SOURCE: Stifel

Stifel

August 06, 2014 07:30 ET

Stifel Reports Second Quarter 2014 Financial Results

ST. LOUIS, MO--(Marketwired - Aug 6, 2014) - Stifel Financial Corp. (NYSE: SF)

Highlights for the three months ended June 30, 2014:

  • Net revenues of $560.1 million, increased 14% compared with the year-ago quarter.
  • Non-GAAP net income from continuing operations of $51.3 million, or $0.68 per diluted common share.
  • Net income from continuing operations of $45.6 million, or $0.60 per diluted common share.

Highlights for the six months ended June 30, 2014:

  • Record net revenues of $1.1 billion, increased 19% compared with the year-ago period.
  • Non-GAAP net income from continuing operations of $103.3 million, or $1.37 per diluted share.
  • Net income from continuing operations of $93.6 million, or $1.24 per diluted share.

Stifel Financial Corp. (NYSE: SF) today reported net income from continuing operations of $45.6 million, or $0.60 per diluted common share on net revenues of $560.1 million for the three months ended June 30, 2014, compared with net income from continuing operations of $30.9 million, or $0.42 per diluted common share, on net revenues of $493.7 million for the second quarter of 2013.

For the three months ended June 30, 2014, the Company reported non-GAAP net income from continuing operations of $51.3 million, or $0.68 per diluted common share. These non-GAAP results exclude merger-related expenses associated with the Company's recent acquisitions for a total of $5.7 million (after-tax).

For the six months ended June 30, 2014, the Company reported net income from continuing operations of $93.6 million, or $1.24 per diluted common share on record net revenues of $1.1 billion, compared with net income from continuing operations of $45.9 million, or $0.64 per diluted share, on net revenues of $932.3 million for the comparable period in 2013. For the six months ended June 30, 2014, the Company reported non-GAAP net income from continuing operations of $103.3 million, or $1.37 per diluted share. A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed below under "Non-GAAP Financial Measures."

           
           
    Three Months Ended     Six Months Ended
(in 000s)   6/30/14     6/30/13     % Change   3/31/14     % Change     6/30/14     6/30/13     % Change
  Net revenues   $ 560,147     $ 493,678     13.5   $ 546,746     2.5     $ 1,106,893     $ 932,282     18.7
  Net income from continuing operations   $ 45,577     $ 30,916     47.4   $ 47,973     (5.0 )   $ 93,550     $ 45,852     104.0
  Net income   $ 43,601     $ 29,435     48.1   $ 47,382     (8.0 )   $ 90,983     $ 44,054     106.5
  Non-GAAP net income from continuing operations(1)   $ 51,266     $ 45,133     13.6   $ 52,028     (1.5 )   $ 103,294     $ 85,191     21.3
Earnings per basic common share:                                                      
  Income from continuing operations   $ 0.69     $ 0.48     43.8   $ 0.73     (5.5 )   $ 1.42     $ 0.74     91.9
  Loss from discontinued operations     (0.03 )     (0.02 )   50.0     (0.01 )   200.0       (0.04 )     (0.03 )   33.3
  Earnings per basic common share   $ 0.66     $ 0.46     43.5   $ 0.72     (8.3 )   $ 1.38     $ 0.71     94.4
                                                       
Earnings per diluted common share:                                                      
  Income from continuing operations   $ 0.60     $ 0.42     42.9   $ 0.63     (4.8 )   $ 1.24     $ 0.64     93.8
  Loss from discontinued operations     (0.02 )     (0.02 )   --     --     nm       (0.04 )     (0.02 )   100.0
  Earnings per diluted common share   $ 0.58     $ 0.40     45.0   $ 0.63     (7.9 )   $ 1.20     $ 0.62     93.5
  Non-GAAP net income from continuing operations1   $ 0.68     $ 0.61     11.5   $ 0.69     (1.4 )   $ 1.37     $ 1.19     15.1
Weighted average number of common shares outstanding:                            
  Basic     66,302       64,505     2.8     66,037     0.4       66,167       62,292     6.1
  Diluted     75,641       74,090     2.1     75,691     (0.1 )     75,665       71,627     5.6
                                                         
