SOURCE: Stifel Financial Corp.

Stifel Financial Corp.

February 23, 2015 16:05 ET

Stifel Reports Fourth Quarter and Full-Year 2014 Financial Results

19th Consecutive Year of Record Net Revenues; Record Revenues & Record Pre-Tax Operating Income in Both the Global Wealth Management and Institutional Group for 2014 

ST. LOUIS, MO--(Marketwired - February 23, 2015) - Stifel Financial Corp. (NYSE: SF)

Quarterly Highlights

  • Record net revenues of $578.1 million, increased 3% compared with the year-ago quarter.
  • Record investment banking revenues of $174.6 million.
  • Record asset management and service fee revenues of $106.0 million.
  • Net income of $45.2 million, a 6% decline from the year-ago quarter, and a 13% sequential increase.
  • Core diluted EPS of $0.75 compares with $0.79 in the fourth quarter of 2013.
  • GAAP diluted EPS of $0.59 compares with $0.69 in the fourth quarter of 2013.
  • Core pre-tax operating margin of 15.5%.

Stifel Financial Corp. (NYSE: SF) today reported net income of $45.2 million, or $0.58 per diluted common share on record net revenues of $578.1 million for the three months ended December 31, 2014, compared with net income of $48.3 million, or $0.64 per diluted common share, on net revenues of $562.5 million for the fourth quarter of 2013.

For the three months ended December 31, 2014, the Company reported non-GAAP net income from continuing operations of $58.4 million, or $0.75 per diluted common share, compared with non-GAAP net income from continuing operations of $59.8 million, or $0.79 per diluted common share for the fourth quarter of 2013. These non-GAAP results exclude merger-related expenses associated with the Company's acquisitions.

   Three Months Ended Year Ended  
(in 000s)  12/31/14  12/31/13  % Change  9/30/14 % Change 12/31/14  12/31/13   % Change  
 Net revenues  $ 578,076  $562,526  2.8  $523,455 10.4 $2,208,424  $1,973,446   11.9  
 Net income from continuing operations  $ 45,488  $52,126  (12.7 )$40,093 13.5 $179,130  $172,907   3.6  
 Net income  $ 45,182  $48,269  (6.4 )$39,903 13.2 $176,067  $162,013   8.7  
 Non-GAAP net income from continuing operations(1)  $ 58,440  $59,819  (2.3 )$48,698 20.0 $210,432  $184,658   14.0  
Earnings per basic common share:                               
 Income from continuing operations  $ 0.67  $0.80  (16.3 )$0.60 11.7 $2.69  $2.72   (1.1 )
 Loss from discontinued operations    -   (0.06 )100.0   - -  (0.04 ) (0.17 ) 70.5  
 Earnings per basic common share  $ 0.67  $0.74  (9.5 )$0.60 11.7 $2.65  $2.55   3.9  
                                
Earnings per diluted common share:                               
 Income from continuing operations  $ 0.59  $0.69  (14.5 )$0.52 13.5 $2.35  $2.35   -  
 Loss from discontinued operations    (0.01 ) (0.05 )80.0   - n/a  (0.04 ) (0.15 ) 73.3  
 Earnings per diluted common share  $ 0.58  $0.64  (9.4 )$0.52 11.5 $2.31  $2.20   5.0  
 Non-GAAP net income from continuing operations1  $ 0.75  $0.79  (5.1 )$0.64 17.2 $2.76  $2.51   10.0  
Weighted average number of common shares outstanding:                   
 Basic    66,851   64,859  3.1   66,691 0.2  66,472   63,568   4.6  
 Diluted    77,540   75,495  2.7   76,681 1.1  76,376   73,504   3.9  

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

Annual Highlights

  • Record net revenues of $2.21 billion, increased 12% compared with 2013.
  • Record investment banking revenues of $578.7 million.
  • Net income increased 9% to $176.1 million in 2014.
  • Completed four acquisitions: De La Rosa, Oriel Securities, 1919 Investment Counsel & Trust, and Merchant Capital
  • Issued $300.0 million of 4.250% Senior Notes due 2024
  • Stifel's Public Finance group, including acquired firms, ranked first in municipal negotiated issues in 2014
  • Stifel ranked first as the most active 2014 Mid-Market Investment Bank

Full-Year 2014 Results

For the year ended December 31, 2014, the Company reported net income of $176.1 million, or $2.31 per diluted common share on record net revenues of $2.21 billion, compared with net income of $162.0 million, or $2.20 per diluted share, on net revenues of $1.97 billion for the comparable period in 2013. For the year ended December 31, 2014, the Company reported non-GAAP net income from continuing operations of $210.4 million, or $2.76 per diluted share, compared with non-GAAP net income from continuing operations of $184.7 million, or $2.51 per diluted common share for the comparable period in 2013. A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed below under "Non-GAAP Financial Measures."

