Stifel Financial Corp. Reports Third Quarter 2012 Financial Results

Record Net Revenues for the Three Months Ended September 30, 2012 Record Net Revenues and Net Income for the Nine Months Ended September 30, 2012

Marketwired

ST. LOUIS, MO--(Marketwire - Nov 5, 2012) -

Highlights for the three months ended September 30, 2012:

  • Record net revenues of $420.1 million.
  • Net income of $37.7 million, or $0.60 per diluted share.
  • Stockholders' equity was $1.43 billion and book value per share was $26.62.

Highlights for the nine months ended September 30, 2012:

  • Record net revenues of $1.2 billion increased 13% from the comparable period in 2011.
  • Record net income of $98.6 million, or $1.57 per diluted share.

Stifel Financial Corp. (NYSE: SF) today reported unaudited net income of $37.7 million, or $0.60 per diluted share, on record net revenues of $420.1 million for the three months ended September 30, 2012, compared with net income of $22.3 million, or $0.35 per diluted share, on net revenues of $334.2 million for the third quarter of 2011.

For the nine months ended September 30, 2012, the Company reported record net income of $98.6 million, or $1.57 per diluted share, on net revenues of $1.2 billion, compared with net income of $57.1 million, or $0.90 per diluted share1, on net revenues of $1.1 billion during the comparable period in 2011. Included in net revenues for the three and nine months ended September 30, 2012 is $25.6 million in realized and unrealized gains recognized on the Company's investment in Knight Capital Group, Inc. The after-tax impact of these gains was $0.09 per diluted share.

"I am pleased with our third quarter results, which included record net revenues, as well as with our record net revenues and net income for the first nine months of 2012. Our results highlight the soundness of our balanced business model, particularly against a challenging economic backdrop. In the quarter, both the Global Wealth Management and Institutional Group segments performed well," commented Ronald J. Kruszewski, Chairman, President and CEO of Stifel Financial. "We continue to invest in businesses that expand our client services, and which we believe will return shareholder value. Opportunities drive our growth. Today's announcement of our merger with KBW furthers our goal of creating the premier middle-market investment bank with a specialized focus on the financial services industry."

 
 
Summary Results of Operations (Unaudited)
    Three Months Ended   Nine Months Ended  
(in 000s)   9/30/12   9/30/11   % Change     6/30/12   % Change   9/30/12   9/30/11   % Change  
  Net revenues   $ 420,080   $ 334,214   25.7     $ 374,407   12.2   $ 1,194,820   $ 1,059,684   12.8  
  Net income   $ 37,710   $ 22,304   69.1     $ 26,136   44.3   $ 98,619   $ 57,118   72.7  
Earnings per share:                                              
  Basic   $ 0.70   $ 0.43   62.8     $ 0.49   42.9   $ 1.84   $ 1.09   68.8  
  Diluted   $ 0.60   $ 0.35   71.4     $ 0.42   42.9   $ 1.57   $ 0.90   74.4  
                                               
Weighted average number of common shares outstanding:                        
  Basic     53,601     52,367   2.4       53,569   0.1     53,471     52,610   1.6  
  Diluted     63,054     63,152   (0.2 )     62,678   0.6     62,817     63,174   (0.6 )
                                               
                                               
                                               

Business Segment Results

 
 
Summary Segment Results (Unaudited)
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/12     9/30/11     % Change     6/30/12     % Change     9/30/12     9/30/11     % Change  
Net revenues:                                                          
  Global Wealth Management   $ 251,728     $ 219,498     14.7     $ 240,029     4.9     $ 740,105     $ 683,589     8.3  
  Institutional Group 2     169,679       113,259     49.8       135,297     25.4       453,480       373,168     21.5  
  Other     (1,327 )     1,457     (191.1 )     (919 )   (44.4 )     1,235       2,927     (57.8 )
    $ 420,080     $ 334,214     25.7     $ 374,407     12.2     $ 1,194,820     $ 1,059,684     12.8  
Pre-tax operating income:                                                          
  Global Wealth Management   $ 68,370     $ 55,612     22.9     $ 61,353     11.4     $ 198,901     $ 172,510     15.3  
  Institutional Group 2     33,427       9,152     265.2       17,546     90.5       74,677       52,496     42.3  
  Other 3     (40,120 )     (25,741 )   55.9       (35,025 )   14.5       (108,773 )     (131,424 )   (17.2 )
    $ 61,677     $ 39,023     58.1     $ 43,874     40.6     $ 164,805     $ 93,582     76.1  
                                                           
