Stifel Reports Second Quarter 2020 Results

Net revenues of $895.8 million, increased 11.9% with the year-ago quarter, were the Company’s third highest quarterly net revenues.
Record Institutional Group net revenues and fixed income brokerage revenues.
Net income available to common shareholders of $103.0 million, or $1.39 per diluted common share.
Non-GAAP net income available to common shareholders of $115.3 million, or $1.55 per diluted common share.
Annualized return on average tangible common shareholders’ equity ⁽¹⁾ was 20.7%.
Non-GAAP annualized return on average tangible common shareholders’ equity ⁽¹⁾ was 23.2%.

ST. LOUIS, July 29, 2020 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $103.0 million, or $1.39 per diluted common share on net revenues of $895.8 million for the three months ended June 30, 2020, compared with net income available to common shareholders of $103.8 million, or $1.31 per diluted common share, on net revenues of $800.8 million for the second quarter of 2019.

For the three months ended June 30, 2020, the Company reported non-GAAP net income available to common shareholders of $115.3 million, or $1.55 per diluted common share. The Company’s reported GAAP net income for the three months ended June 30, 2020 was primarily impacted by merger-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“The benefits of the investments we have made in our business were again evident in our second quarter results. Net revenue and earnings per share were the third highest in our history. Our Institutional Group had a record quarter led by record fixed income brokerage revenue as well as strong investment banking results primarily from robust capital raising activity in both fixed income and equity. This helped to counter the impact of the market sell off in the first quarter and the zero rate environment had on revenue lines such as asset management and net interest income, respectively. In terms of the future, I remain cautiously optimistic. We enter the third quarter, with a strong and liquid balance sheet, our strongest capital ratios in nearly four years, and a solid and improving recruiting pipeline. While the economic outlook for the second half of the year remains unclear, I believe that the performance of our diversified financial services model will remain strong,” stated Ronald J. Kruszewski, Chairman and Chief Executive Officer of Stifel.

Financial Highlights (Unaudited)	Three Months Ended
($ in 000s, except per share data)	GAAP 6/30/20			GAAP 6/30/19			% Change			GAAP 3/31/20			% Change			Non-GAAP ⁽²⁾ 6/30/20			Non-GAAP ⁽²⁾ 6/30/19			% Change
Net revenues	$	895,817		$	800,787			11.9		$	913,034			(1.9	)	$	895,817		$	800,787			11.9
Net income applicable to Stifel Financial Corp.	$	107,887		$	109,085			(1.1	)	$	86,589			24.6		$	120,178		$	116,659			3.0
Preferred dividends		4,843			5,288			(8.4	)		4,844			(0.0	)		4,843			5,288			(8.4	)
Net income available to common shareholders	$	103,044		$	103,797			(0.7	)	$	81,745			26.1		$	115,335		$	111,371			3.6
Earnings per diluted common share	$	1.45		$	1.38			5.1		$	1.13			28.3		$	1.62		$	1.48			9.5
Earnings per diluted common share available to common shareholders	$	1.39		$	1.31			6.1		$	1.07			29.9		$	1.55		$	1.41			9.9
Compensation ratio		61.1	%		58.3	%					63.2	%					60.0	%		57.9	%
Non-compensation ratio		22.9	%		23.2	%					24.2	%					22.2	%		22.3	%
Pre-tax operating margin ⁽³⁾		16.0	%		18.5	%					12.6	%					17.8	%		19.8	%

For the six months ended June 30, 2020, the Company reported net income available to common shareholders of $184.8 million, or $2.44 per diluted common share on record net revenues of $1.8 billion, compared with net income available to common shareholders of $200.7 million, or $2.53 per diluted common share, on net revenues of $1.6 billion for the six months ended June 30, 2019.

For the six months ended June 30, 2020, the Company reported non-GAAP net income available to common shareholders of $207.3 million, or $2.74 per diluted common share.

Financial Highlights (Unaudited)	Six Months Ended
($ in 000s, except per share data)	GAAP 6/30/20			GAAP 6/30/19			% Change			Non-GAAP ⁽²⁾ 6/30/20			Non-GAAP ⁽²⁾ 6/30/19			% Change
Net revenues	$	1,808,851		$	1,571,207			15.1		$	1,809,030		$	1,571,207			15.1
Net income applicable to Stifel Financial Corp.	$	194,476		$	208,292			(6.6	)	$	216,955		$	223,523			(2.9	)
Preferred dividends		9,687			7,632			26.9			9,687			7,632			26.9
Net income available to common shareholders	$	184,789		$	200,660			(7.9	)	$	207,268		$	215,891			(4.0	)
Earnings per diluted common share	$	2.57		$	2.63			(2.3	)	$	2.87		$	2.82			1.8
Earnings per diluted common share available to common shareholders	$	2.44		$	2.53			(3.6	)	$	2.74		$	2.73			0.4
Compensation ratio		62.2	%		58.9	%					61.3	%		58.4	%
Non-compensation ratio		23.5	%		22.9	%					22.8	%		22.2	%
Pre-tax operating margin ⁽⁴⁾		14.3	%		18.2	%					15.9	%		19.4	%

Net Revenues

Net revenues were $895.8 million for the second quarter of 2020, an 11.9% increase from the second quarter of 2019 and a 1.9% decrease from the first quarter of 2020. Net revenues, compared with the second quarter of 2019, reflected significantly higher brokerage revenues, increased capital raising revenues, and advisory fee revenues, partially offset by lower net interest income and asset management and service fees. Net revenues, compared with the first quarter of 2020, reflected increased advisory fee revenues, principal transaction fee revenues, and capital raising revenues, partially offset by lower net interest income, asset management and service fees, and commission revenues.