                                                         

Chairman's Comments

"We are pleased with the performance of our private client and investment banking groups, which contributed nicely to our results in a challenging market environment. Our global wealth management segment posted record net revenues and record pre-tax operating contributions in the quarter. Investment banking benefitted from strong equity capital raising and advisory activity. Our institutional brokerage results are reflective of lower industry volumes," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

"During the second quarter, we announced two acquisitions. Oriel Securities, a London-based stockbroking and investment banking firm, will build out our institutional businesses already underway in London. And, in June, we announced the acquisition of Legg Mason Investment Counsel, which will be complementary to our high net worth private client group."

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions revenues, were $278.4 million, a 5% increase compared with the second quarter of 2013 and a 3% decrease compared with the first quarter of 2014.

  • Global wealth management brokerage revenues were $161.8 million, a 1% increase compared with the second quarter of 2013 and flat compared with the first quarter of 2014.
  • Institutional equity brokerage revenues were $62.1 million, a 3% decrease compared with the second quarter of 2013 and a 6% decrease compared with the first quarter of 2014.
  • Institutional fixed income brokerage revenues were $54.5 million, a 33% increase compared with the second quarter of 2013 and a 7% decrease compared with the first quarter of 2014.

Investment Banking Revenues

Investment banking revenues were $141.5 million, a 19% increase compared with the second quarter of 2013 and a 7% increase compared with the first quarter of 2014.

  • Equity capital raising revenues were $65.8 million, a 23% increase compared with the second quarter of 2013 and an 8% increase compared with the first quarter of 2014.
  • Fixed income capital raising revenues were $15.4 million, a 13% decrease compared with the second quarter of 2013 and an 18% increase compared with the first quarter of 2014.
  • Advisory fee revenues were $60.4 million, a 25% increase compared with the second quarter of 2013 and a 3% increase compared with the first quarter of 2014.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $94.2 million, a 24% increase compared with the second quarter of 2013 and a 6% increase compared with the first 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 June 30, 2014, compensation and benefits expenses were $355.3 million, which included $1.5 million of merger-related expenses, compared with $317.2 million in the second quarter of 2013, and $346.8 million in the first quarter of 2014. Compensation and benefits expense included merger-related expenses of $6.0 million in the second quarter of 2013 and $2.3 million in the first quarter of 2014.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 63.0% in the second quarter of 2014, compared with 62.8% in the second quarter of 2013 and 62.8% in the first quarter of 2014. Transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, as a percentage of net revenues was 4.5% in the second quarter of 2014, compared with 4.2% in the second quarter of 2013 and 4.3% in the first quarter of 2014. 

Non-Compensation Operating Expenses

For the quarter ended June 30, 2014, non-compensation operating expenses were $127.4 million, which included merger-related expenses of $4.5 million, compared with $123.9 million in the second quarter of 2013, and $121.8 million in the first quarter of 2014. Non-compensation operating expenses included merger-related expenses of $14.9 million in the second quarter of 2013 and $2.5 million in the first quarter of 2014.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2014 was 21.9%, compared with 22.0% in the second quarter of 2013 and 21.8% in the first quarter of 2014.

Provision for Income Taxes

The effective income tax rate for the quarter ended June 30, 2014 was 41.2% compared with 41.2% in the second quarter of 2013, and 38.6% in the first quarter of 2014.

Assets and Capital 

Assets

  • Assets increased 13% to $9.6 billion as of June 30, 2014 from $8.5 billion as of June 30, 2013. The increase is primarily attributable to growth of Stifel Bank, the Company's bank subsidiary, which as of June 30, 2014 has grown its assets to $5.1 billion from $4.3 billion as of June 30, 2013.
  • At June 30, 2014, the Company's Level 3 assets of $196.2 million, or 2.0% of total assets, consisted of $112.5 million of auction rate securities and $83.7 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 6.6% at June 30, 2014.
  • Non-performing assets as a percentage of total assets as of June 30, 2014 was 0.10%.

