SOURCE: Stifel

Stifel

November 06, 2014 16:01 ET

Stifel Reports Third Quarter 2014 Financial Results

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

Highlights for the three months ended September 30, 2014:

  • Net revenues of $523.5 million, increased 9% compared with the year-ago quarter.
  • Record Global Wealth Management revenues of $317.2 million

Highlights for the nine months ended September 30, 2014:

  • Record net revenues of $1.6 billion, increased 16% compared with the year-ago period.
  • Net income of $130.9 million, or $1.72 per diluted common share, increased 15% compared with the year-ago period.

Stifel Financial Corp. (NYSE: SF) today reported net income of $39.9 million, or $0.52 per diluted common share on net revenues of $523.5 million for the three months ended September 30, 2014, compared with net income of $69.7 million, or $0.93 per diluted common share, on net revenues of $478.6 million for the third quarter of 2013. Included in net income for the three months ended September 30, 2013 is a tax benefit related to discontinuing the business operations of SN Canada and merger-related expenses. The after tax impact of these items was $0.47 per diluted common share.

For the three months ended September 30, 2014, the Company reported non-GAAP net income from continuing operations of $48.7 million, or $0.64 per diluted common share, compared with non-GAAP net income from continuing operations of $39.6 million, or $0.53 per diluted common share for the third quarter of 2013. These non-GAAP results exclude merger-related expenses associated with the Company's acquisitions. The after-tax impact is $0.12 per diluted common share.

For the nine months ended September 30, 2014, the Company reported net income of $130.9 million, or $1.72 per diluted common share on record net revenues of $1.6 billion, compared with net income of $113.7 million, or $1.56 per diluted common share, on net revenues of $1.4 billion for the comparable period in 2013.

For the nine months ended September 30, 2014, the Company reported non-GAAP net income from continuing operations of $152.0 million, or $2.00 per diluted common share, compared with non-GAAP net income from continuing operations of $124.8 million, or $1.71 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."

             
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/14   9/30/13     % Change     6/30/14     % Change     9/30/14     9/30/13     % Change  
  Net revenues   $ 523,455   $ 478,639     9.4     $ 560,147     (6.6 )   $ 1,630,348     $ 1,410,921     15.6  
  Net income from continuing operations   $ 40,093   $ 74,929     (46.5 )   $ 45,577     (12.0 )   $ 133,643     $ 120,782     10.6  
  Net income   $ 39,903   $ 69,690     (42.7 )   $ 43,601     (8.5 )   $ 130,886     $ 113,745     15.1  
  Non-GAAP net income from continuing operations1   $ 48,698   $ 39,649     22.8     $ 51,266     (5.0 )   $ 151,992     $ 124,840     21.7  
Earnings per basic common share:                                                        
  Income from continuing operations   $ 0.60   $ 1.16     (48.3 )   $ 0.69     (13.0 )   $ 2.01     $ 1.91     5.2  
  Loss from discontinued operations     --     (0.08 )   (100.0 )     (0.03 )   (100.0 )     (0.04 )     (0.11 )   (63.6 )
  Earnings per basic common share   $ 0.60   $ 1.08     (44.4 )   $ 0.66     (9.1 )   $ 1.97     $ 1.80     9.4  
                                                         
Earnings per diluted common share:                                                        
  Income from continuing operations   $ 0.52   $ 1.00     (48.0 )   $ 0.60     (13.3 )   $ 1.76     $ 1.66     6.0  
  Loss from discontinued operations     --     (0.07 )   (100.0 )     (0.02 )   (100.0 )     (0.04 )     (0.10 )   (60.0 )
  Earnings per diluted common share   $ 0.52   $ 0.93     (44.1 )   $ 0.58     (10.3 )   $ 1.72     $ 1.56     10.3  
  Non-GAAP net income from continuing operations1   $ 0.64   $ 0.53     20.8     $ 0.68     (5.9 )   $ 2.00     $ 1.71     17.0  
Weighted average number of common shares outstanding:                                                        
  Basic     66,691     64,706     3.1       66,302     0.6       66,344       63,133     5.1  
  Diluted     76,681     75,191     2.0       75,641     1.4       76,011       72,851     4.3  
                                                           

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

Chairman's Comments

"In the third quarter, we had record results in Global Wealth Management and solid results in Investment Banking. Our equity and fixed income brokerage businesses were impacted in the quarter by lower volumes, particularly in the month of August. On the positive side, market volumes have strengthened in the month of October," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

"Our results reflect two months of our partnership with Oriel Securities, our U.K. investment bank. The initial integration is going well and we look forward to their future contributions. Looking ahead, we expect to close the acquisition of Legg Mason Investment Counsel in November, which will add $9 billion in client assets."

