ST. LOUIS, MO--(Marketwired - May 01, 2017) -
- Record net revenues of $675.5 million, increased 9.0% compared with the year-ago quarter and 2.1% sequentially.
- Record net revenues and pre-tax operating income in Global Wealth Management.
- Net income available to common shareholders of $63.2 million, or $0.78 per diluted common share.
- Record client assets of $252.4 billion, increased 14.2% compared with the year-ago quarter and 6.5% sequentially.
Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $63.2 million, or $0.78 per diluted common share on record net revenues of $675.5 million for the three months ended March 31, 2017, compared with net income available to common shareholders of $27.1 million, or $0.36 per diluted common share, on net revenues of $620.0 million for the first quarter of 2016.
The GAAP results for the three months ended March 31, 2017 were impacted by the following:
- Anticipated merger-related charges of approximately $17.1 million ($10.4 million after-tax) associated with the Company's acquisitions;
- Severance expense of approximately $4.5 million ($2.8 million after-tax) associated with the Company's cost saving initiatives; and
- New accounting guidance associated with stock-based compensation that favorably impacted the quarter's income tax expense by $16.9 million.
Chairman's Comments
"I'm pleased with our results, as Stifel generated a second consecutive quarter of record net revenue, and non-GAAP pre-tax margins were just under 15%, the highest level since the fourth quarter of 2014. Our continued growth on both the top and bottom line is a testament to Stifel's diversified business strategy as well as our efforts to improve our expense efficiencies. In the first quarter, our net revenue was driven by record results in our Global Wealth Management segment that was due to further increases in fee-based revenue and improved net interest income at Stifel Bank. The growth in these recurring revenue streams over the past year and a half has helped to offset the volatility in our more transaction-driven institutional businesses. In terms of expense discipline, we continue to make progress on our cost-reduction initiatives as the first quarter represented the lowest non-compensation ratio at the firm in eleven quarters," stated Ronald J. Kruszewski, Chairman & CEO of Stifel.
Financial Highlights (Unaudited) Three Months Ended
Non-GAAP
(1)
(in 000s, except per share data) 3/31/17 3/31/16 12/31/16 3/31/17
--------- --------- --------- ---------
U.S. GAAP
Net revenues $ 675,531 $ 619,974 $ 661,391 $ 677,515
Compensation ratio 64.6% 66.3% 63.6% 62.3%
Non-compensation ratio 23.7% 26.6% 28.1% 22.8%
Pre-tax operating margin 11.7% 7.1% 8.3% 14.9%
Net income $ 65,512 $ 27,055 $ 26,880 $ 61,806
Preferred dividend 2,344 - 2,343 2,344
--------- --------- --------- ---------
Net income available to
common shareholders $ 63,168 $ 27,055 $ 24,537 $ 59,462
Earnings per diluted common
share $ 0.81 $ 0.36 $ 0.34 $ 0.77
Earnings per diluted common
share available to common
shareholders $ 0.78 $ 0.36 $ 0.31 $ 0.74
Brokerage Revenues
Brokerage revenues, defined as commissions and principal transactions, were $292.1 million, an 8.4% decrease compared with the first quarter of 2016 and a 0.8% increase compared with the fourth quarter of 2016. Brokerage revenues generated by the Sterne businesses, which were sold in 2016, were $15.8 million during the first quarter of 2016.
Three Months Ended
-------------------------------------------
% %
(in 000s) 3/31/17 3/31/16 Change 12/31/16 Change
-------- -------- ------- -------- -------
Global Wealth Management
brokerage revenues $171,494 $172,965 (0.9) $160,017 7.2
Institutional brokerage:
Equity 53,820 62,273 (13.6) 64,007 (15.9)
Fixed income 66,817 83,640 (20.1) 65,712 1.7
-------- -------- ------- -------- -------
Total institutional brokerage 120,637 145,913 (17.3) 129,719 (7.0)
-------- -------- ------- -------- -------
Total brokerage revenues (1) $292,131 $318,878 (8.4) $289,736 0.8
-------- -------- ------- -------- -------
- Global wealth management brokerage revenues were $171.5 million, a 0.9% decrease compared with the first quarter of 2016 and a 7.2% increase compared with the fourth quarter of 2016. Excluding the revenues from the Sterne businesses, global wealth brokerage revenues for the first quarter of 2017 increased 7.9% compared to the first quarter of 2016.