Capital 

  • The Company's Tier 1 leverage capital ratio was 15.4% at June 30, 2014 and Tier 1 risk-based capital ratio was 25.5% at June 30, 2014.
  • At June 30, 2014, book value per common share was $33.18 based on 65.5 million common shares outstanding.
  • Stockholders' equity as of June 30, 2014 increased $275.2 million, or 13%, to $2.2 billion from $1.9 billion as of June 30, 2013.

Conference Call Information 

Stifel Financial Corp. will host its second quarter 2014 financial results conference call on Wednesday, August 6, 2014, at 8:30 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 (888) 676-3684 and referencing conference ID #80900810. A live audio webcast of the call, as well as a presentation highlighting the Company's results, will be available through the Company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information 

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel clients are served through Stifel, Nicolaus & Company, Incorporated in the U.S., through Stifel Nicolaus Europe Limited in the United Kingdom and Europe, and through Keefe, Bruyette & Woods, Inc. in the U.S. and Europe. The Company's broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. offers trust and related services. To learn more about Stifel, please visit the Company's web site at www.stifel.com

Forward-Looking Statements 

This earnings release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies' operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. 

 
 
Summary Results of Operations (Unaudited)
   
    Three Months Ended     Six Months Ended  
(in thousands, except per share amounts)   6/30/14     6/30/13     % Change     3/31/14     % Change     6/30/14     6/30/13     % Change  
Revenues:                                                          
  Commissions   $ 152,712     $ 154,795     (1.3 )   $ 159,416     (4.2 )   $ 312,128     $ 300,662     3.8  
  Principal transactions     125,676       111,306     12.9       126,461     (0.6 )     252,137       218,570     15.4  
  Investment banking     141,515       119,443     18.5       132,304     7.0       273,819       196,348     39.5  
  Asset management and service fees     94,231       76,088     23.8       89,170     5.7       183,401       145,000     26.5  
  Other income     8,742       11,787     (25.8 )     5,200     68.1       13,942       32,206     (56.7 )
    Operating revenues     522,876       473,419     10.4       512,551     2.0       1,035,427       892,786     16.0  
  Interest revenue     46,113       32,893     40.2       42,826     7.7       88,939       62,699     41.9  
    Total revenues     568,989       506,312     12.4       555,377     2.5       1,124,366       955,485     17.7  
  Interest expense     8,842       12,634     (30.0 )     8,631     2.4       17,473       23,203     (24.7 )
    Net revenues     560,147       493,678     13.5       546,746     2.5       1,106,893       932,282     18.7  
                                                           
Non-interest expenses:                                                          
  Compensation and benefits     355,267       317,247     12.0       346,771     2.4       702,038       632,159     11.1  
  Occupancy and equipment rental     42,967       41,282     4.1       40,532     6.0       83,499       74,801     11.6  
  Communications and office supplies     25,869       25,456     1.6       24,818     4.2       50,687       47,913     5.8  
  Commission and floor brokerage     9,248       9,790     (5.5 )     9,028     2.4       18,276       18,627     (1.9 )
  Other operating expenses     49,273       47,328     4.1       47,469     3.8       96,742       82,549     17.2  
    Total non-interest expenses     482,624       441,103     9.4       468,618     3.0       951,242       856,049     11.1  
                                                           
Income from continuing operations before income taxes     77,523       52,575     47.5       78,128     (0.8 )     155,651       76,233     104.2  
  Provision for income taxes     31,946       21,659     47.5       30,155     5.9       62,101       30,381     104.4  
Net income from continuing operations     45,577       30,916     47.4       47,973     (5.0 )     93,550       45,852     104.0  
                                                           
Discontinued operations:                                                          
  Loss from discontinued operations, net of tax     (1,976 )     (1,481 )   33.4       (591 )   234.2       (2,567 )     (1,798 )   42.7  
Net income   $ 43,601     $ 29,435     48.1     $ 47,382     (8.0 )   $ 90,983     $ 44,054     106.5  
                                                           