                                                           

Global Wealth Management

For the quarter ended September 30, 2012, the Global Wealth Management ("GWM") segment generated pre-tax operating income of $68.4 million, compared with $55.6 million in the third quarter of 2011 and $61.4 million in the second quarter of 2012. Net revenues for the quarter were $251.7 million, compared with $219.5 million in the third quarter of 2011, and $240.0 million in the second quarter of 2012. The increase in net revenues over the comparable period in 2011 is primarily attributable to: (1) higher principal transactions revenues, offset by a decrease in commissions revenue; (2) higher sales credits from investment banking underwritings; (3) growth in asset management and service fees as a result of an increase in assets under management and positive gains in market performance; and (4) increased net interest revenues as a result of the growth of net interest-earning assets at Stifel Bank. The increase in net revenues from the second quarter of 2012 was primarily attributable to: (1) higher sales credits from investment banking underwritings; (2) an increase in principal transactions revenues; and (3) increased net interest revenues as a result of the growth of net interest-earning assets at Stifel Bank.

  • The Private Client Group reported net revenues of $229.4 million, a 14% increase compared with the third quarter of 2011 and a 4% increase compared with the second quarter of 2012.
  • Stifel Bank reported net revenues of $22.3 million, a 27% increase compared with the third quarter of 2011 and a 17% increase compared with the second quarter of 2012.

Institutional Group

For the quarter ended September 30, 2012, the Institutional Group segment generated pre-tax operating income of $33.4 million, compared with $9.2 million in the third quarter of 2011 and $17.5 million in the second quarter of 2012. Net revenues for the quarter were $169.7 million, compared with $113.3 million in the third quarter of 2011 and $135.3 million in the second quarter of 2012. The increase in net revenues from the comparable period in 2011 was driven by: (1) an increase in advisory fees; (2) an increase in fixed income capital raising revenues; (3) higher fixed income institutional brokerage revenues; and (4) the realized and unrealized gains recognized on the Company's investment in Knight Capital Group, Inc. Offsetting these increases was a decrease in equity institutional brokerage revenues. The increase in net revenues from the second quarter of 2012 was primarily attributable to: (1) an increase in fixed income institutional brokerage revenues; and (2) the realized and unrealized gains recognized on the Company's investment in Knight Capital Group, Inc.

Institutional brokerage revenues were $82.8 million, a 5% increase compared with the third quarter of 2011 and a 10% increase compared with the second quarter of 2012.

  • Equity brokerage revenues were $38.0 million, a 20% decrease compared with the third quarter of 2011 and a 1% decrease compared with the second quarter of 2012.
  • Fixed income brokerage revenues were $44.8 million, a 41% increase compared with the third quarter of 2011 and a 23% increase compared with the second quarter of 2012.

Investment banking revenues were $59.6 million, a 76% increase compared with the third quarter of 2011 and a 1% increase compared with the second quarter of 2012.

  • Equity capital raising revenues were $17.5 million, a 7% increase compared with the third quarter of 2011 and a 1% decrease compared with the second quarter of 2012.
  • Fixed income capital raising revenues were $14.9 million, a 194% increase compared with the third quarter of 2011 and a 2% increase compared with the second quarter of 2012.
  • Advisory fee revenues were $27.2 million, a 118% increase compared with the third quarter of 2011 and a 2% increase compared with the second quarter of 2012.

Consolidated Compensation and Benefits Expenses

For the quarter ended September 30, 2012, compensation and benefits expenses were $267.7 million, compared with $210.6 million in the third quarter of 2011 and $239.4 million in the second quarter of 2012.

Compensation and benefits as a percentage of net revenues was 64% in the third quarter of 2012, compared with 63% in the third quarter of 2011 and 64% in the second quarter of 2012. Transition pay, which primarily consists of amortization of upfront notes, signing bonuses and retention awards, as a percentage of net revenues was 5% in the third quarter of 2012, consistent with the third quarter of 2011 and the second quarter of 2012.