Brokerage Revenues

Brokerage revenues, defined as commissions plus principal transactions revenues were $261.0 million, a 3% decrease compared with the third quarter of 2013 and an 6% decrease compared with the second quarter of 2014.

  • Global wealth management brokerage revenues were $159.4 million, a 1% increase compared with the third quarter of 2013 and a 2% decrease compared with the second quarter of 2014.
  • Institutional equity brokerage revenues were $58.2 million, a 1% decrease compared with the third quarter of 2013 and a 6% decrease compared with the second quarter of 2014.
  • Institutional fixed income brokerage revenues were $43.4 million, a 16% decrease compared with the third quarter of 2013 and a 20% decrease compared with the second quarter of 2014.

Investment Banking Revenues

Investment banking revenues were $120.1 million, a 29% increase compared with the third quarter of 2013 and a 15% decrease compared with the second quarter of 2014.

  • Equity capital raising revenues were $44.1 million, a 14% increase compared with the third quarter of 2013 and a 28% decrease compared with the second quarter of 2014.
  • Fixed income capital raising revenues were $25.1 million, a 65% increase compared with the third quarter of 2013 and a 24% increase compared with the second quarter of 2014.
  • Advisory fee revenues were $50.9 million, a 31% increase compared with the third quarter of 2013 and an 16% decrease compared with the second quarter of 2014.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $96.6 million, a 26% increase compared with the third quarter of 2013 and a 3% increase compared with the second 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 September 30, 2014, compensation and benefits expenses were $331.4 million, which included $7.2 million of merger-related expenses. This compares with $326.0 million in the third quarter of 2013, which includes merger-related expenses of $28.6 million, and $355.3 million in the second quarter of 2014, which includes merger-related expenses of $1.5 million.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 61.8% in the third quarter of 2014, compared with 62.0% in the third quarter of 2013 and 63.0% in the second 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 5.1% in the third quarter of 2014, compared with 4.6% in the third quarter of 2013 and 4.5% in the second quarter of 2014. 

Non-Compensation Operating Expenses

For the quarter ended September 30, 2014, non-compensation operating expenses were $126.2 million, which included merger-related expenses of $3.7 million. This compares with $121.6 million in the third quarter of 2013, which includes merger-related expenses of $4.8 million, and $127.4 million in the second quarter of 2014, which includes merger-related expenses of $4.5 million.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2014 was 23.3%, compared with 24.4% in the third quarter of 2013 and 21.9% in the second quarter of 2014.

Provision for Income Taxes

The effective income tax rate for the quarter ended September 30, 2014 was 39.0%. The provision for income taxes for the quarter ended September 30, 2013 was impacted by the U.S. tax benefit of $58.2 million as a result of the Company's investment in SN Canada. The effective income tax rate was 41.2% in the second quarter of 2014.

Assets and Capital

Assets

  • Assets increased 7% to $9.3 billion as of September 30, 2014 from $8.7 billion as of September 30, 2013. The increase is primarily attributable to growth of Stifel Bank, the Company's bank subsidiary, which as of September 30, 2014 has grown its assets to $5.0 billion from $4.5 billion as of September 30, 2013.
  • At September 30, 2014, the Company's Level 3 assets of $177.8 million, or 2% of total assets, consisted of $101.8 million of auction rate securities and $76.0 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 September 30, 2014.
  • Non-performing assets as a percentage of total assets as of September 30, 2014 was 0.07%.

Capital

  • The Company's Tier 1 leverage capital ratio was 16.0% at September 30, 2014 and Tier 1 risk-based capital ratio was 27.9% at September 30, 2014.
  • At September 30, 2014, book value per common share was $33.92 based on 66.0 million common shares outstanding.
  • Stockholders' equity as of September 30, 2014 increased $244.1 million, or 12%, to $2.2 billion from $2.0 billion as of September 30, 2013.

Conference Call Information

Stifel Financial Corp. will host its third quarter 2014 financial results conference call on Thursday, November 6, 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 #28188942. 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     Nine Months Ended  
(in thousands, except per share amounts)   9/30/14     9/30/13     % Change     6/30/14     % Change     9/30/14     9/30/13     % Change  
Revenues:                                                          
  Commissions   $ 151,621     $ 145,837     4.0     $ 152,712     (0.7 )   $ 463,749     $ 446,498     3.9  
  Principal transactions     109,378       122,583     (10.8 )     125,676     (13.0 )     361,515       341,153     6.0  
    Brokerage revenues     260,999       268,420     (2.8 )     278,388     (6.2 )     825,264       787,651     4.8  
                                                           