Earnings per basic common share:                                                          
  Income from continuing operations   $ 0.69     $ 0.48     43.8     $ 0.73     (5.5 )   $ 1.42     $ 0.74     91.9  
  Loss from discontinued operations     (0.03 )     (0.02 )   50.0       (0.01 )   200.0       (0.04 )     (0.03 )   33.3  
  Earnings per basic common share   $ 0.66     $ 0.46     43.5     $ 0.72     (8.3 )   $ 1.38     $ 0.71     94.4  
                                                           
Earnings per diluted common share:                                                          
  Income from continuing operations   $ 0.60     $ 0.42     42.9     $ 0.63     (4.8 )   $ 1.24     $ 0.64     93.8  
  Loss from discontinued operations     (0.02 )     (0.02 )   --       --     *       (0.04 )     (0.02 )   100.0  
  Earnings per diluted common share   $ 0.58     $ 0.40     45.0     $ 0.63     (7.9 )   $ 1.20     $ 0.62     93.5  
                                                           
Weighted average number of common shares outstanding:                                            
  Basic     66,302       64,505     2.8       66,037     0.4       66,167       62,292     6.1  
  Diluted     75,641       74,090     2.1       75,691     (0.1 )     75,665       71,627     5.6  
                                                           
* Percentage not meaningful.                                                          
                                                           
                                                           

Statistical Information

 
 
(in thousands, except per share, employee and location amounts)
    6/30/14   6/30/13   % Change   3/31/14   % Change
Statistical Information:                          
  Book value per share   $ 33.18   $ 30.05   10.4   $ 32.09   3.4
  Financial advisors (2)     2,085     2,069   0.8     2,081   0.2
  Full-time associates     5,881     5,759   2.1     5,831   0.9
  Locations     361     357   1.1     359   0.6
  Total client assets   $ 173,383,000   $ 150,628,000   15.1   $ 168,899,000   2.7
                             
                             

Business Segment Results

 
 
Summary Segment Results (Unaudited)
 
   
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/14     6/30/13     % Change     3/31/14     % Change     6/30/14     6/30/13     % Change  
Net revenues:                                                          
  Global Wealth Management   $ 307,247     $ 282,717     8.7     $ 297,183     3.4     $ 604,430     $ 549,674     10.0  
  Institutional Group     255,712       215,444     18.7       249,977     2.3       505,689       388,744     30.1  
  Other     (2,812 )     (4,483 )   37.3       (414 )   (578.9 )     (3,226 )     (6,136 )   47.4  
    $ 560,147     $ 493,678     13.5     $ 546,746     2.5     $ 1,106,893     $ 932,282     18.7  
Operating contribution: (1)                                                          
  Global Wealth Management   $ 89,098     $ 78,924     12.9     $ 79,676     11.8     $ 168,774     $ 148,423     13.7  
  Institutional Group     42,690       31,083     37.3       45,622     (6.4 )     88,312       59,313     48.9  
  Other     (46,858 )     (34,785 )   (34.7 )     (40,726 )   (15.1 )     (87,584 )     (68,523 )   (27.8 )
    $ 84,930     $ 75,222     12.9     $ 84,572     0.4     $ 169,502     $ 139,213     21.8  
As a percentage of net revenues:                                                    
  Compensation and benefits                                                          
    Global Wealth Management     55.9       57.7             58.6             57.2       58.4        
    Institutional Group     61.6       61.5             61.6             61.6       61.5        
  Non-comp. operating expenses                                                          
    Global Wealth Management     15.1       14.4             14.6             14.9       14.6        
    Institutional Group     21.7       24.1             20.1             20.9       23.2        
  Income before income taxes                                                          
    Global Wealth Management     29.0       27.9             26.8             27.9       27.0        
    Institutional Group     16.7       14.4             18.3             17.5       15.3        
      15.1       15.2             15.4             15.3       14.9        
                                                           
                                                           
 
 
Global Wealth Management Summary Results of Operations (Unaudited)
   