Chairman's Comments

"We had a strong finish to the year and are excited to report that 2014 was our 19th consecutive year of record net revenues. Both the Global Wealth Management and Institutional Group generated record revenues and record pre-tax operating income in 2014. We continue to add capabilities and talented professionals in our pursuit of building the preeminent brokerage and investment banking firm.

Today, we announced the acquisition of Sterne Agee, which bolsters our Global Wealth Management segment with the addition of more than 700 financial advisors and independent representatives nationwide managing over $20 billion in client assets, and complements our Fixed Income platform, generating significant scale," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

Fourth Quarter 2014

Brokerage Revenues

Brokerage revenues, defined as commissions plus principal transactions, were $269.1 million, which was consistent with the fourth quarter of 2013 and a 4% increase compared with the third quarter of 2014.

  • Global wealth management brokerage revenues were $160.0 million, a 1% increase compared with the fourth quarter of 2013 and a 2% increase compared with the third quarter of 2014.
  • Institutional equity brokerage revenues were $67.3 million, a 14% increase compared with the fourth quarter of 2013 and a 17% increase compared with the third quarter of 2014.
  • Institutional fixed income brokerage revenues were $41.8 million, an 18% decrease compared with the fourth quarter of 2013 and a 2% decrease compared with the third quarter of 2014.

Investment Banking Revenues

Investment banking revenues were a record $174.6 million, an 8% increase compared with the fourth quarter of 2013 and a 42% increase compared with the third quarter of 2014.

  • Equity capital raising revenues were $49.9 million, a 13% decrease compared with the fourth quarter of 2013 and a 12% decrease compared with the third quarter of 2014.
  • Fixed income capital raising revenues were $21.3 million, a 32% increase compared with the fourth quarter of 2013 and a 33% increase compared with the third quarter of 2014.
  • Advisory fee revenues were $103.4 million, an 18% increase compared with the fourth quarter of 2013 and a 103% increase compared with the third quarter of 2014.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $106.0 million, a 26% increase compared with the fourth quarter of 2013 and a 10% increase compared with the third quarter of 2014. The increase is due to the higher value of fee-based accounts as a result of market appreciation and new client assets.

Compensation and Benefits Expenses

For the quarter ended December 31, 2014, compensation and benefits expenses were $370.5 million, which included $14.9 million of merger-related expenses. This compares with $353.2 million in the fourth quarter of 2013 and $331.4 million in the third quarter of 2014.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 61.5% in the fourth quarter of 2014, compared with 61.5% in the fourth quarter of 2013 and 61.8% in the third quarter of 2014.

Transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, was 4.0% of net revenues in the fourth quarter of 2014, compared with 4.0% in the fourth quarter of 2013 and 5.1% in the third quarter of 2014. 

Non-Compensation Operating Expenses

For the quarter ended December 31, 2014, non-compensation operating expenses were $138.2 million, which included merger-related expenses of $5.5 million. This compares with $131.3 million in the fourth quarter of 2013 and $126.2 million in the third quarter of 2014.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2014 was 23.0%, compared with 22.5% in the fourth quarter of 2013 and 23.3% in the third quarter of 2014.

Provision for Income Taxes

The effective income tax rate for the quarter ended December 31, 2014 was 34.4% compared with 33.9% in the fourth quarter of 2013 and 39.0% in the third quarter of 2014.

Full-Year 2014

Brokerage Revenues

Brokerage revenues were $1.08 billion, a 3% increase compared to $1.05 billion in 2013.

  • Global wealth management brokerage revenues were $638.2 million, a 1% increase compared to $632.8 million in 2013.
  • Institutional equity brokerage revenues were $249.8 million, a 9% increase compared to $228.8 million in 2013.
  • Institutional fixed income brokerage revenues were $196.2 million, a 5% increase compared to $187.7 million in 2013.