Consolidated Non-Compensation Operating Expenses

For the quarter ended September 30, 2012, non-compensation operating expenses were $90.8 million, compared to $84.6 million in the third quarter of 2011 and $91.2 million in the second quarter of 2012.

Non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2012 was 22% compared with 25% in the third quarter of 2011 and 24% in the second quarter of 2012. The lower ratio in the third quarter of 2012 was driven by the impact of higher revenues.

Provision for Income Taxes

The effective income tax rate for the quarter ended September 30, 2012 was 39% compared with 43% in the third quarter of 2011 and 40% in the second quarter of 2012.

Statement of Financial Condition (Unaudited)

Total assets increased 24% to $6.1 billion as of September 30, 2012 from $4.9 billion as of September 30, 2011. The increase is primarily attributable to growth of Stifel Bank, the Company's bank subsidiary, which as of September 30, 2012 has grown its assets to $3.2 billion from $2.3 billion as of September 30, 2011. As of September 30, 2012, Stifel Bank's investment portfolio of $2.1 billion has increased 45% from September 30, 2011, with more than 99% of the investment portfolio comprised of investment grade securities, of which more than 71% were Government-Sponsored Enterprise guaranteed MBS or AAA-rated investments. The Company's broker-dealer subsidiary's gross assets and liabilities, including trading inventory, stock loan/borrow, receivables and payables from/to brokers, dealers and clearing organizations and clients, fluctuate with business levels and overall market conditions.

Total stockholders' equity as of September 30, 2012 increased $165.4 million, or 13%, to $1.427 billion from $1.262 billion as of September 30, 2011. Book value per share was $26.62 as of September 30, 2012. The Company repurchased $9.1 million, or 0.3 million shares, of its common stock pursuant to existing Board repurchase authorizations during the nine months ended September 30, 2012.

As of September 30, 2012, the Company reported total securities owned and investments at fair value of $2.4 billion, which included securities categorized as Level 3 of $214.5 million. The Company's Level 3 assets include auction rate securities with a fair value of $162.8 million, and private equity and other fixed income securities with a fair value $51.7 million as of September 30, 2012.

Conference Call Information

Stifel Financial Corp. will host its third quarter 2012 financial results conference call on Monday, November 5, 2012, at 8:30 a.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to the Company's Chairman, President, and CEO, Ronald J. Kruszewski, by dialing (800) 651-2240 and referencing conference ID #64728788. 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 Canada Inc. in Canada, and through Stifel Nicolaus Europe Limited in the United Kingdom 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 Financial, 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     Nine Months Ended  
(in thousands, except per share amounts)   9/30/12   9/30/11   % Change     6/30/12   % Change     9/30/12   9/30/11   % Change  
Revenues:                                                
  Commissions   $ 127,966   $ 143,243   (10.7 )   $ 127,427   0.4     $ 378,696   $ 437,344   (13.4 )
  Principal transactions     102,979     76,650   34.4       91,564   12.5       310,776     249,250   24.7  
  Investment banking     72,938     37,673   93.6       67,363   8.3       210,739     143,509   46.8  
  Asset management and service fees     62,881     58,253   7.9       65,311   (3.7 )     189,010     172,914   9.3  
  Other income     31,922     540   *       5,418   489.2       50,634     11,352   346.0  
    Operating revenues     398,686     316,359   26.0       357,083   11.7       1,139,855     1,014,369   12.4  
  Interest revenue     27,306     24,161   13.0       27,181   0.5       79,744     64,246   24.1  
    Total revenues     425,992     340,520   25.1       384,264   10.9       1,219,599     1,078,615   13.1  
  Interest expense     5,912     6,306   (6.2 )     9,857   (40.0 )     24,779     18,931   30.9  
    Net revenues     420,080     334,214   25.7       374,407   12.2       1,194,820     1,059,684   12.8  
                                                 
Non-interest expenses:                                                
  Compensation and benefits     267,652     210,573   27.1       239,374   11.8       761,730     671,678   13.4  
  Occupancy and equipment rental     33,061     30,914   6.9       32,320   2.3       96,172     89,962   6.9  
  Communications and office supplies     19,976     18,838   6.0       20,797   (3.9 )     61,146     56,198   8.8  
  Commission and floor brokerage     8,031     7,400   8.5       7,747   3.7       23,390     20,943   11.7  
  Other operating expenses     29,683     27,466   8.1       30,295   (2.0 )     87,577     127,321   (31.2 )
    Total non-interest expenses     358,403     295,191   21.4       330,533   8.4       1,030,015     966,102   6.6  
                                                 
