Stifel Reports First Quarter 2013 Financial Results, Record Net Revenues

Marketwired

ST. LOUIS, MO--(Marketwired - May 9, 2013) - Stifel Financial Corp. (NYSE: SF)

Financial highlights for the three months ended March 31, 2013:

  • Record net revenues of $441.8 million.
  • Non-GAAP net income of $39.9 million, or $0.58 per diluted share.
  • Net income of $14.6 million, or $0.21 per diluted share.
  • Stockholders' equity totaled $1.9 billion and book value per share was $30.13.

Stifel Financial Corp. (NYSE: SF) today reported record net revenues of $441.8 million for the three months ended March 31, 2013. The Company reported non-GAAP net income of $39.9 million, or $0.58 per diluted share. On a GAAP basis, the Company reported net income of $14.6 million, or $0.21 per diluted share for the three months ended March 31, 2013, compared with net income of $34.8 million, or $0.55 per diluted share, on net revenues of $400.3 million for the first quarter of 2012. The Company reported net income of $40.0 million, or $0.63 per diluted share, on net revenues of $417.8 million for the three months ended December 31, 2012. A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed below under "Non-GAAP Financial Measures."

Two items significantly impacted GAAP results for the three months ended March 31, 2013:

  • A non-cash charge of $19.2 million after-tax ($30.6 million pre-tax), or $0.28 per diluted share, related to expensing stock awards issued in connection with the acquisition of KBW.
  • Merger-related expenses of $6.1 million after-tax ($9.7 million pre-tax), or $0.09 per diluted share, related to the previously announced acquisitions of KBW and Miller Buckfire. 

"We are pleased with our performance for the quarter, which included record net revenues," said Ronald J. Kruszewski, Chairman, President and CEO of Stifel.

Kruszewski continued, "While our profitability is clouded by merger-related charges, it is noteworthy that our Global Wealth Management segment posted record revenue and profitability, and our Institutional segment generated record quarterly revenue. As we work through the KBW integration process and the related expense reductions, we expect to continue to report both GAAP and non-GAAP results for the remainder of the year. Looking forward, we are focused on leveraging our new and established businesses to drive growth and profits across the platform. Additionally, we are on track this quarter to complete the acquisition of the U.S. institutional fixed income sales and trading team and hiring of the European team from Knight Capital Group."

   
Summary Results of Operations (Unaudited)  
    Three Months Ended  
(in 000s)   3/31/13   3/31/12   % Change     12/31/12   % Change  
  Net revenues   $ 441,780   $ 400,333   10.4     $ 417,830   5.7  
  Net income   $ 14,619   $ 34,773   (58.0 )   $ 39,954   (63.4 )
  Non-GAAP net income 1   $ 39,884   $ 34,773   14.7     $ 39,954   (0.2 )
Earnings per share:                              
  Basic   $ 0.24   $ 0.65   (63.1 )   $ 0.74   (67.6 )
  Diluted   $ 0.21   $ 0.55   (61.8 )   $ 0.63   (66.7 )
  Non-GAAP diluted 1   $ 0.58   $ 0.55   5.5     $ 0.63   (7.9 )
Weighted average number of common shares outstanding:                              
  Basic     60,054     53,243   12.8       53,835   11.6  
  Diluted     69,189     62,669   10.4       63,301   9.3  
                                 

Business Segment Results

                           
Summary Segment Results (Unaudited)
    Three Months Ended
(in 000s)   3/31/13     3/31/12     % Change   12/31/12     % Change
Net revenues:                                
  Global Wealth Management   $ 266,957     $ 247,608     7.8   $ 255,084     4.7
  Institutional Group 2     176,437       149,244     18.2     165,056     6.9
  Other     (1,614 )     3,481     *     (2,310 )   30.1
    $ 441,780     $ 400,333     10.4   $ 417,830     5.7
Operating contribution:3                                
  Global Wealth Management   $ 69,499     $ 68,878     0.9   $ 69,282     0.3
  Institutional Group 2     28,137       24,004     17.2     21,490     30.9
  Other     (33,944 )     (33,628 )   0.9     (29,705 )   14.3
    $ 63,692     $ 59,254     7.5   $ 61,067     4.3
                                 
* Percentage is not meaningful.
 