Investment Banking Revenues

Investment banking revenues were $578.7 million, a 26% increase compared to $457.7 million in 2013.

  • Equity capital raising revenues were $232.5 million, a 27% increase compared to $183.3 million in 2013.
  • Fixed income capital raising revenues were $72.7 million, which was consistent with 2013.
  • Advisory fee revenues were $273.5 million, a 36% increase compared to $201.7 million in 2013.

Asset Management and Service Fee Revenues

Asset management and service fee revenues was $386.0 million, a 26% increase compared to $305.6 million in 2013. The increase is due to the higher value of fee-based accounts, as a result of market appreciation and new client assets.

Compensation and Benefits Expenses

For the year ended December 31, 2014, compensation and benefits expenses were $1.40 billion, which included $25.9 million of merger-related expenses, compared to $1.31 billion in 2013.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues for the year ended December 31, 2014 was 62.3%, compared with 62.5% in 2013. Transition pay as a percentage of net revenues for the year ended December 31, 2014 was 4.5%, compared with 4.4% in 2013. 

Non-Compensation Operating Expenses

For the year ended December 31, 2014, non-compensation operating expenses were $513.7 million, which included merger-related expenses of $16.2 million, compared to $476.8 million in 2013.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the year ended December 31, 2014 was 22.5%, compared with 22.6% in 2013.

Provision for Income Taxes

The effective income tax rate for the year ended December 31, 2014 was 38.4% compared with 6.7% in 2013. The effective rate in 2013 reflects a $58.2 million U.S. tax benefit in connection with the discontinuance of SN Canada's operations during 2013.

Assets and Capital

Assets

  • Assets increased 6% to $9.5 billion as of December 31, 2014 from $9.0 billion as of December 31, 2013. The increase is attributable to growth of Stifel Bank, which as of December 31, 2014 has grown its assets to $5.2 billion from $5.0 billion as of December 31, 2013. The growth in our assets is also attributable to the acquired assets from our four acquisitions during 2014. 
  • At December 31, 2014, the Company's Level 3 assets of $168.5 million, or 2% of total assets, consisted of $91.6 million of auction rate securities and $76.9 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 6% at December 31, 2014.
  • Non-performing assets as a percentage of total assets as of December 31, 2014 was 0.11%.

Capital

  • Stockholders' equity as of December 31, 2014 increased $263.2 million, or 13%, to $2.32 billion from $2.06 billion as of December 31, 2013.
  • At December 31, 2014, book value per common share was $35.00 based on 66.3 million common shares outstanding. This represents an 8% increase from December 31, 2013.
  • At December 31, 2014, the Company's Tier 1 leverage capital and Tier 1 risk-based capital ratios were 16.5% and 25.0%, respectively, compared to 15.4% and 26.7%, respectively, at December 31, 2013.

Conference Call Information

Stifel Financial Corp. will host its fourth quarter and full-year 2014 financial results conference call on Monday, February 23, 2014, 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 #89391947.

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; Keefe, Bruyette & Woods Limited; and Oriel Securities 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. 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   Year Ended  
(in thousands, except per share amounts)  12/31/14   12/31/13   % Change   9/30/14   % Change   12/31/14   12/31/13   % Change  
Revenues:                                      
 Commissions  $174,990   $163,715   6.9   $162,814   7.5   $674,418   $640,287   5.3  
 Principal transactions   94,109    105,393   (10.7 )  94,915   (0.8 )  409,823    408,954   0.2  
  Brokerage revenues   269,099    269,108   -    257,729   4.4    1,084,241    1,049,241   3.3  
                                       
 Investment banking   174,601    161,018   8.4    123,417   41.5    578,689    457,736   26.4  
 Asset management and service fees   105,962    83,928   26.3    96,638   9.6    386,001    305,639   26.3  
 Other income   (3,960 )  19,391   *    4,803   *    14,785    64,659   (77.1 )
  Operating revenues   545,702    533,445   2.3    482,587   13.1    2,063,716    1,877,275   9.9  
 Interest revenue   44,934    40,711   10.4    52,096   (13.7 )  185,969    142,539   30.5  
  Total revenues   590,636    574,156   2.9    534,683   10.5    2,249,685    2,019,814   11.4  
 Interest expense   12,560    11,630   8.0    11,228   11.9    41,261    46,368   (11.0 )
  Net revenues   578,076    562,526   2.8    523,455   10.4    2,208,424    1,973,446   11.9  
                                       