- Institutional equity brokerage revenues were $53.8 million, a 13.6% decrease compared with the first quarter of 2016 and a 15.9% decrease compared with the fourth quarter of 2016.
- Institutional fixed income brokerage revenues were $66.8 million, a 20.1% decrease compared with the first quarter of 2016 and a 1.7% increase compared with the fourth quarter of 2016.
Investment Banking Revenues
Investment banking revenues were $126.9 million, a 26.0% increase compared with the first quarter of 2016 and a 5.7% decrease compared with the fourth quarter of 2016.
Three Months Ended
-------------------------------------------
% %
(in 000s) 3/31/17 3/31/16 Change 12/31/16 Change
-------- -------- ------- -------- -------
Investment banking:
Capital raising:
Equity $ 48,812 $ 25,548 91.1 $ 48,393 0.9
Fixed income 25,104 27,756 (9.6) 29,811 (15.8)
-------- -------- ------- -------- -------
Capital raising 73,916 53,304 38.7 78,204 (5.5)
Advisory fees 52,936 47,354 11.8 56,248 (5.9)
-------- -------- ------- -------- -------
Total investment banking $126,852 $100,658 26.0 $134,452 (5.7)
-------- -------- ------- -------- -------
- Equity capital raising revenues were $48.8 million, a 91.1% increase compared with the first quarter of 2016 and a 0.9% increase compared with the fourth quarter of 2016.
- Fixed income capital raising revenues were $25.1 million, a 9.6% decrease compared with the first quarter of 2016 and a 15.8% decrease compared with the fourth quarter of 2016.
- Advisory fee revenues were $52.9 million, an 11.8% increase compared with the first quarter of 2016 and a 5.9% decrease compared with the fourth quarter of 2016.
Asset Management and Service Fee Revenues
Asset management and service fee revenues were a record $162.7 million, a 12.6% increase compared with the first quarter of 2016 and an 8.9% increase compared with the fourth quarter of 2016. The increase from the comparative period in 2016 is primarily attributable to the growth in the value of fee-based accounts and an increase in the Federal Funds rate, which increased fees earned on cash balances.
Net Interest Income
Record net interest income of $85.1 million, a 74.7% increase compared with the first quarter of 2016 and a 13.8% increase compared with the fourth quarter of 2016.
- Interest income was $101.0 million, a 60.8% increase compared with the first quarter of 2016 and an 11.1% increase compared with the fourth quarter of 2016. Interest income was impacted by the continued growth of interest-earning assets.
- Interest expense was $15.9 million, a 12.6% increase compared with the first quarter of 2016 and a 1.4% decrease compared with the fourth quarter of 2016. Interest expense was impacted by the Company's July 2016 issuance of $200.0 million senior notes.
Compensation and Benefits Expenses
For the quarter ended March 31, 2017, compensation and benefits expenses were $436.4 million, which included $14.3 million of merger-related and severance expenses. This compares with $411.1 million in the first quarter of 2016 and $420.6 million in the fourth quarter of 2016. Excluding merger-related expenses, compensation and benefits as a percentage of net revenues were 62.3% in the first quarter of 2017.
GAAP compensation and benefits $ 436,387
As a percentage of net revenues 64.6%
Non-GAAP adjustments:(1)
Merger-related (9,805)
Severance (4,535)
------------
(14,340)
------------
Non-GAAP compensation and benefits $ 422,047
------------
As a percentage of non-GAAP net revenues 62.3%
Non-Compensation Operating Expenses
For the quarter ended March 31, 2017, non-compensation operating expenses were $160.1 million, which included merger-related expenses of $5.3 million. This compares with $164.9 million in the first quarter of 2016 and $185.9 million in the fourth quarter of 2016. Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended March 31, 2017 were 22.8%.
GAAP non-compensation expenses $ 160,125
As a percentage of net revenues 23.7%
Non-GAAP adjustments:(1)
Merger-related (5,325)
------------
Non-GAAP non-compensation expenses $ 154,800
------------
As a percentage of non-GAAP net revenues 22.8%
Provision for Income Taxes
The GAAP effective income tax rate for the quarter ended March 31, 2017 was 17.1%, as new accounting guidance associated with stock-based compensation favorably impacted the quarter's income tax expense by $16.9 million. This new accounting guidance, which was adopted by the Company on January 1, 2017, will continue to impact the Company's effective income tax rate. This compares with an effective income tax rate of 38.4% for the first quarter of 2016 and 51.0% for the fourth quarter of 2016. The adjusted non-GAAP effective income tax rate for the quarter ended March 31, 2017 was 38.6%.