The operating environment continued to be impacted by the spread of the COVID-19 virus which caused a sharp contraction in global economic activity and increased market volatility. Economic indicators generally improved as the quarter progressed, following significant declines in March and April, as economies began to reopen and central banks, along with governments, continued to implement monetary easing measures and provide fiscal stimulus to support the economy. These contributed to higher global equity prices and tighter credit spreads compared with the end of the first quarter of 2020.

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $343.0 million, a 31.2% increase compared with the second quarter of 2019 and a 1.9% decrease compared with the first quarter of 2020.

	Three Months Ended
($ in 000s)	6/30/20		6/30/19		% Change			3/31/20		% Change
Global Wealth Management	$	159,123	$	162,388		(2.0	)	$	179,879		(11.5	)
Institutional brokerage:
Equity capital markets		63,193		40,670		55.4			70,195		(10.0	)
Fixed income capital markets		120,731		58,387		106.8			99,688		21.1
Total institutional brokerage		183,924		99,057		85.7			169,883		8.3
Total brokerage revenues ⁽⁵⁾	$	343,047	$	261,445		31.2		$	349,762		(1.9	)

Global Wealth Management brokerage revenues were $159.1 million, a 2.0% decrease compared with the second quarter of 2019 and an 11.5% decrease compared with the first quarter of 2020.
Institutional equity brokerage revenues were $63.2 million, a 55.4% increase compared with the second quarter of 2019 and a 10.0% decrease compared with the first quarter of 2020.
Institutional fixed income brokerage revenues were $120.7 million, a 106.8% increase compared with the second quarter of 2019 and a 21.1% increase compared with the first quarter of 2020.

Investment Banking Revenues

Investment banking revenues were $217.0 million, a 20.8% increase compared with the second quarter of 2019 and a 20.9% increase compared with the first quarter of 2020.

	Three Months Ended
($ in 000s)	6/30/20		6/30/19		% Change			3/31/20		% Change
Capital raising:
Global Wealth Management	$	8,016	$	10,559		(24.1	)	$	10,314		(22.3	)

Equity capital markets		63,277		59,156		7.0			60,195		5.1
Fixed income capital markets		47,904		26,997		77.4			32,887		45.7
Institutional Group		111,181		86,153		29.1			93,082		19.4
Total capital raising ⁽⁵⁾		119,197		96,712		23.2			103,396		15.3
Advisory fees ⁽⁵⁾		97,838		82,905		18.0			76,072		28.6
Total investment banking	$	217,035	$	179,617		20.8		$	179,468		20.9

Global Wealth Management capital raising revenues were $8.0 million, a 24.1% decrease compared with the second quarter of 2019 and a 22.3% decrease compared with the first quarter of 2020.
Institutional equity capital raising revenues were $63.3 million, a 7.0% increase compared with the second quarter of 2019 and a 5.1% increase compared with the first quarter of 2020.
Institutional fixed income capital raising revenues were $47.9 million, a 77.4% increase compared with the second quarter of 2019 and a 45.7% increase compared with the first quarter of 2020.
Advisory fee revenues were $97.8 million, an 18.0% increase compared with the second quarter of 2019 and a 28.6% increase compared with the first quarter of 2020.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $198.9 million, a 5.8% decrease compared with the second quarter of 2019 and a 16.3% decrease compared with the first quarter of 2020. The decrease from the comparative period in 2019 is primarily attributable to lower asset values at the beginning of the second quarter of 2020, partially offset by fee-based asset flows. See Asset Management and Service Fee Break-down table.

Net Interest Income

Net interest income of $115.3 million, a 14.6% decrease compared with the second quarter of 2019 and a 15.7% decrease compared with the first quarter of 2020. See Net Interest Income Analysis table.

Interest income was $128.4 million, a 31.7% decrease compared with the second quarter of 2019 and a 20.4% decrease compared with the first quarter of 2020.
Interest expense was $13.1 million, a 75.3% decrease compared with the second quarter of 2019 and a 46.3% decrease compared with the first quarter of 2020.

Compensation and Benefits Expenses

For the quarter ended June 30, 2020, compensation and benefits expenses were $547.2 million, which included $9.7 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $466.9 million in the second quarter of 2019 and $577.2 million in the first quarter of 2020. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 60.0% in the second quarter of 2020 (non-GAAP measure).

The increase in compensation and benefits expenses, compared with the second quarter of 2019, is primarily attributable to higher volume and revenue-related expense and investments.