Non-interest expenses:                                      
 Compensation and benefits   370,454    353,207   4.9    331,440   11.8    1,403,932    1,311,386   7.1  
 Occupancy and equipment rental   43,929    42,178   4.2    41,611   5.6    169,040    158,268   6.8  
 Communications and office supplies   28,775    25,692   12.0    27,464   4.8    106,926    99,726   7.2  
 Commission and floor brokerage   8,308    8,448   (1.6 )  9,971   (16.7 )  36,555    37,225   (1.8 )
 Other operating expenses   57,232    55,012   4.0    47,203   21.2    201,177    181,612   10.8  
  Total non-interest expenses   508,698    484,537   5.0    457,689   11.1    1,917,630    1,788,217   7.2  
                                       
Income from continuing operations before income taxes   69,378    77,989   (11.0 )  65,766   5.5    290,794    185,229   57.0  
 Provision for income taxes   23,890    25,863   (7.6 )  25,673   (6.9 )  111,664    12,322   *  
Net income from continuing operations   45,488    52,126   (12.7 )  40,093   13.5    179,130    172,907   3.6  
                                       
Discontinued operations:                                      
 Loss from discontinued operations, net of tax   (306 )  (3,857 ) 92.1    (190 ) (61.4 )  (3,063 )  (10,894 ) 71.9  
Net income  $45,182   $48,269   (6.4 ) $39,903   13.2   $176,067   $162,013   8.7  
                                       
Earnings per basic common share:                                      
 Income from continuing operations  $0.67   $0.80   (16.3 ) $0.60   11.7   $2.69   $2.72   (1.1 )
 Loss from discontinued operations   -    (0.06 ) 100.0    -   -    (0.04 )  (0.17 ) 70.5  
 Earnings per basic common share  $0.67   $0.74   (9.5 ) $0.60   11.7   $2.65   $2.55   3.9  
                                       
Earnings per diluted common share:                                      
 Income from continuing operations  $0.59   $0.69   (14.5 ) $0.52   13.5   $2.35   $2.35   -  
 Loss from discontinued operations   (0.01 )  (0.05 ) 80.0    -   n/a    (0.04 )  (0.15 ) 73.3  
 Earnings per diluted common share  $0.58   $0.64   (9.4 ) $0.52   11.5   $2.31   $2.20   5.0  
                                       
Weighted average number of common shares outstanding:                             
 Basic   66,851    64,859   3.1    66,691   *    66,472    63,568   4.6  
 Diluted   77,540    75,495   2.7    76,681   1.1    76,376    73,504   3.9  
                                       
* Percentage not meaningful.                              

Statistical Information

(in thousands, except per share, employee and location amounts)
  12/31/14  12/31/13  % Change  9/30/14  % Change
 Statistical Information:                    
 Book value per share $ 35.00  $ 32.30  8.4  $ 33.92  3.2
 Financial advisors (2)   2,103    2,077  1.3    2,096  0.3
 Full-time associates   6,223    5,862  6.2    6,083  2.3
 Locations   367    357  2.8    360  1.9
 Total client assets $ 186,558,000  $ 165,570,000  12.7  $ 172,742,000  8.0