Global Wealth Management

For the quarter ended March 31, 2013, the Global Wealth Management ("GWM") segment generated pre-tax operating income of $69.5 million, compared with $68.8 million in the first quarter of 2012 and $69.3 million in the fourth quarter of 2012. Net revenues for the quarter were $267.0 million, compared with $247.6 million in the first quarter of 2012, and $255.1 million in the fourth quarter of 2012. The increase in net revenues both from the first quarter and fourth quarter of 2012 is primarily attributable to (1) an increase in commission revenues; (2) growth in asset management and service fees; and (3) increased net interest revenues, offset by (1) a decline in principal transactions revenues; and (2) lower investment banking revenues.

  • The Private Client Group reported record net revenues of $243.1 million, a 5% increase compared with both the first quarter and fourth quarter of 2012.
  • Stifel Bank reported net revenues of $23.9 million, a 49% increase compared with the first quarter of 2012 and a 6% increase compared with the fourth quarter of 2012.

Institutional Group

For the quarter ended March 31, 2013, the Institutional Group segment generated pre-tax operating income of $28.1 million, compared with $24.0 million in the first quarter of 2012 and $21.5 million in the fourth quarter of 2012. Net revenues for the quarter were $176.4 million, compared with $149.2 million in the first quarter of 2012 and $165.1 million in the fourth quarter of 2012. The increase in net revenues from the first quarter of 2012 was primarily attributable to (1) an increase in advisory fees; (2) the realized and unrealized gains recognized on the Company's investment in Knight Capital Group; (3) higher equity institutional brokerage revenues; and (4) an increase in fixed income capital raising revenues, offset by (1) a decrease in equity capital raising revenues; and (2) lower fixed income institutional brokerage revenues. The increase in net revenues from the fourth quarter of 2012 was primarily attributable to (1) an increase in equity institutional brokerage revenues; (2) higher equity capital raising revenues; and (3) higher fixed income institutional brokerage revenues, offset by a decline in fixed income capital raising revenues. Net revenue growth, both year-over-year and sequentially, is attributable to the acquisitions of KBW and, to a lesser extent, Miller Buckfire.

Institutional brokerage revenues were $97.5 million, an 8% increase compared with the first quarter of 2012 and a 16% increase compared with the fourth quarter of 2012.

  • Equity brokerage revenues were $52.0 million, an 18% increase compared with the first quarter of 2012 and a 24% increase compared with the fourth quarter of 2012.
  • Fixed income brokerage revenues were $45.5 million, a 1% decrease compared with the first quarter of 2012 and a 7% increase compared with the fourth quarter of 2012.

Investment banking revenues were $67.3 million, a 16% increase compared with the first quarter of 2012 and a 4% increase compared with the fourth quarter of 2012.

  • Equity capital raising revenues were $24.4 million, a 23% decrease compared with the first quarter of 2012 and a 23% increase compared with the fourth quarter of 2012.
  • Fixed income capital raising revenues were $15.7 million, a 44% increase compared with the first quarter of 2012 and a 15% decrease compared with the fourth quarter of 2012.
  • Advisory fee revenues were $27.2 million, a 74% increase compared with the first quarter of 2012 and a 2% increase compared with the fourth quarter of 2012.

Consolidated Compensation and Benefits Expenses

For the quarter ended March 31, 2013, compensation and benefits expenses were $315.7 million, which included $33.8 million related to (1) expensing stock awards issued as retention in connection with the acquisition of KBW of $30.6 million and (2) merger-related expenses of $3.2 million, compared with $254.7 million in the first quarter of 2012 and $262.2 million in the fourth quarter of 2012.