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/14   6/30/13   % Change     3/31/14   % Change     6/30/14   6/30/13   % Change  
Revenues:                                                
  Commissions   $ 107,438   $ 104,576   2.7     $ 107,739   (0.3 )   $ 215,177   $ 206,662   4.1  
  Principal transactions     54,342     56,313   (3.5 )     53,766   1.1       108,108     112,620   (4.0 )
  Asset management and service fees     94,187     75,976   24.0       89,130   5.7       183,317     144,910   26.5  
  Net interest     35,839     24,505   46.2       35,262   1.6       71,101     45,991   54.6  
  Investment banking     9,892     15,334   (35.5 )     9,926   (0.3 )     19,818     26,437   (25.0 )
  Other income     5,549     6,013   (7.7 )     1,360   307.9       6,909     13,054   (47.1 )
    Net revenues     307,247     282,717   8.7       297,183   3.4       604,430     549,674   10.0  
Non-interest expenses:                                                
  Compensation and benefits     171,724     163,156   5.3       174,168   (1.4 )     345,892     320,752   7.8  
  Non-compensation operating expenses     46,425     40,637   14.2       43,339   7.1       89,764     80,499   11.5  
    Total non-interest expenses     218,149     203,793   7.0       217,507   0.3       435,656     401,251   8.6  
Income before income taxes   $ 89,098   $ 78,924   12.9     $ 79,676   11.8     $ 168,774   $ 148,423   13.7  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     55.9     57.7           58.6           57.2     58.4      
  Non-compensation operating expenses     15.1     14.4           14.6           14.9     14.6      
  Income before income taxes     29.0     27.9           26.8           27.9     27.0      
                                                 
                                                 
                               
                               
Stifel Bank & Trust (Unaudited)  
Key Statistical Information  
   
(in 000s, except percentages)   6/30/14     6/30/13     % Change     3/31/14     % Change  
Other information:                                    
  Assets   $ 5,050,036     $ 4,306,447     17.3     $ 4,994,215     1.1  
  Investment securities     2,915,235       2,956,073     (1.4 )     3,083,902     (5.5 )
  Retained loans, net     1,773,853       984,765     80.1       1,514,465     17.1  
  Loans held for sale     119,477       152,246     (21.5 )     102,367     16.7  
  Deposits     4,653,656       4,007,050     16.1       4,605,260     1.1  
                                     
  Allowance as a percentage of loans     0.97 %     1.10 %           0.94 %      
  Non-performing assets as a percentage of total assets     0.10 %     0.03 %           0.03 %      
                                     
                                     
 
 
Institutional Group Summary Results of Operations (Unaudited)
   
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/14   6/30/13   % Change     3/31/14   % Change     6/30/14   6/30/13   % Change  
Revenues:                                                
  Commissions   $ 45,274   $ 50,219   (9.8 )   $ 51,677   (12.4 )   $ 96,951   $ 94,000   3.1  
  Principal transactions     71,333     54,993   29.7       72,695   (1.9 )     144,028     105,950   35.9  
                                                 
  Capital raising     71,268     55,969   27.3       63,878   11.6       134,873     94,715   42.4  
  Advisory fees     60,356     48,140   25.4       58,500   3.2       119,129     75,196   58.4  
  Investment banking     131,624     104,109   26.4       122,378   7.6       254,002     169,911   49.5  
  Other (3)     7,481     6,123   22.2       3,227   131.8       10,708     18,883   (43.3 )
    Net revenues     255,712     215,444   18.7       249,977   2.3       505,689     388,744   30.1  
Non-interest expenses:                                                
  Compensation and benefits     157,499     132,397   19.0       154,016   2.3       311,515     239,218   30.2  
  Non-compensation operating expenses     55,523     51,964   6.8       50,339   10.3       105,862     90,213   17.3  
    Total non-interest expenses     213,022     184,361   15.5       204,355   4.2       417,377     329,431   26.7  
Income before income taxes   $ 42,690   $ 31,083   37.3     $ 45,622   (6.4 )   $ 88,312   $ 59,313   48.9  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     61.6     61.5           61.6           61.6     61.5      
  Non-compensation operating expenses     21.7     24.1           20.1           20.9     23.2      
  Income before income taxes     16.7     14.4           18.3           17.5     15.3      
                                                 