Business Segment Results

Summary Segment Results (Unaudited)
  Three Months Ended    Year Ended  
(in 000s) 12/31/14   12/31/13   % Change   9/30/14   % Change    12/31/14   12/31/13   % Change  
Net revenues:                                             
 Global Wealth Management $ 310,980   $292,836     6.2   $317,241     (2.0 )  $1,232,651   $1,117,179     10.3  
 Institutional Group   272,732    267,282     2.0    215,160     26.8     993,581    861,158     15.4  
 Other   (5,636 )  2,408     *    (8,946 )   *     (17,808 )  (4,891 )   *  
  $ 578,076   $562,526     2.8   $523,455     10.4    $2,208,424   $1,973,446     11.9  
Operating contribution: (3)                                             
 Global Wealth Management $ 84,178   $79,022     6.5   $94,026     (10.5 )  $346,978   $299,572     15.8  
 Institutional Group   35,093    48,590     (27.8 )  29,500     19.0     152,905    142,889     7.0  
 Other   (29,532 )  (37,184 )   (20.6 )  (45,495 )   (35.1 )   (162,611 )  (147,377 )   10.3  
  $ 89,739   $90,428     (0.8 ) $78,031     15.0    $337,272   $295,084     14.3  
As a percentage of net revenues:                                         
 Compensation and benefits                                             
  Global Wealth Management   58.0    57.4          55.9           57.1    58.1        
  Institutional Group   64.9    62.0          61.2           62.4    60.9        
 Non-comp. operating expenses                                             
  Global Wealth Management   14.9    15.6          14.5           14.8    15.1        
  Institutional Group   22.2    19.8          25.1           22.2    22.5        
 Income before income taxes3                                             
  Global Wealth Management   27.1    27.0          29.6           28.1    26.8        
  Institutional Group   12.9    18.2          13.7           15.4    16.6        
    15.5    16.0          14.9           15.2    14.9        
                                              
* Percentage not meaningful.                             

2 Includes 138, 143, and 139 independent contractors at December 31, 2014, December 31, 2013, and September 30, 2014, respectively.

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   Year Ended  
(in 000s) 12/31/14   12/31/13  % Change   9/30/14  % Change   12/31/14  12/31/13  % Change  
Revenues:                                 
 Commissions $115,351   $108,588  6.2   $113,177  1.9   $453,730  $428,610  5.9  
 Principal transactions  44,671    50,526  (11.6 )  44,418  0.6    184,476   204,194  (9.7 )
  Brokerage revenues  160,022    159,114  0.6    157,595  1.5    638,206   632,804  0.9  
                                   
 Asset management and service fees  105,511    82,964  27.2    96,354  9.5    385,182   304,541  26.5  
 Net interest  40,236    31,092  29.4    43,357  (7.2 )  154,694   104,748  47.7  
 Investment banking  9,811    10,412  (5.8 )  13,443  (27.0 )  45,768   49,921  (8.3 )
 Other income  (4,600 )  9,254  *    6,492  *    8,801   25,165  (65.0 )
  Net revenues  310,980    292,836  6.2    317,241  (2.0 )  1,232,651   1,117,179  10.3  
Non-interest expenses:                                 
 Compensation and benefits  180,491    167,980  7.4    177,296  1.8    703,679   648,681  8.5  
 Non-compensation operating expenses  46,311    45,834  1.0    45,919  0.9    181,994   168,926  7.7  
  Total non-interest expenses  226,802    213,814  6.1    223,215  1.6    885,673   817,607  8.3  
Income before income taxes $84,178   $79,022  6.5   $94,026  (10.5 ) $346,978  $299,572  15.8  
                                  
As a percentage of net revenues:                                 
 Compensation and benefits  58.0    57.4       55.9       57.1   58.1     
 Non-compensation operating expenses  14.9    15.6       14.5       14.8   15.1     
 Income before income taxes  27.1    27.0       29.6       28.1   26.8     
                                  
* Percentage not meaningful.  
                
                      
Stifel Bank & Trust (Unaudited)  
Key Statistical Information  
(in 000s, except percentages)  12/31/14   12/31/13   % Change   9/30/14   % Change  
Other information:                        
 Assets  $5,237,970   $5,038,714   4.0   $4,977,194   5.2  
 Investment securities   2,684,947    3,062,602   (12.3 )  2,720,860   (1.3 )
 Bank loans, net   2,298,929    1,530,389   50.2    1,988,076   15.6  
 Loans held for sale   121,939    109,110   11.8    104,277   16.9  
 Deposits   4,790,084    4,666,789   2.6    4,552,524   5.2  
                         
 Allowance as a percentage of loans   0.94 %  0.89 %      1.01 %    
 Non-performing assets as a percentage of total assets   0.11 %  0.03 %      0.07 %    
                         
  
  