	Three Months Ended						Six Months Ended
($ in 000s)	6/30/20			6/30/19			6/30/20			6/30/19
GAAP compensation and benefits	$	547,174		$	466,861		$	1,124,353		$	924,975
As a percentage of net revenues		61.1	%		58.3	%		62.2	%		58.9	%
Non-GAAP adjustments:⁽⁶⁾
Merger-related and severance		(9,710	)		(3,304	)		(16,137	)		(7,236	)
Non-GAAP compensation and benefits	$	537,464		$	463,557		$	1,108,216		$	917,739
As a percentage of non-GAAP net revenues		60.0	%		57.9	%		61.3	%		58.4	%

Non-Compensation Operating Expenses

For the quarter ended June 30, 2020, non-compensation operating expenses were $205.7 million, which included $6.5 million of merger-related expenses (non-GAAP adjustments). This compares with $185.9 million in the second quarter of 2019 and $220.7 million in the first quarter of 2020. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2020 were 22.2% (non-GAAP measure).

The increase in non-compensation operating expenses, compared with the second quarter of 2019, is primarily attributable to the increase in the provision for credit losses as a result of the impact of COVID-19 on the broader economic environment, volume-related expenses, net provisions for regulatory matters, and professional fees, partially offset by decreases in travel and conference-related expenses as a result of COVID-19. In addition, the second quarter of 2020 included provisions related to growth in loans and the impact of accounting for credit losses under the CECL standard ⁽⁷⁾.

	Three Months Ended						Six Months Ended
($ in 000s)	6/30/20			6/30/19			6/30/20			6/30/19
GAAP non-compensation expenses	$	205,683		$	185,944		$	426,432		$	360,441
As a percentage of net revenues		22.9	%		23.2	%		23.5	%		22.9	%
Non-GAAP adjustments:⁽⁶⁾
Merger-related		(6,549	)		(3,417	)		(13,453	)		(7,676	)
Litigation-related		—			(3,507	)		—			(3,507	)
		(6,549	)		(6,924	)		(13,453	)		(11,183	)
Non-GAAP non-compensation expenses	$	199,134		$	179,020		$	412,979		$	349,258
As a percentage of non-GAAP net revenues		22.2	%		22.3	%		22.8	%		22.2	%

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended June 30, 2020 was 24.5%. This compares with an effective income tax rate of 25.9% for the second quarter of 2019 and 24.8% for the first quarter of 2020. The adjusted non-GAAP effective income tax rate for the quarter ended June 30, 2020 was 24.5%.

	Three Months Ended						Six Months Ended
($ in 000s)	6/30/20			6/30/19			6/30/20			6/30/19
GAAP provision for income taxes	$	35,073		$	38,225		$	63,590		$	76,595
GAAP effective tax rate		24.5	%		25.9	%		24.6	%		26.9	%
Non-GAAP adjustments:⁽⁶⁾
Merger-related, litigation-related, and severance		3,986			2,752			7,286			4,955
Other		(18	)		(98	)		4			(1,767	)
		3,968			2,654			7,290			3,188
Non-GAAP provision for income taxes	$	39,041		$	40,879		$	70,880		$	79,783
Non-GAAP effective tax rate		24.5	%		25.9	%		24.6	%		26.3	%

Conference Call Information

Stifel Financial Corp. will host its first quarter 2020 financial results conference call on Wednesday, July 29, 2020, at 9:30 a.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 2565812. 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, including its Eaton Partners business division; Keefe, Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc. 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 and Stifel Bank & Trust offer 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 website at www.stifel.com. For global disclosures, please visit www.stifel.com/investor-relations/press-releases.

Cautionary Note Regarding 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. For information about the risks and important factors that could affect the Company’s future results, financial condition and liquidity, see “Risk Factors” in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Forward-looking statements speak only as to the date they are made. The Company 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.

Statements about the effects of the COVID-19 pandemic on the Company’s business, results, financial position and liquidity may constitute forward-looking statements and are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected.

Summary Results of Operations (Unaudited)
	Three Months Ended												Six Months Ended
($ in 000s, except per share amounts)	6/30/20		6/30/19		% Change			3/31/20		% Change			6/30/20		6/30/19		% Change
Revenues:
Commissions	$	177,028	$	164,981		7.3		$	211,098		(16.1	)	$	388,126	$	320,430		21.1
Principal transactions		166,017		96,464		72.1			138,666		19.7			304,683		200,496		52.0
Brokerage revenues		343,045		261,445		31.2			349,764		(1.9	)		692,809		520,926		33.0

Advisory fees		97,838		82,911		18.0			76,072		28.6			173,910		187,801		(7.4	)
Capital raising		119,197		96,706		23.3			103,396		15.3			222,593		153,656		44.9
Investment banking		217,035		179,617		20.8			179,468		20.9			396,503		341,457		16.1
Asset management and service fees		198,939		211,171		(5.8	)		237,775		(16.3	)		436,714		406,438		7.4
Other income		21,514		13,505		59.3			9,207		133.7			30,721		25,714		19.5
Operating revenues		780,533		665,738		17.2			776,214		0.6			1,556,747		1,294,535		20.3
Interest revenue		128,368		187,940		(31.7	)		161,177		(20.4	)		289,545		379,011		(23.6	)
Total revenues		908,901		853,678		6.5			937,391		(3.0	)		1,846,292		1,673,546		10.3
Interest expense		13,084		52,891		(75.3	)		24,357		(46.3	)		37,441		102,339		(63.4	)
Net revenues		895,817		800,787		11.9			913,034		(1.9	)		1,808,851		1,571,207		15.1