                                                 
 
 
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
 
    Three Months Ended     Six Months Ended
(in 000s)   6/30/14   6/30/13   % Change     3/31/14   % Change     6/30/14   6/30/13   % Change
Institutional brokerage:                                              
  Equity   $ 62,087   $ 64,273   (3.4 )   $ 65,768   (5.6 )   $ 127,855   $ 113,511   12.6
  Fixed income     54,520     40,939   33.2       58,604   (7.0 )     113,124     86,439   30.9
Institutional brokerage     116,607     105,212   10.8       124,372   (6.2 )     240,979     199,950   20.5
                                               
Investment banking:                                              
  Capital raising:                                              
  Equity     51,903     41,891   23.9       44,476   16.7       96,291     64,822   48.5
  Fixed income     19,365     14,078   37.6       19,402   (0.2 )     38,582     29,893   29.1
    Capital raising     71,268     55,969   27.3       63,878   11.6       134,873     94,715   42.4
  Advisory fees:     60,356     48,140   25.4       58,500   3.2       119,129     75,196   58.4
Investment banking   $ 131,624   $ 104,109   26.4     $ 122,378   7.6     $ 254,002   $ 169,911   49.5
                                               

Non-GAAP Financial Measures

The Company utilized non-GAAP calculations of presented net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin and diluted earnings per share as additional measures to aid in understanding and analyzing the Company's financial results for the three and six months ended June 30, 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 recent 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 diluted earnings per share is that the GAAP accounting effects of these merger-related charges do in fact reflect the underlying financial results of the Company's business and these effects should not be ignored in evaluating and analyzing its financial results. Therefore, the Company believes that GAAP measures of net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin and diluted earnings per share and the same respective non-GAAP measures of the Company's financial performance should be considered together.

The following table provides details with respect to reconciling net revenues, compensation and benefits, non-compensation operating expenses, income before income taxes, provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax margin and diluted earnings per share on a GAAP basis for the three and six months ended June 30, 2014 to the aforementioned expenses on a non-GAAP basis for the same period.

         
         
    Three Months Ended
June 30, 2014
  Six Months Ended
June 30, 2014
(in 000s, except per share amounts)   Non-GAAP   Non-Core     GAAP   Non-GAAP   Non-Core     GAAP
Net revenues   $ 561,495   $ (1,348 )   $ 560,147   $ 1,109,930   $ (3,037 )   $ 1,106,893
                                         
Non-interest expenses:                                        
  Compensation and benefits     353,754     1,513       355,267     698,241     3,797       702,038
  Non-compensation operating expenses     122,811     4,546       127,357     242,187     7,017       249,204
    Total non-interest expenses     476,565     6,059       482,624     940,428     10,814       951,242
  Income from continuing operations before income taxes     84,930     (7,407 )     77,523     169,502     (13,851 )     155,651
  Provision for income taxes     33,664     (1,718 )     31,946     66,208     (4,107 )     62,101
Net income from continuing operations   $ 51,266   $ (5,689 )   $ 45,577   $ 103,294   $ (9,744 )   $ 93,550
                                         
Earnings per share::                                        
  Basic   $ 0.77   $ (0.08 )   $ 0.69   $ 1.56   $ (0.14 )   $ 1.42
  Diluted   $ 0.68   $ (0.08 )   $ 0.60   $ 1.37   $ (0.13 )   $ 1.24
                                         
As a percentage of net revenues:                                        
  Compensation and benefits     63.0             63.4     62.9             63.4
  Non-compensation operating expenses     21.9             22.8     21.8             22.5
  Income before income taxes     15.1             13.8     15.3             14.1
                                           
                                           

1 A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."
2 Includes 140, 145 and 141 independent contractors at June 30, 2014, June 30, 2013, and March 31, 2014, respectively.
3 Includes net interest and other income.

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