Stifel Reports First Quarter 2016 Financial Results
/EINPresswire.com/ -- ST. LOUIS, MO --(Marketwired - May 09, 2016) -
Quarterly Highlights
- Net revenues of $620.0 million, increased 10.5% compared with the year-ago quarter.
- Net income of $27.1 million, or $0.36 per diluted common share, a 37.2% decline from the year ago quarter.
- Non-GAAP net income of $43.4 million, or $0.57 per diluted common share.
Stifel Financial Corp. (NYSE: SF) today reported net income of $27.1 million, or $0.36 per diluted common share on net revenues of $620.0 million for the three months ended March 31, 2016, compared with net income of $43.1 million, or $0.56 per diluted common share, on net revenues of $561.0 million for the first quarter of 2015.
For the three months ended March 31, 2016, the Company reported non-GAAP net income of $43.4 million, or $0.57 per diluted common share, compared with non-GAAP net income of $49.9 million, or $0.65 per diluted common share for the first quarter of 2015. These non-GAAP results primarily exclude merger-related expenses associated with the Company's acquisitions.
Chairman's Comments
"The diversity of Stifel's business model that has evolved through both organic growth and acquisitions was highlighted in the quarter as the firm generated record quarterly revenue and sequential improvement in EPS. The growth in our private client business, Stifel Bank & Trust, and our institutional fixed income business more than offset the negative impact that increased market volatility had on the equity capital markets business during the quarter," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.
"After a year of substantial investment into the business, we began to realize some of the benefits of these growth initiatives as the scale of our operations continued to increase during the first quarter of 2016. That said, we remain committed to optimizing our current capital base, managing our expense base, and taking the necessary steps to achieve our key financial targets."
Summary Results of Operations (Unaudited)
Three Months Ended
---------------------------------------------
% %
(in 000s) 3/31/16 3/31/15 Change 12/31/15 Change
--------- --------- ------- --------- ------
Net revenues $ 619,974 $ 560,982 10.5 $ 581,286 6.7
Net income $ 27,055 $ 43,097 (37.2) $ 11,172 142.2
Non-GAAP net income (1) $ 43,354 $ 49,940 (13.2) $ 40,211 7.8
Earnings per common share:
Basic $ 0.40 $ 0.62 $ (35.5) $ 0.16 150.0
Diluted $ 0.36 $ 0.56 $ (35.7) $ 0.14 157.1
Non-GAAP net income (1) $ 0.57 $ 0.65 $ (12.3) $ 0.51 11.8
Weighted average number of
common shares outstanding:
Basic 67,579 68,006 (0.6) 68,150 (0.8)
Diluted 76,086 77,359 (1.6) 79,355 (4.1)
(1) A reconciliation of the Company's GAAP results to these non-GAAP
measures is discussed under "Non-GAAP Financial Measures."
Brokerage Revenues
Brokerage revenues, defined as commissions plus principal transactions, were $318.9 million, a 13.7% increase compared with the first quarter of 2015 and an 8.2% compared with the fourth quarter of 2015.
- Global wealth management brokerage revenues were $173.0 million, a 9.5% increase compared with the first quarter of 2015 and a 4.0% increase compared with the fourth quarter of 2015.
- Institutional equity brokerage revenues were $62.3 million, a 0.8% increase compared with the first quarter of 2015 and a 13.6% increase compared with the fourth quarter of 2015.
- Institutional fixed income brokerage revenues were $83.6 million, a 37.8% increase compared with the first quarter of 2015 and a 13.7% increase compared with the fourth quarter of 2015.
Investment Banking Revenues
Investment banking revenues were $100.7 million, a 19.5% decrease compared with the first quarter of 2015 and a 2.1% decrease compared with the fourth quarter of 2015.
- Equity capital raising revenues were $25.5 million, a 47.8% decrease compared with the first quarter of 2015 and a 37.0% decrease compared with the fourth quarter of 2015.
- Fixed income capital raising revenues were $27.8 million, a 3.9% increase compared with the first quarter of 2015 and a 6.3% decrease compared with the fourth quarter of 2015.
- Advisory fee revenues were $47.4 million, a 4.2% decrease compared with the first quarter of 2015 and a 53.7% increase compared with the fourth quarter of 2015.
Asset Management and Service Fee Revenues
Asset management and service fee revenues were $144.5 million, a 26.9% increase compared with the first quarter of 2015 and an 11.8% increase compared with the fourth quarter of 2015.
Compensation and Benefits Expenses
For the quarter ended March 31, 2016, compensation and benefits expenses were $411.1 million, which included $16.4 million of merger-related expenses. This compares with $355.7 million in the first quarter of 2015 and $399.0 million in the fourth quarter of 2015.
Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 63.6% in the first quarter of 2015, compared with 62.5% in the first quarter of 2015 and 64.8% in the fourth quarter of 2015.
Excluding merger-related expenses, transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, was 4.2% of net revenues in the first quarter of 2015, compared with 4.1% in the first quarter of 2015 and 3.9% in the fourth quarter of 2015.
Non-Compensation Operating Expenses
For the quarter ended March 31, 2016, non-compensation operating expenses were $164.9 million, which included merger-related expenses of $10.1 million. This compares with $135.2 million in the first quarter of 2015 and $171.2 million in the fourth quarter of 2015.
Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended March 31, 2015 was 25.0%, compared with 23.2% in the first quarter of 2015 and 25.4% in the fourth quarter of 2015.
Provision for Income Taxes
The effective income tax rate for the quarter ended March 31, 2016 was 38.4% compared with 38.5% in the first quarter of 2015.
Assets and Capital
Assets
- Assets increased 51.6% to $14.2 billion as of March 31, 2016 from $9.4 billion as of March 31, 2015.
- At March 31, 2016, the Company's Level 3 assets of $58.0 million, or 0.4% of total assets, consisted of $52.2 million of auction rate securities and $5.8 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 1.7% at March 31, 2016.
- Non-performing assets as a percentage of total assets as of March 31, 2016 was 0.28% .
Capital
- Shareholders' equity as of March 31, 2016 increased 2.3% to $2.41 billion from $2.36 billion as of March 31, 2015.
- During the three months ended March 31, 2016, the Company repurchased 2.7 million shares of the Company's common stock for approximately $91.4 million.
- At March 31, 2016, book value per common share was $36.37 based on 66.5 million common shares outstanding. This represents a 4.4% increase from March 31, 2015.
- At March 31, 2016, the Company's Tier 1 leverage capital and Tier 1 risk-based capital ratios were 11.6% and 21.3%, respectively, compared to 17.5% and 29.9%, respectively, at March 31, 2015.
Conference Call Information
Stifel Financial Corp. will host its first quarter 2016 financial results conference call on Monday, May 9, 2016, 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 #88960277. 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 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 thousands, except per % %
share amounts) 3/31/16 3/31/15 Change 12/31/15 Change
--------- --------- ------ --------- ------
Revenues:
Commissions $ 197,930 $ 180,302 9.8 $ 187,287 5.7
Principal transactions 120,948 100,205 20.7 107,464 12.5
--------- --------- ------ --------- ------
Brokerage Revenues 318,878 280,507 13.7 294,751 8.2
Investment banking 100,658 125,089 (19.5) 102,811 (2.1)
Asset management and
service fees 144,532 113,869 26.9 129,319 11.8
Other income 7,231 11,800 (38.7) 18,251 (60.4)
--------- --------- ------ --------- ------
Operating Revenue 571,299 531,265 7.5 545,132 4.8
Interest Revenue 62,786 42,736 46.9 48,639 29.1
--------- --------- ------ --------- ------
Total Revenue 634,085 574,001 10.5 593,771 6.8
Interest Expense 14,111 13,019 8.4 12,485 13.0
--------- --------- ------ --------- ------
Net Revenue 619,974 560,982 10.5 581,286 6.7
--------- --------- ------ --------- ------
Non-interest Expenses:
Compensation and benefits 411,113 355,693 15.6 398,966 3.0
Occupancy and equipment
rental 57,255 44,170 29.6 61,667 (7.2)
Communication and office
supplies 36,660 29,234 25.4 34,652 5.8
Commissions and floor
brokerage 11,732 10,069 16.5 10,895 7.7
Other operating expenses 59,301 51,750 14.6 64,024 (7.4)
--------- --------- ------ --------- ------
Total non-interest
expenses 576,061 490,916 17.3 570,204 1.0
Income before income taxes 43,913 70,066 (37.3) 11,082 296.3
Provision for income taxes 16,858 26,969 (37.5) (90) nm
--------- --------- ------ --------- ------
Net income $ 27,055 $ 43,097 (37.2) $ 11,172 142.2
========= ========= ====== ========= ======
Earnings per common share:
Basic 0.40 $ 0.62 (35.5) 0.16 150.0
Diluted $ 0.36 $ 0.56 (35.7) $ 0.14 157.1
Weighted average number of
common shares outstanding:
Basic 67,579 68,006 (0.6) 68,150 (0.8)
Diluted 76,086 77,359 (1.6) 79,355 (4.1)
Statistical Information
(in thousands, except per share amounts)
% %
3/31/16 3/31/15 Change 12/31/15 Change
------------ ------------ ------ ------------ ------
Statistical
Information:
Book value per
share $ 36.37 $ 34.83 4.4 $ 37.19 (2.2)
Financial
advisors(2) 2,849 2,097 35.9 2,891 (1.5)
Full-time
associates 7,100 6,140 15.6 7,133 (0.5)
Locations 401 368 9.0 402 (0.2)
Total client
assets $232,013,000 $188,616,000 23.0 $234,070,000 (0.9)
(2) Includes 688, 134, and 719 independent contractors at March 31, 2016,
March 31, 2015, and December 31, 2015, respectively.