GAAP provision for income taxes $ 13,507
GAAP effective tax rate 17.1%
Non-GAAP adjustments:(1)
Merger-related 8,412
Excess tax benefits from stock-based compensation 16,943
------------
25,355
------------
Non-GAAP provision for income taxes $ 38,862
------------
Non-GAAP effective tax rate 38.6%
Assets and Capital
Assets
- Assets increased 34.6% to $19.1 billion as of March 31, 2017 from $14.2 billion as of March 31, 2016. The increase is attributable to growth of Stifel Bank, which as of March 31, 2017 has grown its assets to $13.2 billion from $8.2 billion as of March 31, 2016. Stifel Bank has increased its investment portfolio by 58.1% and its loan portfolio by 69.1% since March 31, 2016.
- Interest-earning assets at Stifel Bank for the three months ended March 31, 2017 were $12.9 billion at an average interest rate of 2.78%, compared with $7.6 billion at an average interest rate of 2.61% during the comparable period in 2016.
- Non-performing assets as a percentage of total assets as of March 31, 2017 was 0.21%.
Capital
- Shareholders' equity as of March 31, 2017 increased 14.9% to $2.8 billion from $2.4 billion as of March 31, 2016.
- At March 31, 2017, book value per common share was $38.40 based on 68.4 million common shares outstanding. This represents a 5.6% increase from March 31, 2016.
- At March 31, 2017, the Company's Tier 1 leverage capital and Tier 1 risk-based capital ratios were 10.1% and 20.9%, respectively, compared to 11.6% and 21.3%, respectively, at March 31, 2016.
Conference Call Information
Stifel Financial Corp. will host its first quarter 2017 financial results conference call on Monday, May 1, 2017, 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 #13766283. 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 Eaton Partners LLC, 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.
Summary Results of Operations (Unaudited)
Three Months Ended
-------------------------------------------
(in 000s, except per share % %
amounts) 3/31/17 3/31/16 Change 12/31/16 Change
-------- -------- ------- -------- -------
Revenues:
Commissions $175,274 $197,930 (11.4) $178,683 (1.9)
Principal transactions 116,857 120,948 (3.4) 111,052 5.2
-------- -------- ------- -------- -------
Brokerage Revenues 292,131 318,878 (8.4) 289,735 0.8
Capital raising 73,916 53,304 38.7 78,204 (5.5)
Advisory fees 52,936 47,354 11.8 56,248 (5.9)
-------- -------- ------- -------- -------
Investment banking 126,852 100,658 26.0 134,452 (5.7)
Asset management and service
fees 162,739 144,532 12.6 149,484 8.9
Other income 8,752 7,231 21.0 12,994 (32.6)
-------- -------- ------- -------- -------
Operating Revenue 590,474 571,299 3.4 586,665 0.6
Interest Revenue 100,953 62,786 60.8 90,844 11.1
-------- -------- ------- -------- -------
Total Revenue 691,427 634,085 9.0 677,509 2.1
Interest Expense 15,896 14,111 12.6 16,118 (1.4)
-------- -------- ------- -------- -------
Net Revenue 675,531 619,974 9.0 661,391 2.1
-------- -------- ------- -------- -------
Non-interest Expenses:
Compensation and benefits 436,387 411,113 6.1 420,644 3.7
Occupancy and equipment
rental 52,545 57,255 (8.2) 52,869 (0.6)
Communication and office
supplies 33,844 36,660 (7.7) 34,376 (1.5)
Commissions and floor
brokerage 10,723 11,732 (8.6) 9,662 11.0
Provision for loan losses 6,134 4,259 44.0 6,015 2.0
Other operating expenses 56,879 55,042 3.3 82,931 (31.4)
-------- -------- ------- -------- -------
Total non-interest expenses 596,512 576,061 3.6 606,497 (1.6)
Income before income taxes 79,019 43,913 79.9 54,894 43.9
Provision for income taxes 13,507 16,858 (19.9) 28,014 (51.8)
-------- -------- ------- -------- -------