Non-interest expenses:
Compensation and benefits		547,174		466,861		17.2			577,179		(5.2	)		1,124,353		924,975		21.6
Occupancy and equipment rental		66,264		61,055		8.5			66,073		0.3			132,337		119,917		10.4
Communication and office supplies		43,046		35,069		22.7			41,124		4.7			84,170		70,766		18.9
Commissions and floor brokerage		15,177		11,008		37.9			14,842		2.3			30,019		21,964		36.7
Provision for credit losses		19,210		2,353		716.4			16,068		19.6			35,278		4,636		661.0
Other operating expenses		61,986		76,459		(18.9	)		82,642		(25.0	)		144,628		143,158		1.0
Total non-interest expenses		752,857		652,805		15.3			797,928		(5.6	)		1,550,785		1,285,416		20.6
Income before income taxes		142,960		147,982		(3.4	)		115,106		24.2			258,066		285,791		(9.7	)
Provision for income taxes		35,073		38,225		(8.2	)		28,517		23.0			63,590		76,595		(17.0	)
Net income		107,887		109,757		(1.7	)		86,589		24.6			194,476		209,196		(7.0	)
Net income applicable to non-controlling interests		—		672	n/m				—		—			—		904	n/m
Net income applicable to Stifel Financial Corp.		107,887		109,085		(1.1	)		86,589		24.6			194,476		208,292		(6.6	)
Preferred dividends		4,843		5,288		(8.4	)		4,844		(0.0	)		9,687		7,632		26.9
Net income available to common shareholders	$	103,044	$	103,797		(0.7	)	$	81,745		26.1		$	184,789	$	200,660		(7.9	)
Earnings per common share:
Basic	$	1.46	$	1.43		2.1		$	1.15		27.0		$	2.61	$	2.74		(4.7	)
Diluted	$	1.39	$	1.31		6.1		$	1.07		29.9		$	2.44	$	2.53		(3.6	)

Cash dividends declared per common share	$	0.17	$	0.15		13.3		$	0.17		—		$	0.34	$	0.30		13.3

Weighted average number of common shares outstanding:
Basic		70,527		72,519		(2.7	)		71,286		(1.1	)		70,905		73,180		(3.1	)
Diluted		74,387		79,079		(5.9	)		76,619		(2.9	)		75,651		79,160		(4.4	)

Summary Segment Results (Unaudited)
	Three Months Ended															Six Months Ended
($ in 000s)	6/30/20			6/30/19			% Change			3/31/20			% Change			6/30/20			6/30/19			% Change
Net revenues:
Global Wealth Management	$	505,782		$	532,433			(5.0	)	$	582,956			(13.2	)	$	1,088,738		$	1,043,043			4.4
Institutional Group		398,096			270,602			47.1			332,238			19.8			730,334			531,888			37.3
Other		(8,061	)		(2,248	)		n/m			(2,160	)		n/m			(10,221	)		(3,724	)		n/m
Total net revenues	$	895,817		$	800,787			11.9		$	913,034			(1.9	)	$	1,808,851		$	1,571,207			15.1

Operating expenses:
Global Wealth Management	$	349,457		$	340,081			2.8		$	388,789			(10.1	)	$	738,246		$	656,201			12.5
Institutional Group		315,047			231,300			36.2			290,498			8.5			605,545			460,382			31.5
Other		88,353			81,424			8.5			118,641			(25.5	)		206,994			168,833			22.6
Total operating expenses	$	752,857		$	652,805			15.3		$	797,928			(5.6	)	$	1,550,785		$	1,285,416			20.6

Operating contribution:
Global Wealth Management	$	156,325		$	192,352			(18.7	)	$	194,167			(19.5	)	$	350,492		$	386,842			(9.4	)
Institutional Group		83,049			39,302			111.3			41,740			99.0			124,789			71,506			74.5
Other		(96,414	)		(83,672	)		15.2			(120,801	)		(20.2	)		(217,215	)		(172,557	)		25.9
Income before income taxes	$	142,960		$	147,982			(3.4	)	$	115,106			24.2		$	258,066		$	285,791			(9.7	)

As a percentage of net revenues:
Compensation and benefits
Global Wealth Management		51.1			49.3						51.2						51.1			48.9
Institutional Group		60.6			57.6						62.0						61.3			59.3
Non-comp. operating expenses
Global Wealth Management		18.0			14.6						15.5						16.7			14.0
Institutional Group		18.5			27.9						25.4						21.6			27.3
Income before income taxes
Global Wealth Management		30.9			36.1						33.3						32.2			37.1
Institutional Group		20.9			14.5						12.6						17.1			13.4
Consolidated pre-tax margin		16.0			18.5						12.6						14.3			18.2