Income before income taxes     61,677     39,023   58.1       43,874   40.6       164,805     93,582   76.1  
  Provision for income taxes     23,967     16,719   43.4       17,738   35.1       66,186     36,464   81.5  
Net income   $ 37,710   $ 22,304   69.1     $ 26,136   44.3     $ 98,619   $ 57,118   72.7  
                                                 
Earnings per share:                                                
  Basic   $ 0.70   $ 0.43   62.8     $ 0.49   42.9     $ 1.84   $ 1.09   68.8  
  Diluted   $ 0.60   $ 0.35   71.4     $ 0.42   42.9     $ 1.57   $ 0.90   74.4  
                                                 
Weighted average number of common shares outstanding:                                    
  Basic     53,601     52,367   2.4       53,569   0.1       53,471     52,610   1.6  
  Diluted     63,054     63,152   (0.2 )     62,678   0.6       62,817     63,174   (0.6 )
                                                 
* Percentage not meaningful.                                                
                                                 
                                                 
 
 
(in thousands, except per share, employee and location amounts)
    9/30/12   9/30/11   % Change   6/30/12   % Change
Statistical Information:                          
  Book value per share   $ 26.62   $ 24.48   8.7   $ 25.63   3.9
  Financial advisors 4     2,042     1,961   4.1     2,028   0.7
  Full-time associates     5,266     4,942   6.6     5,196   1.3
  Locations     338     313   8.0     332   1.8
  Total client assets 5   $ 136,015,000   $ 110,797,000   22.8   $ 131,026,000   3.8
                           
                           
   
   
Global Wealth Management Summary Results of Operations (Unaudited)  
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/12   9/30/11   % Change     6/30/12   % Change     9/30/12   9/30/11   % Change  
Revenues:                                                
  Commissions   $ 89,393   $ 92,029   (2.9 )   $ 88,423   1.1     $ 268,839   $ 287,384   (6.5 )
  Principal transactions     58,801     48,836   20.4       55,628   5.7       173,474     156,262   11.0  
  Asset management and service fees     62,871     58,007   8.4       65,169   (3.5 )     188,626     172,354   9.4  
  Net interest     22,283     15,016   48.4       18,233   22.2       58,163     39,586   46.9  
  Investment banking     13,347     3,737   257.2       8,531   56.5       34,348     16,460   108.7  
  Other income     5,033     1,873   168.7       4,045   24.4       16,655     11,543   44.3  
    Net revenues     251,728     219,498   14.7       240,029   4.9       740,105     683,589   8.3  
Non-interest expenses:                                                
  Compensation and benefits     146,882     128,244   14.5       140,984   4.2       431,623     403,782   6.9  
  Non-compensation operating expenses     36,476     35,642   2.3       37,692   (3.2 )     109,581     107,297   2.1  
    Total non-interest expenses     183,358     163,886   11.9       178,676   2.6       541,204     511,079   5.9  
Income before income taxes   $ 65,921   $ 55,612   22.9     $ 61,353   11.4     $ 198,901   $ 172,510   15.3  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     58.3     58.4           58.7           58.3     59.1      
  Non-compensation operating expenses     14.5     16.3           15.7           14.8     15.7      
  Income before income taxes     27.2     25.3           25.6           26.9     25.2      
                                                 
                                                 
                                 
                                 
Stifel Bank & Trust (Unaudited)
Key Statistical Information
(in 000s, except percentages)   9/30/12     9/30/11     % Change   6/30/12     % Change
Other information:                                
  Assets   $ 3,228,021     $ 2,311,371     39.7   $ 3,058,971     5.5
  Investment securities     2,133,494       1,470,812     45.1     1,849,622     15.3
  Retained loans, net     746,120       567,341     31.5     709,079     5.2
  Loans held for sale     209,358       114,452     82.9     117,166     78.7
  Deposits     2,923,671       2,120,763     37.9     2,776,684     5.3
                                 