Net income 65,512 27,055 142.1 26,880 143.7
Preferred dividends 2,344 - n/m 2,343 0.0
-------- -------- ------- -------- -------
Net income available to common
shareholders $ 63,168 $ 27,055 133.5 $ 24,537 157.4
======== ======== ======= ======== =======
Earnings per common share:
Basic $ 0.92 $ 0.40 130.0 $ 0.37 148.6
Diluted $ 0.78 $ 0.36 116.7 $ 0.31 151.6
Weighted average number of
common shares outstanding:
Basic 68,386 67,579 1.2 66,636 2.6
Diluted 80,695 76,086 6.1 79,539 1.5
Summary Business Segment Results (Unaudited)
Three Months Ended
---------------------------------------------
% %
(in 000s) 3/31/17 3/31/16 Change 12/31/16 Change
-------- -------- ------- -------- ------
Net revenues:
Global Wealth Management $442,732 $379,805 16.6 $407,535 8.6
Institutional Group 237,467 241,276 (1.6) 253,168 (6.2)
Other (4,668) (1,107) (321.7) 688 (778.5)
-------- -------- ------- -------- ------
Total net revenues (1) $675,531 $619,974 9.0 $661,391 2.1
Operating expenses:
Global Wealth Management $300,680 $286,470 5.0 $284,683 5.6
Institutional Group 197,595 212,082 (6.8) 205,653 (3.9)
Other 98,237 77,509 26.7 116,161 (15.4)
-------- -------- ------- -------- ------
Total operating expenses $596,512 $576,061 3.6 $606,497 (1.6)
Operating contribution:
Global Wealth Management $142,052 $93,335 52.2 $122,852 15.6
Institutional Group 39,872 29,194 36.6 47,515 (16.1)
Other (102,905) (78,616) 30.9 (115,473) (10.9)
-------- -------- ------- -------- ------
Income before income
taxes $79,019 $43,913 79.9 $54,894 43.9
-------- -------- ------- -------- ------
As a percentage of net
revenues:
Compensation and benefits
Global Wealth Management 51.6 58.3 52.9
Institutional Group 60.5 62.4 57.7
Non-compensation operating
expenses
Global Wealth Management 16.3 17.1 17.0
Institutional Group 22.7 25.5 23.5
Income before income taxes
Global Wealth Management 32.1 24.6 30.1
Institutional Group 16.8 12.1 18.8
-------- -------- --------
Consolidated pre-tax margin
(2) 11.7 7.1 8.3
-------- -------- --------
Statistical Information
(in 000s, except
per share % %
amounts) 3/31/17 3/31/16 Change 12/31/16 Change
------------ ------------ ------ ------------ ------
Statistical
Information:
Book value per
common share $ 38.40 $ 36.37 5.6 $ 38.84 (1.1)
Financial
advisors (3) 2,299 2,289 (4) 0.4 2,282 0.7
Locations 399 401 (0.5) 396 0.8
Total client
assets $252,448,000 $220,986,000 (4) 14.2 $236,942,000 6.5
Fee-based
client assets $ 75,414,000 $ 63,418,000 18.9 $ 70,195,000 7.4
Client money
market and
insured
product $ 19,058,000 $ 18,171,000 4.9 $ 19,253,000 (1.0)
Secured client
lending (5) $ 2,962,936 $ 2,565,885 15.5 $ 2,959,628 0.1
Global Wealth Management Summary Results of Operations (Unaudited)
Three Months Ended
--------------------------------------------
% %
(in 000s) 3/31/17 3/31/16 Change 12/31/16 Change
-------- -------- ------- -------- -------
Revenues:
Commissions $120,577 $131,554 (8.3) $114,824 5.0
Principal transactions 50,917 41,411 23.0 45,193 12.7
-------- -------- --------- -------- --------
Brokerage revenues 171,494 172,965 (0.9) 160,017 7.2
Asset management and service
fees 162,664 144,352 12.7 149,998 8.4
Net interest 89,695 51,767 73.3 78,748 13.9
Investment banking 11,854 8,410 41.0 12,064 (1.7)
Other income 7,025 2,311 204.0 6,708 4.7
-------- -------- --------- -------- --------
Net revenues 442,732 379,805 16.6 407,535 8.6
-------- -------- --------- -------- --------
Non-interest expenses:
Compensation and benefits 228,471 221,416 3.2 215,458 6.0
Non-compensation operating
expenses 72,209 65,054 11.0 69,225 4.3
-------- -------- --------- -------- --------