Financial metrics (unaudited):	As of and For the Three Months Ended
($ in 000s, except percentages and per share amounts)	6/30/20			6/30/19			3/31/20
Total assets	$	25,624,225		$	24,343,597		$	25,896,006
Total Stifel Financial shareholders' equity	$	3,884,060		$	3,429,126		$	3,470,326
Book value per common share ⁽⁸⁾	$	48.84		$	44.68		$	46.13
Return on common equity ⁽⁹⁾		12.6	%		13.4	%		10.0	%
Non-GAAP return on common equity ^{(2) (9)}		14.1	%		14.3	%		11.2	%
Return on tangible common equity ⁽¹⁾		20.7	%		21.1	%		16.6	%
Non-GAAP return on tangible common equity ^{(1) (2)}		23.2	%		22.6	%		18.6	%
Tier 1 common capital ratio ⁽¹⁰⁾		15.3	%		15.6	%		14.3	%
Tier 1 risk based capital ratio ⁽¹⁰⁾		19.3	%		18.0	%		16.6	%
Tier 1 leverage capital ratio ⁽¹⁰⁾		11.0	%		10.0	%		9.6	%
Pre-tax margin on net revenues		16.0	%		18.5	%		12.6	%
Non-GAAP pre-tax margin on net revenues ^{(2) (3)}		17.8	%		19.8	%		14.1	%
Effective tax rate		24.5	%		25.9	%		24.8	%
Non-GAAP effective tax rate ⁽²⁾		24.5	%		25.9	%		24.8	%

Statistical Information (unaudited):	As of and For the Three Months Ended
($ in 000s, except financial advisors and locations)	6/30/20		6/30/19		% Change			3/31/20		% Change
Financial advisors		2,138		2,097		2.0			2,130		0.4
Independent contractors		94		96		(2.1	)		94		—
Total financial advisors		2,232		2,193		1.8			2,224		0.4
Locations		447		413		8.2			447		—
Total client assets	$	306,235,000	$	305,233,000		0.3		$	276,627,000		10.7
Fee-based client assets	$	106,218,000	$	103,824,000		2.3		$	93,633,000		13.4
Client money market and insured product	$	18,664,000	$	13,674,000		36.5		$	17,234,000		8.3
Secured client lending ⁽¹¹⁾	$	2,563,773	$	3,251,723		(21.2	)	$	3,148,790		(18.6	)

	Asset Management and Service Fee Break-down (unaudited)
Asset Management and Service Fee Revenues:	Three Months Ended
($ in 000s)	6/30/20			6/30/19			% Change			3/31/20			% Change
Private Client Group ⁽¹²⁾	$	164,403		$	164,554			(0.1	)	$	193,260			(14.9	)
Asset Management		23,769			29,485			(19.4	)		29,762			(20.1	)
Third-party Bank Sweep Program		522			6,869			(92.4	)		3,308			(84.2	)
Other ⁽¹³⁾		10,245			10,263			(0.2	)		11,445			(10.5	)
Total asset management and service fee revenues	$	198,939		$	211,171			(5.8	)	$	237,775			(16.3	)

Fee-based Assets:	Three Months Ended
($ in millions)	6/30/20			6/30/19			% Change			3/31/20			% Change
Private Client Group ⁽¹²⁾	$	91,360		$	80,983			12.8		$	80,617			13.3
Asset Management		25,706			33,156			(22.5	)		22,752			13.0
Elimination ⁽¹⁴⁾		(10,848	)		(10,315	)		5.2			(9,736	)		11.4
Total fee-based assets	$	106,218		$	103,824			2.3		$	93,633			13.4

Individual Program Banks	$	3,007		$	1,459			106.1		$	1,491			101.7

ROA (bps) ⁽¹⁵⁾
Private Client Group ⁽¹²⁾		81.6			89.5						83.9
Asset Management		37.0			35.6						38.0
Individual Program Banks		7.1			163.6						95.0

Consolidated Net Interest Income Analysis (Unaudited):