Excluding these expenses, compensation and benefits as a percentage of net revenues was 63.8% in the first quarter of 2013, compared with 63.6% in the first quarter of 2012 and 62.8% in the fourth 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 4.7% in the first quarter of 2013, compared with 4.3% in the first quarter of 2012 and 5.4% in the fourth quarter of 2012.

Consolidated Non-Compensation Operating Expenses

For the quarter ended March 31, 2013, non-compensation operating expenses were $102.7 million, which included $6.6 million of merger-related expenses, compared with $86.4 million in the first quarter of 2012 and $94.6 million in the fourth quarter of 2012.

Excluding the merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended March 31, 2013 was 21.8%, compared with 21.6% in the first quarter of 2012 and 22.6% in the fourth quarter of 2012.

Provision for Income Taxes

The effective income tax rate for the quarter ended March 31, 2013 was 37% compared with 41% in the first quarter of 2012 and 35% in the fourth quarter of 2012. The decrease in the effective rate for the three months ended March 31, 2013 from the year-ago quarter is primarily attributable to adjustments to the provision as a result of the Miller Buckfire acquisition.

Statement of Financial Condition (Unaudited)

Total assets increased 49% to $8.1 billion as of March 31, 2013 from $5.5 billion as of March 31, 2012. The increase is primarily attributable to growth of Stifel Bank, the Company's bank subsidiary, which as of March 31, 2013 has grown its assets to $3.8 billion from $2.6 billion as of March 31, 2012. As of March 31, 2013, Stifel Bank's investment portfolio of $2.4 billion increased 46% from March 31, 2012, 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 increase in total assets from March 31, 2012 is also attributable to the recently completed acquisition of KBW. In addition to the net assets acquired, the Company recognized goodwill of $307.9 million, which is based on preliminary estimates and is subject to change upon the completion of the valuation. 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 March 31, 2013 increased $560.7 million, or 42%, to $1.90 billion from $1.34 billion as of March 31, 2012. Book value per share was $30.13 as of March 31, 2013.

As of March 31, 2013, the Company reported total securities owned and investments at fair value of $3.1 billion, which included securities categorized as Level 3 of $274.6 million. The Company's Level 3 assets include auction rate securities with a fair value of $166.6 million, private equity and partnership interests with a fair value of $82.3 million, and corporate and municipal securities with a fair value $25.7 million as of March 31, 2013. The acquisition of KBW contributed to the growth in the Company's level 3 assets. As of March 31, 2013, the KBW entities held Level 3 assets with a fair value of $57.1 million.

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 months ended March 31, 2013. 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 periods 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 exclude compensation expense related to the granting of stock awards with no continuing service requirement issued as retention as part of the acquisition of KBW and certain compensation and non-compensation operating expenses associated with the acquisitions of KBW and Miller Buckfire.

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 months ended March 31, 2013 to the aforementioned expenses on a non-GAAP basis for the same period.

 
Reconciliation of GAAP to Non-GAAP Earnings (Unaudited)
    Three Months Ended March 31, 2013
(in 000s, except per share amounts)   GAAP   Merger-related     Non-GAAP
Net revenues   $ 441,780   $ 8     $ 441,788
                     
Non-interest expenses:                    
  Compensation and benefits     315,727     (33,786 )     281,941
  Non-compensation operating expenses     102,707     (6,552 )     96,155
    Total non-interest expenses     418,434     (40,338 )     378,096
Income before income taxes     23,346     40,346       63,692
  Provision for income taxes     8,727     15,081       23,808
Net income   $ 14,619   $ 25,265     $ 39,884
                     
Earnings per share::                    
  Basic   $ 0.24   $ 0.42     $ 0.66
  Diluted   $ 0.21   $ 0.37     $ 0.58
                     
As a percentage of net revenues:                    
  Compensation and benefits     71.5             63.8
  Non-compensation operating expenses     23.2             21.8
  Income before income taxes     5.3             14.4
                     

Conference Call Information

Stifel Financial Corp. will host its first quarter 2013 financial results conference call on Thursday, May 9, 2013, 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, President, and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID #58716630. 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, 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.