Business Segment Results
Summary Segment Results (Unaudited)
Three Months Ended
-----------------------------------------------
% %
(in 000s) 3/31/16 3/31/15 Change 12/31/15 Change
--------- --------- ------ --------- ------
Net revenues:
Global Wealth Management $ 379,805 $ 329,410 15.3 $ 347,216 9.4
Institutional Group 241,276 238,607 1.1 246,325 (2.0)
Other (1,107) (7,035) 84.3 (12,255) (91.0)
--------- --------- ------ --------- ------
$ 619,974 $ 560,982 10.5 $ 581,286 6.7
Operating contribution:(3)
Global Wealth Management $ 93,335 $ 98,847 (5.6) $ 92,077 1.4
Institutional Group 29,194 32,331 (9.7) 40,917 (28.7)
Other (51,920) (50,369) 3.1 (75,701) (31.4)
--------- --------- ------ --------- ------
$ 70,609 $ 80,809 (12.6) $ 57,293 23.2
--------- --------- ------ --------- ------
As a percentage of net
revenues:
Compensation and benefits
Global Wealth
Management 58.3 55.6 57.1
Institutional Group 62.4 62.6 58.1
Non-comp. operating
expenses
Global Wealth
Management 17.1 14.4 16.4
Institutional Group 25.5 23.8 25.3
Income before income
taxes
Global Wealth
Management 24.6 30.0 26.5
Institutional Group 12.1 13.6 16.6
--------- --------- ---------
11.4 14.3 9.8
--------- --------- ---------
(3) A reconciliation of the Company's GAAP results to these non-GAAP
measures is discussed under "Non-GAAP Financial Measures."
Global Wealth Management Summary Results of Operations (Unaudited)
Three Months Ended
---------------------------------------------
% %
(in 000s) 3/31/16 3/31/15 Change 12/31/15 Change
--------- --------- ------ --------- ------
Revenues:
Commissions $ 131,554 $ 116,214 13.2 $ 128,395 2.5
Principal transactions 41,411 41,781 (0.9) 37,944 9.1
--------- --------- ------ --------- ------
Brokerage revenues 172,965 157,995 9.5 166,339 4.0
Asset management and service
fees 144,352 113,666 27.0 $ 130,382 10.7
Net interest 51,767 37,924 36.5 42,187 22.7
Investment banking 8,410 10,326 (18.6) 8,313 1.2
Other income 2,311 9,499 (75.7) (5) nm
--------- --------- ------ --------- ------
Net revenues 379,805 329,410 15.3 347,216 9.4
--------- --------- ------ --------- ------
Non-interest expenses:
Compensation and benefits 221,416 183,243 20.8 198,137 11.7
Non-compensation operating
expenses 65,054 47,320 37.5 57,002 14.1
--------- --------- ------ --------- ------
Total non-interest
expenses 286,470 230,563 24.2 255,139 12.3
--------- --------- ------ --------- ------
Income before income taxes $ 93,335 $ 98,847 (5.6) $ 92,077 1.4
--------- --------- ------ --------- ------
As a percentage of net
revenues:
Compensation and benefits 58.3 55.6 57.1
Non-compensation operating
expenses 17.1 14.4 16.4
Income before income taxes 24.6 30.0 26.5
Stifel Bank & Trust (Unaudited)
Key Statistical Information
---------------------------------------------------------------------------
(in 000s, except % %
percentages) 3/31/16 3/31/15 Change 12/31/15 Change
--------- ---------- ------ ---------- ------
Other information:
Assets 8,310,224 $5,289,349 57.1 $7,275,308 14.2
Investment securities 4,147,647 2,599,854 59.5 3,479,336 19.2
Retained loans, net 3,737,209 2,505,007 49.2 3,449,662 8.3
Loans held for sale 132,900 188,783 (29.6) 189,921 (30.0)
Deposits 7,218,100 4,834,042 49.3 6,638,359 8.7
Allowance as a
percentage of loans(4) 0.94% 0.96% 0.90%
Non-performing assets
as a percentage of
total assets 0.28% 0.13% 0.03%
(4) Excluding acquired loans of $822.5 million, $263.7 million, and $606.8
million, the allowance as a percentage of loans totaled 1.29%, 1.10%,
and 1.19% as of March 31, 2016, March 31, 2015, and December 31, 2015,
respectively.