	Three Months Ended
	June 30, 2020								June 30, 2019							March 31, 2020
($ in millions, except percentages)	Average Balance		Interest Income/ Expense			Average Interest Rate			Average Balance		Interest Income/ Expense		Average Interest Rate			Average Balance		Interest Income/ Expense			Average Interest Rate
Interest-earning assets:
Cash and federal funds sold	$	1,674.0	$	1.0			0.24	%	$	750.4	$	4.3		2.31	%	$	931.8	$	3.7			1.58	%
Financial instruments owned		761.7		2.9			1.50			1,320.5		6.4		1.94			1,076.6		4.6			1.70
Margin balances		981.5		6.4			2.59			1,291.5		13.7		4.23			1,231.7		10.1			3.29
Investments:
Asset-backed securities		4,842.0		32.6			2.70			4,508.4		46.0		4.08			4,538.5		37.0			3.26
Mortgage-backed securities		877.2		4.6			2.09			1,470.9		8.6		2.33			1,094.2		6.0			2.18
Corporate fixed income securities		648.9		4.2			2.59			915.0		6.9		3.02			732.8		5.0			2.76
State and municipal securities		12.2		0.1			2.19			48.0		0.2		1.85			18.4		0.1			2.13
Other		5.3		—			2.02			—		—		—			3.9		—			2.17
Total Investments		6,385.6		41.5			2.60			6,942.3		61.7		3.56			6,387.8		48.1			3.01
Loans:
Commercial and industrial		4,095.4		31.8			3.10			3,337.4		41.3		4.95			3,560.3		38.0			4.27
Residential real estate		3,589.2		25.6			2.85			2,953.7		22.5		3.05			3,416.1		25.3			2.96
Securities-based loans		1,789.2		9.9			2.22			1,916.3		20.2		4.21			2,063.8		16.5			3.19
Commercial real estate		402.6		4.0			3.98			354.3		5.0		5.63			445.0		5.8			5.22
Loans held for sale		486.7		3.3			2.68			178.6		1.8		4.02			374.5		4.0			4.26
Other		546.3		4.6			3.36			377.9		5.1		5.38			500.1		5.6			4.46
Total Loans		10,909.4		79.2			2.90			9,118.2		95.9		4.21			10,359.8		95.2			3.67
Other interest-bearing assets		476.3		(2.6	)		(2.15	)		831.6		5.9		2.86			607.9		(0.5	)		(0.30	)
Total interest-earning assets/interest income		21,188.5		128.4			2.42			20,254.5		187.9		3.71			20,595.6		161.2			3.13
Interest-bearing liabilities:
Short-term borrowings		11.4		0.1			2.83			29.8		0.2		3.16			91.3		0.2			0.88
Senior notes		1,195.0		13.1			4.38			1,016.2		11.1		4.38			1,017.1		11.2			4.40
Deposits		16,676.5		2.3			0.05			14,660.7		29.3		0.80			15,377.9		9.6			0.25
FHLB		250.8		0.7			1.09			550.2		2.9		2.12			590.5		2.4			1.59
Other interest-bearing liabilities		1,179.2		(3.1	)		(1.03	)		1,764.4		9.4		2.10			1,628.1		1.0			0.26
Total interest-bearing liabilities/interest expense	$	19,312.9	$	13.1			0.27	%	$	18,021.3	$	52.9		1.17	%	$	18,704.9	$	24.4			0.52	%
Net interest income/margin			$	115.3			2.18	%			$	135.0		2.67	%			$	136.8			2.66	%

Stifel Bancorp, Inc. ⁽¹⁶⁾ Net Interest Income Analysis (Unaudited):

	Three Months Ended
	June 30, 2020							June 30, 2019							March 31, 2020
($ in millions, except percentages)	Average Balance		Interest Income/ Expense		Average Interest Rate			Average Balance		Interest Income/ Expense		Average Interest Rate			Average Balance		Interest Income/ Expense		Average Interest Rate
Interest-earning assets:
Cash and federal funds sold	$	961.1	$	0.3		0.13	%	$	330.6	$	1.8		2.15	%	$	446.0	$	1.2		1.10	%
Investments		6,385.6		41.5		2.60			6,942.3		61.7		3.56			6,387.8		48.1		3.01
Loans		10,909.4		79.2		2.90			9,118.2		95.9		4.21			10,359.8		95.2		3.67
Other interest-bearing assets		46.7		0.3		2.46			57.2		0.6		4.38			59.6		0.6		4.02
Total interest-earning assets/interest income		18,302.8		121.3		2.65			16,448.3		160.0		3.89			17,253.2		145.1		3.36
Interest-bearing liabilities:
Deposits		16,676.5		2.3		0.05			14,660.7		29.3		0.80			15,377.9		9.6		0.25
FHLB		250.8		0.7		1.09			550.2		2.9		2.12			590.5		2.4		1.59
Other interest-bearing liabilities		1.5		—		6.71			1.7		0.1		6.73			1.6		—		7.09
Total interest-bearing liabilities/interest expense	$	16,928.8		3.0		0.07	%	$	15,212.6		32.3		0.85	%	$	15,970.0		12.0		0.30	%
Net interest income/margin			$	118.3		2.59	%			$	127.7		3.11	%			$	133.1		3.09	%

Stifel Bancorp, Inc. ⁽¹⁶⁾ - a component of Global Wealth Management

Selected operating data (unaudited):	Three Months Ended															Six Months Ended
($ in 000s, except percentages)	6/30/20			6/30/19			% Change			3/31/20			% Change			6/30/20			6/30/19			% Change
Net interest income	$	118,298		$	127,714			(7.4	)	$	133,131			(11.1	)	$	251,429		$	262,278			(4.1	)
Credit loss provision		19,210			2,353			716.4			16,068			19.6			35,278			4,636			661.0
Charge-offs		150			54			177.8			20			650.0			170			110			54.5
Net interest margin		2.59	%		3.11	%	(52) bps				3.09	%	(50) bps				2.83	%		3.14	%	(31) bps