   
Summary Results of Operations (Unaudited)  
        Three Months Ended               
(in 000s)   3/31/13   3/31/12   % Change     12/31/12   % Change  
Revenues:                              
  Commissions   $ 148,648   $ 123,303   20.6     $ 134,280   10.7  
  Principal transactions     107,244     116,233   (7.7 )     97,708   9.8  
  Investment banking     78,379     70,438   11.3       75,846   3.3  
  Asset management and service fees     68,912     60,818   13.3       68,971   (0.1 )
  Other income     20,212     13,294   52.0       19,597   3.1  
    Operating revenues     423,395     384,086   10.2       396,402   6.8  
  Interest revenue     29,845     25,257   18.2       30,032   (0.6 )
    Total revenues     453,240     409,343   10.7       426,434   6.3  
  Interest expense     11,460     9,010   27.2       8,604   33.2  
    Net revenues     441,780     400,333   10.4       417,830   5.7  
                               
Non-interest expenses:                              
  Compensation and benefits     315,727     254,704   24.0       262,213   20.4  
  Occupancy and equipment rental     34,048     30,791   10.6       34,075   (0.1 )
  Communication and office supplies     22,979     20,373   12.8       19,795   16.1  
  Commission and floor brokerage     9,058     7,612   19.0       7,480   21.1  
  Other operating expenses     36,622     27,599   32.7       33,200   10.3  
    Total non-interest expenses     418,434     341,079   22.7       356,763   17.3  
                               
Income before income taxes     23,346     59,254   (60.6 )     61,067   (61.8 )
  Provision for income taxes     8,727     24,481   (64.4 )     21,113   (58.7 )
Net income   $ 14,619   $ 34,773   (58.0 )   $ 39,954   (63.4 )
                               
Earnings per share:                              
  Basic   $ 0.24   $ 0.65   (63.1 )   $ 0.74   (67.6 )
  Diluted   $ 0.21   $ 0.55   (61.8 )   $ 0.63   (66.7 )
                               
Weighted average number of common shares outstanding:                              
  Basic     60,054     53,243   12.8       53,835   11.6  
  Diluted     69,189     62,669   10.4       63,301   9.3  
                                 
                                 
 
(in thousands, except per share data, employee and location amounts)
Key statistical information:   3/31/13   3/31/12   % Change   12/31/12   % Change
  Book value per share   $ 30.13   $ 25.07   20.2   $ 27.24   10.6
  Financial advisors 4     2,063     2,013   2.5     2,041   1.1
  Full-time associates     5,680     5,135   10.6     5,343   6.3
  Locations     357     326   9.5     340   5.0
  Total client assets     147,119,000     130,550,000   12.7     137,855,000   6.7
                             
                             
                       
Global Wealth Management Segment
Summary Results of Operations (Unaudited)
     
    Three Months Ended
(in 000s)   3/31/13   3/31/12   % Change     12/31/12   % Change
Revenues:                            
  Commissions   $ 102,086   $ 91,020   12.2     $ 93,045   9.7
  Principal transactions     56,307     58,381   (3.6 )     54,747   2.8
  Asset management and service fees     68,934     60,586   13.8       68,631   0.4
  Net interest     21,486     17,642   21.8       21,195   1.4
  Investment banking     11,103     12,402   (10.5 )     10,906   1.8
  Other income     7,041     7,577   (7.1 )     6,560   7.3
    Net revenues     266,957     247,608   7.8       255,084   4.7
Non-interest expenses:                            
  Compensation and benefits     157,596     143,351   9.9       147,029   7.2
  Non-compensation operating expenses     39,862     35,379   12.7       38,773   2.8
    Total non-interest expenses     197,458     178,730   10.5       185,802   6.3
Income before income taxes   $ 69,499   $ 68,878   0.9     $ 69,282   0.3
                             