Institutional Group Summary Results of Operations (Unaudited)  
  Three Months Ended   Year Ended  
(in 000s) 12/31/14   12/31/13  % Change   9/30/14  % Change   12/31/14  12/31/13  % Change  
Revenues:                            
 Commissions $59,640   $55,127  8.2   $49,637  20.2   $220,689  $211,678  4.3  
 Principal transactions 49,437   54,867  (9.9 ) 50,497  (2.1 ) 225,347  204,760  10.1  
  Brokerage revenues 109,077   109,994  (0.8 ) 100,134  8.9   446,036  416,438  7.1  
 Capital raising 61,525   62,545  (1.6 ) 59,035  4.2   259,587  205,591  26.3  
 Advisory fees 103,266   88,060  17.3   50,939  102.7   273,333  202,223  35.2  
 Investment banking 164,791   150,605  9.4   109,974  49.8   532,920  407,814  30.7  
 Other 4 (1,136 ) 6,683  *   5,052  *   14,625  36,906  (60.4 )
  Net revenues 272,732   267,282  2.0   215,160  26.8   993,581  861,158  15.4  
Non-interest expenses:                            
 Compensation and benefits 176,897   165,779  6.7   131,589  34.4   620,001  524,870  18.1  
 Non-compensation operating expenses 60,742   52,913  14.8   54,071  12.3   220,675  193,399  14.1  
  Total non-interest expenses 237,639   218,692  8.7   185,660  28.0   840,676  718,269  17.0  
Income before income taxes $35,093   $48,590  (27.8 ) $29,500  19.0   $152,905  $142,889  7.0  
                             
As a percentage of net revenues:                            
 Compensation and benefits 64.9   62.0      61.2      62.4  60.9     
 Non-compensation operating expenses 22.2   19.8      25.1      22.2  22.5     
 Income before income taxes 12.9   18.2      13.7      15.4  16.6     
                             
* Percentage not meaningful.                   
 
 
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
  Three Months Ended   Year Ended
(in 000s) 12/31/14  12/31/13  % Change   9/30/14  % Change   12/31/14  12/31/13  % Change
Institutional brokerage:                              
 Equity $67,273  $59,259  13.5   $57,371  17.3   $249,845  $228,755  9.2
 Fixed income  41,804   50,735  (17.6 )  42,763  (2.2 )  196,191   187,683  4.5
Institutional brokerage  109,077   109,994  (0.8 )  100,134  8.9    446,036   416,438  7.1
                               
Investment banking:                              
 Capital raising:                              
  Equity  42,191   51,561  (18.2 )  46,261  (8.8 )  202,137   156,094  29.5
  Fixed income  19,334   10,984  76.0    12,774  51.4    57,450   49,497  16.1
   Capital raising  61,525   62,545  (1.6 )  59,035  4.2    259,587   205,591  26.3
 Advisory fees:  103,266   88,060  17.3    50,939  102.7    273,333   202,223  35.2
Investment banking $164,791  $150,605  9.4   $109,974  49.8   $532,920  $407,814  30.7
                               

4 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 and twelve months ended December 31, 2014. 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. These non-GAAP amounts exclude certain compensation and non-compensation operating expenses associated with the Company's acquisitions.

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 and twelve months ended December 31, 2014 to the aforementioned expenses on a non-GAAP basis for the same period.

   Three Months Ended December 31, 2014  Year Ended December 31, 2014
(in 000s, except per share amounts)  Non-GAAP  Non-Core   GAAP  Non-GAAP  Non-Core   GAAP
Net revenues  $578,115  $(39 ) $578,076  $2,212,770  $(4,346 ) $2,208,424
                           
Non-interest expenses:                          
 Compensation and benefits   355,584   14,870    370,454   1,378,018   25,914    1,403,932
 Non-compensation operating expenses   132,792   5,452    138,244   497,480   16,218    513,698
   Total non-interest expenses   488,376   20,322    508,698   1,875,498   42,132    1,917,630
Income from continuing operations before income taxes   89,739   (20,361 )  69,378   337,272   (46,478 )  290,794
 Provision for income taxes   31,299   (7,409 )  23,890   126,840   (15,176 )  111,664
Net income from continuing operations  $58,440  $(12,952 ) $45,488  $210,432  $(31,302 ) $179,130
                           
Earnings per share::                          
 Basic  $0.87  $(0.20 ) $0.67  $3.17  $(0.48 ) $2.69
 Diluted  $0.75  $(0.16 ) $0.59  $2.76  $(0.41 ) $2.35
                           
As a percentage of net revenues:                          
 Compensation and benefits   61.5        64.1   62.3        63.6
 Non-compensation operating expenses   23.0        23.9   22.5        23.2
 Income before income taxes   15.5        12.0   15.2        13.2

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