Total non-interest
expenses 300,680 286,470 5.0 284,683 5.6
-------- -------- --------- -------- --------
Income before income taxes $142,052 $ 93,335 52.2 $122,852 15.6
-------- -------- --------- -------- --------
As a percentage of net
revenues:
Compensation and benefits 51.6 58.3 52.9
Non-compensation operating
expenses 16.3 17.1 17.0
Income before income taxes 32.1 24.6 30.1
Stifel Bank & Trust - a component of Global Wealth Management (Unaudited)
Key Statistical Information
---------------------------------------------------------------------------
As of and For The Three Months Ended
---------------------------------------------------
(in 000s, except % %
percentages) 3/31/17 3/31/16 Change 12/31/16 Change
----------- ---------- ------ ----------- ------
Assets $13,232,940 $8,172,348 61.9 $12,798,240 3.4
Investment securities 6,557,000 4,147,647 58.1 6,209,022 5.6
Retained loans, net 5,864,549 3,467,187 69.1 5,591,190 4.9
Loans held for sale 206,724 132,900 55.5 228,588 (9.6)
Deposits 11,700,961 7,218,100 62.1 11,527,483 1.5
Net interest margin 2.66% 2.47% 2.24%
Allowance as a
percentage of loans
(1) 0.87% 0.98% 0.81%
Non-performing assets
as a percentage of
total assets 0.21% 0.28% 0.21%
Institutional Group Summary Results of Operations (Unaudited)
Three Months Ended
-----------------------------------------
% %
(in 000s) 3/31/17 3/31/16 Change 12/31/16 Change
-------- -------- ------ -------- ------
Revenues:
Commissions $ 54,697 $ 66,376 (17.6) $ 63,859 (14.3)
Principal transactions 65,940 79,537 (17.1) 65,860 0.1
-------- -------- ------ -------- ------
Brokerage revenues 120,637 145,913 (17.3) 129,719 (7.0)
Capital raising 62,062 44,895 38.2 66,949 (7.3)
Advisory fees 52,936 47,354 11.8 55,439 (4.5)
-------- -------- ------ -------- ------
Investment banking 114,998 92,249 24.7 122,388 (6.0)
Other (1) 1,832 3,114 (41.2) 1,061 72.7
-------- -------- ------ -------- ------
Net revenues 237,467 241,276 (1.6) 253,168 (6.2)
-------- -------- ------ -------- ------
Non-interest expenses:
Compensation and benefits 143,640 150,618 (4.6) 146,056 (1.7)
Non-compensation operating
expenses 53,955 61,464 (12.2) 59,597 (9.5)
-------- -------- ------ -------- ------
Total non-interest expenses 197,595 212,082 (6.8) 205,653 (3.9)
-------- -------- ------ -------- ------
Income before income taxes $ 39,872 $ 29,194 36.6 $ 47,515 (16.1)
-------- -------- ------ -------- ------
As a percentage of net revenues:
Compensation and benefits 60.5 62.4 57.7
Non-compensation operating
expenses 22.7 25.5 23.5
Income before income taxes 16.8 12.1 18.8
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 March 31, 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 March 31, 2017 to net income and earnings per diluted common share on a non-GAAP basis for the same period.
(in 000s)
GAAP net income $ 65,512
Preferred dividend 2,344
----------
Net income available to common shareholders 63,168
Non-GAAP adjustments:
Merger-related (1) 17,114
Severance 4,535
Provision for income taxes (2) (25,355)
----------
Total non-GAAP adjustments (3,706)
----------
Non-GAAP net income available to common shareholders $ 59,462
----------
Weighted average diluted shares outstanding 80,695
GAAP earnings per diluted common share $ 0.81
Non-GAAP adjustments (0.04)
----------
Non-GAAP earnings per diluted common share $ 0.77
----------
GAAP earnings per diluted common share available to common
shareholders $ 0.78
Non-GAAP adjustments (0.04)
----------
Non-GAAP earnings per diluted common share available to common
shareholders $ 0.74
----------
Investor Relations
Joel Jeffrey
(212) 271-3610
investorrelations@stifel.com