Institutional Group Summary Results of Operations (Unaudited)
Three Months Ended
--------------------------------------------
% %
(in 000s) 3/31/16 3/31/15 Change 12/31/15 Change
--------- --------- ------ --------- ------
Revenues:
Commissions $ 66,376 $ 64,088 3.6 $ 58,891 12.7
Principal transactions 79,537 58,423 36.1 69,520 14.4
--------- --------- ------ --------- ------
Brokerage revenues 145,913 122,511 19.1 128,411 13.6
Capital raising 44,895 65,321 (31.3) 61,766 (27.3)
Advisory fees 47,354 49,443 (4.2) 30,810 53.7
--------- --------- ------ --------- ------
Investment banking 92,249 114,764 (19.6) 92,576 (0.4)
Other(5) 3,114 1,332 133.8 25,338 (87.7)
--------- --------- ------ --------- ------
Net revenues 241,276 238,607 1.1 246,325 (2.0)
--------- --------- ------ --------- ------
Non-interest expenses:
Compensation and benefits 150,618 149,411 0.8 143,162 5.2
Non-compensation operating
expenses 61,464 56,865 8.1 62,246 (1.3)
--------- --------- ------ --------- ------
Total non-interest
expenses 212,082 206,276 2.8 205,408 3.2
--------- --------- ------ --------- ------
Income before income taxes $ 29,194 $ 32,331 (9.7) $ 40,917 (28.7)
--------- --------- ------ --------- ------
As a percentage of net
revenues:
Compensation and benefits 62.4 62.6 58.1
Non-compensation operating
expenses 25.5 23.8 25.3
Income before income taxes 12.1 13.6 16.6
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
Three Months Ended
--------------------------------------------
% %
(in 000s) 3/31/16 3/31/15 Change 12/31/15 Change
--------- --------- ------ --------- ------
Institutional brokerage:
Equity $ 62,273 $ 61,803 0.8 $ 54,837 13.6
Fixed income 83,640 60,708 37.8 73,574 13.7
--------- --------- ------ --------- ------
Institutional brokerage 145,913 122,511 19.1 128,411 13.6
Investment banking:
Capital raising:
Equity 18,930 44,591 (57.5) 38,499 (50.8)
Fixed income 25,965 20,730 25.3 23,267 11.6
--------- --------- ------ --------- ------
Capital raising 44,895 65,321 (31.3) 61,766 (27.3)
Advisory fees: 47,354 49,443 (4.2) 30,810 53.7
--------- --------- ------ --------- ------
Investment banking $ 92,249 $ 114,764 (19.6) $ 92,576 (0.4)
--------- --------- ------ --------- ------
(5) Includes net interest, asset management and service fees, and other
income.
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 basic 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, 2016. 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 amounts primarily exclude acquisition related expenses which management believes are duplicative and will be eliminated and other expenses which in management's view are not representative of on-going 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 basic 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 basic 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 basic and diluted earnings per share on a GAAP basis for the three months ended March 31, 2016 to the aforementioned expenses on a non-GAAP basis for the same period.
Three Months Ended March 31, 2016
---------------------------------
(in 000s, except per share amounts) Non-GAAP Adjustments GAAP
--------- ------------ ---------
Net revenues $ 620,121 $ (147) $ 619,974
Non-interest expenses:
Compensation and benefits 394,684 16,429 411,113
Non-compensation operating expenses 154,828 10,120 164,948
--------- ------------ ---------
Total non-interest expenses 549,512 26,549 576,061
Income before income taxes 70,609 (26,696) 43,913
Provision for income taxes 27,255 (10,397) 16,858
--------- ------------ ---------
Net income $ 43,354 $ (16,299) $ 27,055
--------- ------------ ---------
Earnings per share::
Basic $ 0.64 $ (0.24) $ 0.40
Diluted $ 0.57 $ (0.21) $ 0.36
As a percentage of net revenues:
Compensation and benefits 63.6 66.3
Non-compensation operating expenses 25.0 26.6
Income before income taxes 11.4 7.1
Investor Relations
Joel Jeffrey
(212) 271-3610
investorrelations@stifel.com
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