  Allowance as a percentage of loans     0.85 %     0.67 %         0.88 %    
  Non-performing assets as a percentage of total assets     0.07 %     0.08 %         0.08 %    
                                 
                                 
 
 
Institutional Group Summary Results of Operations (Unaudited) 
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/12   9/30/11   % Change     6/30/12   % Change     9/30/12   9/30/11   % Change  
Revenues:                                                
  Commissions   $ 38,574   $ 51,214   (24.7 )   $ 39,004   (1.1 )   $ 109,858   $ 149,960   (26.7 )
  Principal transactions     44,178     27,815   58.8       35,936   22.9       137,302     92,988   47.7  
                                                 
  Capital raising     32,386     21,436   51.1       32,202   0.6       106,951     80,654   32.6  
  Advisory fees     27,205     12,500   117.6       26,630   2.2       69,440     46,395   49.7  
  Investment banking     59,591     33,936   75.6       58,832   1.3       176,391     127,049   38.8  
  Other 6     27,336     294   *       1,525   *       29,929     3,171   *  
    Net revenues     169,679     113,259   49.8       135,297   25.4       453,480     373,168   21.5  
Non-interest expenses:                                                
  Compensation and benefits     104,913     74,813   40.2       84,754   23.8       283,691     234,006   21.2  
  Non-compensation operating expenses     31,339     29,294   7.0       32,997   (5.0 )     95,112     86,666   9.7  
    Total non-interest expenses     136,252     104,107   30.9       117,751   15.7       378,803     320,672   18.1  
Income before income taxes   $ 33,427   $ 9,152   265.2     $ 17,546   90.5     $ 74,677   $ 52,496   42.3  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     61.8     66.0           62.6           62.6     62.7      
  Non-compensation operating expenses     18.5     25.9           24.4           20.9     23.2      
  Income before income taxes     19.7     8.1           13.0           16.5     14.1      
                                                 
* Percentage not meaningful.                                            
                                                 
                                                 
 
 
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/12   9/30/11   % Change     6/30/12   % Change     9/30/12   9/30/11   % Change  
Institutional brokerage:                                                
  Equity   $ 37,956   $ 47,185   (19.6 )   $ 38,466   (1.3 )   $ 120,594   $ 141,278   (14.6 )
  Fixed income     44,796     31,844   40.7       36,474   22.8       126,566     101,670   24.5  
Institutional brokerage     82,752     79,029   4.7       74,940   10.4       247,160     242,948   1.7  
                                                 
Investment banking:                                                
  Capital raising:                                                
    Equity     17,527     16,382   7.0       17,651   (0.7 )     66,728     67,386   (1.0 )
    Fixed income     14,859     5,054   194.0       14,551   2.1       40,223     13,268   203.2  
      Capital raising     32,386     21,436   51.1       32,202   0.6       106,951     80,654   32.6  
  Advisory fees     27,205     12,500   117.6       26,630   2.2       69,440     46,395   49.7  
Investment banking   $ 59,591   $ 33,936   75.6     $ 58,832   1.3     $ 176,391   $ 127,049   38.8  
                                                 
                                                 

1 Included in the results for the nine months ended September 30, 2011 were the estimated costs of settlement and litigation-related expenses of $29.4 million after tax, or $0.47 per diluted share, respectively, associated with the civil lawsuit and related regulatory investigation in connection with the previously disclosed matter involving five Southeastern Wisconsin school districts and certain merger-related expenses.

2 Results for the three and nine months ended September 30, 2012 include $25.6 million in realized and unrealized gains recognized on the Company's investment in Knight Capital Group, Inc.

3 Results for the nine months ended September 30, 2011 include litigation-related charges and merger-related expenses of $47.5 million pre-tax.

4 Includes 154, 160 and 156 independent contractors at September 30, 2012 and 2011 and June 30, 2012, respectively.

5 Includes money market and FDIC-insured balances. Prior period amounts have been adjusted to conform to the current period presentation.

6 Includes net interest and other income. Other income for the three and nine months ended September 30, 2012 include $25.6 million in realized and unrealized gains recognized on the Company's investment in Knight Capital Group, Inc.

Contact:
Investor Relations Contact
Sarah Anderson
(415) 364-2500
Email Contact

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