Stifel Reports Second Quarter 2015 Financial Results

ST. LOUIS, MO--(Marketwired - August 10, 2015) -

Highlights for the three months ended June 30, 2015:

• Record net revenues of $597.8 million, increased 6.7% compared with the year-ago quarter.
• Non-GAAP net income of $55.1 million, or $0.71 per diluted common share.
• Net income of $20.9 million, or $0.27 per diluted common share.

Highlights for the six months ended June 30, 2015:

• Record net revenues of $1.2 billion, increased 4.7% compared with the year-ago period.
• Non-GAAP net income of $105.0 million, or $1.35 per diluted share.
• Net income of $64.0 million, or $0.82 per diluted share.

Stifel Financial Corp. (NYSE: SF) today reported net income of $20.9 million, or $0.27 per diluted common share on record net revenues of $597.8 million for the three months ended June 30, 2015, compared with net income of $43.6 million, or $0.58 per diluted common share, on net revenues of $560.1 million for the second quarter of 2014.

For the three months ended June 30, 2015, the Company reported non-GAAP net income of $55.1 million, or $0.71 per diluted common share. These non-GAAP results exclude merger-related and other non-recurring expenses of $34.2 million (after-tax).

For the six months ended June 30, 2015, the Company reported net income of $64.0 million, or $0.82 per diluted common share on record net revenues of $1.2 billion, compared with net income of $91.0 million, or $1.20 per diluted share, on net revenues of $1.1 billion for the comparable period in 2014.

For the six months ended June 30, 2015, the Company reported non-GAAP net income of $105.0 million, or $1.35 per diluted share. A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed below under "Non-GAAP Financial Measures."

Chairman's Comments

"Our record second quarter results demonstrate the strength of our platform. On June 5, 2015, we completed the acquisition of Sterne Agee, and as a result, our second quarter includes approximately one month of Sterne Agee's financial results. We are pleased to welcome our new associates to Stifel," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

Kruszewski continued, "We remain excited about partnering with the professionals at Barclays to continue to grow our Global Wealth Management business. We are committed to investing in and helping grow the Barclays franchise over the long-term, and creating a best-in-class platform to serve our clients. We remain on track to close the transaction in the 4^th quarter of 2015."

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions revenues, were $269.3 million, a 2.1% decrease compared with the second quarter of 2014 and a 4.0% decrease compared with the first quarter of 2015.

• Global wealth management brokerage revenues were $158.8 million, a 1.1% decrease compared with the second quarter of 2014 and a 0.5% increase compared with the first quarter of 2015.
• Institutional equity brokerage revenues were $58.6 million, a 3.8% decrease compared with the second quarter of 2014 and a 5.3% decrease compared with the first quarter of 2015.
• Institutional fixed income brokerage revenues were $52.0 million, a 3.2% decrease compared with the second quarter of 2014 and a 14.4% decrease compared with the first quarter of 2015.

Investment Banking Revenues

Investment banking revenues were $161.0 million, an 11.2% increase compared with the second quarter of 2014 and a 28.7% increase compared with the first quarter of 2015.

• Equity capital raising revenues were $55.5 million, a 15.7% decrease compared with the second quarter of 2014 and a 13.3% increase compared with the first quarter of 2015.
• Fixed income capital raising revenues were $41.9 million, a 124.2% increase compared with the second quarter of 2014 and a 57.0% increase compared with the first quarter of 2015.
• Advisory fee revenues were $63.6 million, a 5.4% increase compared with the second quarter of 2014 and a 28.7% increase compared with the first quarter of 2015.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $119.9 million, a 27.3% increase compared with the second quarter of 2014 and a 5.3% increase compared with the first quarter of 2015. The increase is due to the higher value of fee-based accounts, as a result of market appreciation and new client assets.