Financial Metrics (unaudited):	As of
($ in 000s, except percentages)	6/30/20			6/30/19			3/31/20
Total assets	$	18,123,326		$	16,645,984		$	18,442,914
Total shareholders' equity		1,378,096			1,236,318			1,224,307
Total loans, net (includes loans held for sale)		10,923,212			9,127,836			10,565,287
Total deposits		16,302,281			14,901,061			16,880,933
Available-for-sale securities, at fair value		3,172,160			2,702,211			3,363,961
Held-to-maturity securities, at amortized cost		3,083,126			3,957,629			3,083,065
Commercial and industrial		4,149,307			3,338,127			3,813,862
Residential real estate		3,710,657			2,984,725			3,495,136
Securities-based loans		1,716,786			1,962,528			1,945,371
Commercial real estate		406,788			367,283			399,732
Loans held for sale		474,899			163,511			570,787
Stifel Bank & Trust:
Common equity tier 1 capital ratio ⁽¹⁰⁾		12.4	%		13.4	%		11.7	%
Tier 1 capital ratio ⁽¹⁰⁾		12.4	%		13.4	%		11.7	%
Total capital ratio ⁽¹⁰⁾		13.9	%		14.5	%		13.0	%
Tier 1 leverage ratio ⁽¹⁰⁾		7.2	%		7.2	%		7.1	%
Stifel Bank:
Common equity tier 1 capital ratio ⁽¹⁰⁾		18.8	%		17.7	%		15.6	%
Tier 1 capital ratio ⁽¹⁰⁾		18.8	%		17.7	%		15.6	%
Total capital ratio ⁽¹⁰⁾		20.1	%		18.9	%		16.5	%
Tier 1 leverage ratio ⁽¹⁰⁾		7.1	%		7.3	%		7.3	%

Credit Metrics:
Allowance for credit losses	$	139,949		$	90,472		$	121,017
Allowance as a percentage of retained loans		1.32	%		1.00	%		1.20	%
Net charge-offs as a percentage of average loans		0.00	%		0.00	%		0.00	%
Total nonperforming assets	$	14,602		$	21,111		$	14,616
Nonperforming assets as % of total assets		0.08	%		0.13	%		0.08	%

Global Wealth Management Summary Results of Operations (Unaudited)
	Three Months Ended												Six Months Ended
($ in 000s)	6/30/20		6/30/19		% Change			3/31/20		% Change			6/30/20		6/30/19		% Change
Revenues:
Commissions	$	116,156	$	120,284		(3.4	)	$	136,897		(15.2	)	$	253,053	$	230,211		9.9
Principal transactions		42,967		42,104		2.0			42,982		(0.0	)		85,949		85,371		0.7
Brokerage revenues		159,123		162,388		(2.0	)		179,879		(11.5	)		339,002		315,582		7.4

Asset management and service fees		198,921		211,156		(5.8	)		237,760		(16.3	)		436,681		406,409		7.4
Net interest		121,564		137,599		(11.7	)		138,682		(12.3	)		260,246		282,894		(8.0	)
Investment banking ⁽¹⁷⁾		8,016		10,559		(24.1	)		10,333		(22.4	)		18,349		18,782		(2.3	)
Other income		18,158		10,731		69.2			16,302		11.4			34,460		19,376		77.8
Net revenues		505,782		532,433		(5.0	)		582,956		(13.2	)		1,088,738		1,043,043		4.4
Non-interest expenses:
Compensation and benefits		258,291		262,321		(1.5	)		298,370		(13.4	)		556,661		509,794		9.2
Non-compensation operating expenses		91,166		77,760		17.2			90,419		0.8			181,585		146,407		24.0
Total non-interest expenses		349,457		340,081		2.8			388,789		(10.1	)		738,246		656,201		12.5
Income before income taxes	$	156,325	$	192,352		(18.7	)	$	194,167		(19.5	)	$	350,492	$	386,842		(9.4	)

As a percentage of net revenues:
Compensation and benefits		51.1		49.3					51.2					51.1		48.9
Non-compensation operating expenses		18.0		14.6					15.5					16.7		14.0
Income before income taxes		30.9		36.1					33.3					32.2		37.1

Institutional Group Summary Results of Operations (Unaudited)
	Three Months Ended													Six Months Ended
($ in 000s)	6/30/20		6/30/19		% Change			3/31/20			% Change			6/30/20			6/30/19		% Change
Revenues:
Commissions	$	60,875	$	44,697		36.2		$	74,198			(18.0	)	$	135,073		$	90,219		49.7
Principal transactions		123,049		54,360		126.4			95,685			28.6			218,734			115,125		90.0
Brokerage revenues		183,924		99,057		85.7			169,883			8.3			353,807			205,344		72.3
Advisory fees		97,838		82,905		18.0			76,053			28.6			173,891			187,800		(7.4	)
Capital raising		111,181		86,153		29.1			93,082			19.4			204,263			134,875		51.4
Investment banking		209,019		169,058		23.6			169,135			23.6			378,154			322,675		17.2
Other ⁽¹⁸⁾		5,153		2,487		107.2			(6,780	)		(176.0	)		(1,627	)		3,869		(142.1	)
Net revenues		398,096		270,602		47.1			332,238			19.8			730,334			531,888		37.3
Non-interest expenses:
Compensation and benefits		241,420		155,779		55.0			205,988			17.2			447,408			315,190		41.9
Non-compensation operating expenses		73,627		75,521		(2.5	)		84,510			(12.9	)		158,137			145,192		8.9
Total non-interest expenses		315,047		231,300		36.2			290,498			8.5			605,545			460,382		31.5
Income before income taxes	$	83,049	$	39,302		111.3		$	41,740			99.0		$	124,789		$	71,506		74.5

As a percentage of net revenues:
Compensation and benefits		60.6		57.6					62.0						61.3			59.3
Non-compensation operating expenses		18.5		27.9					25.4						21.6			27.3
Income before income taxes		20.9		14.5					12.6						17.1			13.4