As a percentage of net revenues:                            
  Compensation and benefits     59.0     57.9           57.6    
  Non-compensation operating expenses     15.0     14.3           15.2    
  Income before income taxes     26.0     27.8           27.2    
                             
                             
                             
Stifel Bank & Trust (Unaudited)  
Key Statistical Information  
(in 000s, except percentages)   3/31/13     3/31/12     % Change   12/31/12     % Change  
Other information:                                  
  Assets   $ 3,832,281     $ 2,611,828     46.7   $ 3,652,633     4.9  
  Investment securities     2,440,146       1,673,866     45.8     2,332,058     4.6  
  Retained loans, net     886,597       657,081     34.9     822,711     7.8  
  Loans held for sale     165,698       141,136     17.4     214,531     (22.8 )
  Deposits     3,556,568       2,357,912     50.8     3,346,133     6.3  
                                     
  Allowance as a percentage of loans     1.01 %     0.87 %         0.99 %      
  Non-performing assets as a percentage of total assets     0.04 %     0.11 %         0.06 %      
                                     
                                   
   
Institutional Group Segment  
Summary Results of Operations (Unaudited)  
       
    Three Months Ended  
(in 000s)   3/31/13   3/31/12   % Change     12/31/12   % Change  
Revenues:                              
  Commissions   $ 46,562   $ 32,283   44.2     $ 41,235   12.9  
  Principal transactions     50,938     57,852   (12.0 )     42,961   18.6  
                                 
    Capital raising     40,095     42,431   (5.5 )     38,296   4.7  
    Advisory fees     27,180     15,605   74.2       26,644   2.0  
  Investment banking     67,275     58,036   15.9       64,940   3.6  
  Other income 5     11,662     1,073   *       15,920   (26.7 )
    Net revenues     176,437     149,244   18.2       165,056   6.9  
Non-interest expenses:                              
  Compensation and benefits     107,636     94,430   14.0       108,371   (0.7 )
  Non-compensation operating expenses     40,664     30,810   32.0       35,195   15.5  
    Total non-interest expenses     148,300     125,240   18.4       143,566   3.3  
Income before income taxes   $ 28,137   $ 24,004   17.2     $ 21,490   30.9  
                               
As a percentage of net revenues:                              
  Compensation and benefits     61.0     63.3           65.7      
  Non-compensation operating expenses     23.1     20.6           21.3      
  Income before income taxes     15.9     16.1           13.0      
                               
* Percentage is not meaningful.  
   
   
   
Institutional Group Segment  
Institutional Brokerage and Investment Banking Revenues (Unaudited)  
       
    Three Months Ended  
(in 000s)   3/31/13   3/31/12   % Change     12/31/12   % Change  
Institutional brokerage:                              
  Equity   $ 52,000   $ 44,171   17.7     $ 41,805   24.4  
  Fixed income     45,500     45,964   (1.0 )     42,391   7.3  
Institutional brokerage     97,500     90,135   8.2       84,196   15.8  
                               
Investment banking:                              
  Capital raising:                              
    Equity     24,380     31,550   (22.7 )     19,830   22.9  
    Fixed income     15,715     10,881   44.4       18,466   (14.9 )
      Capital raising     40,095     42,431   (5.5 )     38,296   4.7  
  Advisory fees     27,180     15,605   74.2       26,644   2.0  
Investment banking   $ 67,275   $ 58,036   15.9     $ 64,940   3.6  
                               

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

2 Results for the three months ended March 31, 2013 and December 31, 2012 includes $2.2 million and $13.4 million, respectively, in realized and unrealized gains recognized on the Company's investment in Knight Capital Group, Inc.

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

4 Includes 148, 155 and 151 independent contractors at March 31, 2013 and 2012 and December 31, 2012, respectively.

5 Includes net interest and other income.

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

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