Compensation and Benefits Expenses

For the quarter ended June 30, 2015, compensation and benefits expenses were $410.0 million, which included $39.6 million of merger-related expenses, compared with $355.3 million in the second quarter of 2014, and $355.7 million in the first quarter of 2015. Compensation and benefits expense included merger-related expenses of $1.5 million in the second quarter of 2014 and $3.4 million in the first quarter of 2015.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 62.0% in the second quarter of 2015, compared with 63.0% in the second quarter of 2014 and 62.5% in the first quarter of 2015. Transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, as a percentage of net revenues was 3.7% in the second quarter of 2015, compared with 4.5% in the second quarter of 2014 and 4.1% in the first quarter of 2015.

Non-Compensation Operating Expenses

For the quarter ended June 30, 2015, non-compensation operating expenses were $149.7 million, which included merger-related expenses of $15.1 million, compared with $130.4 million in the second quarter of 2014, and $135.2 million in the first quarter of 2015.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2015 was 22.5%, compared with 22.4% in the second quarter of 2014 and 23.2% in the first quarter of 2015.

Provision for Income Taxes

The effective income tax rate for the quarter ended June 30, 2015 was 45.1% compared with 41.4% in the second quarter of 2014, and 38.5% in the first quarter of 2015. The effective tax rate for the second quarter of 2015 was impacted by losses recognized by our foreign subsidiaries that are taxed at a different rate than our U.S. subsidiaries.

Assets and Capital

Assets

• Assets increased 5.9% to $10.1 billion as of June 30, 2015 from $9.6 billion as of June 30, 2014. The increase is primarily attributable growth attributable to acquired assets from our acquisitions and an increase in the loan portfolio at Stifel Bank, offset by a decrease in Stifel Bank's investment portfolio and financial instruments owned, at fair value.
• At June 30, 2015, the Company's Level 3 assets of $127.7 million, or 1.3% of total assets, consisted of $49.7 million of auction rate securities and $78.1 million of partnership interests, private company investments, private equity, and fixed income securities. The Company's Level 3 assets as a percentage of total assets measured at fair value was 6.3% at June 30, 2015.
• Non-performing assets as a percentage of total assets as of June 30, 2015 was 0.13%.

Capital

• The Company's Tier 1 leverage capital ratio was 18.3% at June 30, 2015 and Tier 1 risk-based capital ratio was 29.4% at June 30, 2015.
• At June 30, 2015, book value per common share was $36.35 based on 69.3 million common shares outstanding.
• Stockholders' equity as of June 30, 2015 increased $347.1 million, or 16.0%, to $2.5 billion from $2.2 billion as of June 30, 2014.

Conference Call Information

Stifel Financial Corp. will host its second quarter 2015 financial results conference call on Monday, August 10, 2015, 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 (888) 876-9938 and referencing conference ID #43107467. 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 clients are served through Stifel, Nicolaus & Company, Incorporated in the U.S., through Stifel Nicolaus Europe Limited in the United Kingdom and Europe, and through Keefe, Bruyette & Woods, Inc. in the U.S. and Europe. The Company's broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. offers trust and related services. To learn more about Stifel, please visit the Company's web site at www.stifel.com.

Forward-Looking Statements

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

Statistical Information

Business Segment Results

Non-GAAP Financial Measures

The Company utilized non-GAAP calculations of presented net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin and diluted earnings per share as additional measures to aid in understanding and analyzing the Company's financial results for the three and six months ended June 30, 2015. 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 operating results and business outlook. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company's results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance. These non-GAAP amounts primarily exclude acquisition related expenses which management believes are duplicative and will be eliminated, stock-based compensation and other expenses which in managements view are not representative of ongoing business.

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

The following table provides details with respect to reconciling net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin and diluted earnings per share on a GAAP basis for the three and six months ended June 30, 2015 to the aforementioned expenses on a non-GAAP basis for the same period.

⁽¹⁾ A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."

⁽²⁾ Includes 736, 140, and 134 independent contractors as of June 30, 2015, June 30, 2014, and March 31, 2015, respectively.

⁽³⁾ A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."

⁽⁴⁾ Includes net interest, other income, and asset management & service fees.