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 June 30, 2020, June 30, 2019, and March 31, 2020. 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 and six months ended June 30, 2020 and 2019, and the three months ended March 31, 2020 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

	Three Months Ended									Six Months Ended
($ in 000s)	6/30/20			6/30/19			3/31/20			6/30/20			6/30/19
GAAP net income applicable to Stifel Financial Corp.	$	107,887		$	109,085		$	86,589		$	194,476		$	208,292
Preferred dividend		4,843			5,288			4,844			9,687			7,632
Net income available to common shareholders		103,044			103,797			81,745			184,789			200,660

Non-GAAP adjustments:
Merger-related and severance ⁽¹⁹⁾		16,259			6,721			13,510			29,769			14,912
Litigation-related ⁽²⁰⁾		—			3,507			—			—			3,507
Provision for income taxes ⁽²¹⁾		(3,968	)		(2,654	)		(3,322	)		(7,290	)		(3,188	)
Total non-GAAP adjustments		12,291			7,574			10,188			22,479			15,231
Non-GAAP net income available to common shareholders	$	115,335		$	111,371		$	91,933		$	207,268		$	215,891

Weighted average diluted shares outstanding		74,387			79,079			76,619			75,651			79,160

GAAP earnings per diluted common share	$	1.45		$	1.38		$	1.13		$	2.57		$	2.63
Non-GAAP adjustments		0.17			0.10			0.13			0.30			0.19
Non-GAAP earnings per diluted common share	$	1.62		$	1.48		$	1.26		$	2.87		$	2.82

GAAP earnings per diluted common share available to common shareholders	$	1.39		$	1.31		$	1.07		$	2.44		$	2.53
Non-GAAP adjustments		0.16			0.10			0.13			0.30			0.20
Non-GAAP earnings per diluted common share available to common shareholders	$	1.55		$	1.41		$	1.20		$	2.74		$	2.73

Footnotes

(1)	Annualized return on average tangible common shareholders’ equity (“ROTE”) is calculated by dividing annualized net income applicable to common shareholders by average tangible shareholders’ equity or, in the case of non-GAAP ROTE, calculated by dividing non-GAAP net income applicable to common shareholders by average tangible shareholders’ equity. Tangible common shareholders’ equity equals total Stifel Financial common shareholders’ equity less goodwill and identifiable intangible assets and the deferred taxes on goodwill and intangible assets. Deferred taxes on goodwill and tangible assets was $48.5 million, $41.6 million, and $47.2 million, as of June 30, 2020 and 2019, and March 31, 2020, respectively. Historical periods have been restated to conform with the current period presentation.
(2)	Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”
(3)	Non-GAAP pre-tax margin for the three months ended June 30, 2020 of 17.8% is calculated by adding non-GAAP adjustments of $16.3 million to our GAAP income before income taxes of $143.0 million and dividing it by non-GAAP net revenues for the quarter of $895.8 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(4)	Non-GAAP pre-tax margin for the six months ended June 30, 2020 of 15.9% is calculated by adding non-GAAP adjustments of $29.8 million to our GAAP income before income taxes of $258.1 million and dividing it by non-GAAP net revenues of $1.8 billion. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”
(5)	Excludes revenue included in the Other segment.
(6)	See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”
(7)	In the first quarter of 2020, the Company adopted ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments,” which amends several aspects of the measurement of credit losses on certain financial instruments, including replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (CECL) model. For further information about ASU No. 2016-13, see Note 2 “Summary of Significant Accounting Policies” in Part II, Item 8 “Financial Statements and Supplementary Data” in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
(8)	Book value per common share represents shareholders’ equity (excluding preferred stock and non-controlling interests) divided by period end common shares outstanding.
(9)	Annualized return on average common shareholders’ equity (“ROE”) is calculated by dividing annualized net income applicable to common shareholders by average Stifel Financial common shareholders’ equity or, in the case of non-GAAP ROE, calculated by dividing non-GAAP net income applicable to commons shareholders by average Stifel Financial common shareholders’ equity.
(10)	Capital ratios are estimates at time of the Company’s earnings release.
(11)	Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at our bank subsidiaries.
(12)	Includes Private Client Group and Trust Business.
(13)	Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.
(14)	Asset management assets managed in Private Client Group or Trust accounts.
(15)	Return on assets (ROA) is calculated based on prior period-end balances for Private Client Group, period-end balances for Asset Management, and average quarterly balances for Individual Program Banks.
(16)	Includes Stifel Bank & Trust, Stifel Bank, Stifel Trust Company, N.A, and Stifel Trust Company Delaware, N.A.
(17)	Includes capital raising and advisory fees.
(18)	Includes net interest, asset management and service fees, and other income.
(19)	Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company’s on-going business.
(20)	Primarily related to costs associated with Company’s legal matters.
(21)	See details of non-GAAP adjustments under “Provision for Income Taxes.”

Media Contact: Neil Shapiro (212) 271-3447
Investor Contact: Joel Jeffrey (212) 271-3610
www.stifel.com/investor-relations

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Stifel Reports Second Quarter 2020 Results

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