

 

0.19

 

 

 

1.52

 

 

 

0.11

 

 

 

0.55

 

 

 

1.85

 

Non-GAAP earnings per diluted common share

 

$

1.60

 

 

$

1.49

 

 

$

1.38

 

 

$

5.39

 

 

$

4.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP earnings per diluted common share available to common shareholders (1)

 

$

1.38

 

 

$

(0.06

)

 

$

1.25

 

 

$

4.73

 

 

$

2.14

 

Non-GAAP adjustments

 

 

0.19

 

 

 

1.53

 

 

 

0.10

 

 

 

0.55

 

 

 

1.85

 

Non-GAAP earnings per diluted common share available to common shareholders

 

$

1.57

 

 

$

1.47

 

 

$

1.35

 

 

$

5.28

 

 

$

3.99

 


 

13

 

Footnotes

 

(1)

GAAP earnings per share for the three months ended December 31, 2017 is calculated using the basic weighted average number of common shares outstanding, not fully dilutive shares, as they are anti-dilutive in periods a loss is incurred.

 

(2)

Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”

 

(3)

Non-GAAP pre-tax margin for the three months ended December 31, 2018 of 21.9% is calculated by adding non-GAAP adjustments of $17.7 million to our GAAP income before income taxes of $155.9 million and dividing it by non-GAAP net revenues for the quarter of $793.4 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”

 

(4)

Excludes revenue included in the Other segment

 

(5)

Non-GAAP pre-tax margin for the year ended December 31, 2018 of 19.6% is calculated by adding non-GAAP adjustments of $58.0 million to our GAAP income before income taxes of $534.4 million and dividing it by non-GAAP net revenues for the year of $3,024.9 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”

 

(6)

See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”

 

(7)

During the first quarter of 2017, the Company adopted new accounting guidance associated with stock-based compensation.

 

(8)

Computed by dividing annualized net income by average common shareholders’ equity or, in the case of non-GAAP return on common equity, computed by dividing non-GAAP net income by average common shareholders’ equity.

 

(9)

Computed by dividing annualized net income by average tangible shareholders' equity or, in the case of non-GAAP return on tangible common equity, computed by dividing non-GAAP net income by average tangible shareholders' equity. Tangible common shareholders' equity equals total common shareholders' equity less goodwill and identifiable intangible assets.

 

(10)

Capital ratios are estimates at time of the Company’s earnings release.

 

(11)

Includes 101, 112, and 104 independent contractors at December 31, 2018, December 31, 2017, and September 30, 2018, respectively.

 

(12)

Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at Stifel Bank.

 

(13)

Includes Private Client Group and Trust Business.

 

(14)

Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.

 

(15)

Asset management assets included in Private Client Group or Trust accounts.

 

(16)

Return on assets (ROA) is calculated based on prior period-end balances for Private Client Group and Asset Management, and average quarterly balances for Individual Program Banks.

 

(17)

Includes Stifel Bank & Trust and Stifel Bank, formerly known as The Business Bank of St. Louis, which was acquired on August 31, 2018.

 

(18)

Includes net interest, asset management and service fees, and other income.

 

(19)

Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company’s on-going business.

 

(20)

Litigation-related adjustments for the three and twelve months ended December 31, 2017 are primarily related to costs associated with the Company’s previously disclosed legal matters.

 

(21)

Primarily related to previously disclosed actions taken by the Company in response to the Tax Legislation that was enacted in the fourth quarter of 2017 to maximize tax savings.

 

(22)

See details of non-GAAP adjustments under “Provision for Income Taxes.”

 

14