  Investment banking     120,147       92,851     29.4       141,515     (15.1 )     393,966       289,199     36.2  
  Asset management and service fees     96,638       76,710     26.0       94,231     2.6       280,039       221,711     26.3  
  Other income     4,803       13,063     (63.2 )     8,742     (45.1 )     18,745       45,269     (58.6 )
    Operating revenues     482,587       451,044     7.0       522,876     (7.7 )     1,518,014       1,343,830     13.0  
  Interest revenue     52,096       39,130     33.1       46,113     13.0       141,035       101,829     38.5  
    Total revenues     534,683       490,174     9.1       568,989     (6.0 )     1,659,049       1,445,659     14.8  
  Interest expense     11,228       11,535     (2.7 )     8,842     27.0       28,701       34,738     (17.4 )
    Net revenues     523,455       478,639     9.4       560,147     (6.6 )     1,630,348       1,410,921     15.6  
                                                           
Non-interest expenses:                                                          
  Compensation and benefits     331,440       326,020     1.7       355,267     (6.7 )     1,033,478       958,179     7.9  
  Occupancy and equipment rental     41,611       41,288     0.8       42,967     (3.2 )     125,110       116,090     7.8  
  Communications and office supplies     27,464       26,122     5.1       25,869     6.2       78,151       74,034     5.6  
  Commission and floor brokerage     9,971       10,150     (1.8 )     9,248     7.8       28,247       28,777     (1.8 )
  Other operating expenses     47,203       44,051     7.2       49,273     (4.2 )     143,945       126,600     13.7  
    Total non-interest expenses     457,689       447,631     2.2       482,624     (5.2 )     1,408,931       1,303,680     8.1  
                                                           
Income from continuing operations before income taxes     65,766       31,008     112.1       77,523     (15.2 )     221,417       107,241     106.5  
  Provision for income taxes     25,673       (43,921 )   *       31,946     (19.6 )     87,774       (13,541 )   *  
Net income from continuing operations     40,093       74,929     (46.5 )     45,577     (12.0 )     133,643       120,782     10.6  
                                                           
Discontinued operations:                                                          
  Loss from discontinued operations, net of tax     (190 )     (5,239 )   (96.4 )     (1,976 )   (90.4 )     (2,757 )     (7,037 )   (60.8 )
Net income   $ 39,903     $ 69,690     (42.7 )   $ 43,601     (8.5 )   $ 130,886     $ 113,745     15.1  
                                                           
Earnings per basic common share:                                                          
  Income from continuing operations   $ 0.60     $ 1.16     (48.3 )   $ 0.69     (13.0 )   $ 2.01     $ 1.91     5.2  
  Loss from discontinued operations     --       (0.08 )   (100.0 )     (0.03 )   (100.0 )     (0.04 )     (0.11 )   (63.6 )
  Earnings per basic common share   $ 0.60     $ 1.08     (44.4 )   $ 0.66     (9.1 )   $ 1.97     $ 1.80     9.4  
                                                           
Earnings per diluted common share:                                                          
  Income from continuing operations   $ 0.52     $ 1.00     (48.0 )   $ 0.60     (13.3 )   $ 1.76     $ 1.66     6.0  
  Loss from discontinued operations     --       (0.07 )   (100.0 )     (0.02 )   (100.0 )     (0.04 )     (0.10 )   (60.0 )
  Earnings per diluted common share   $ 0.52     $ 0.93     (44.1 )   $ 0.58     (10.3 )   $ 1.72     $ 1.56     10.3  
                                                           
                                             
Weighted average number of common shares outstanding:                                                          
  Basic     66,691       64,706     3.1       66,302     0.6       66,344       63,133     5.1  
  Diluted     76,681       75,191     2.0       75,641     1.4       76,011       72,851     4.3  
                                                             
* Percentage not meaningful.
 
 

Statistical Information

   
(in thousands, except per share, employee and location amounts)  
    9/30/14   9/30/13   % Change   6/30/14   % Change  
Statistical Information:                            
  Book value per share   $ 33.92   $ 31.46   7.8   $ 33.18   2.2  
  Financial advisors 2     2,096     2,075   1.0     2,085   0.5  
  Full-time associates     6,083     5,780   5.2     5,881   3.4  
  Locations     360     354   1.7     360   --  
  Total client assets   $ 172,742,000   $ 153,901,000   12.2   $ 173,383,000   (0.4 )
                               
                               

Business Segment Results

 
Summary Segment Results (Unaudited)
   
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/14     9/30/13     % Change     6/30/14     % Change     9/30/14     9/30/13     % Change  
Net revenues:                                                          
  Global Wealth Management   $ 317,241     $ 274,669     15.5     $ 307,247     3.3     $ 921,671     $ 824,344     11.8  
  Institutional Group     215,160       205,132     4.9       255,712     (15.9 )     720,849       593,875     21.4  
  Other     (8,946 )     (1,162 )   (669.9 )     (2,812 )   (218.1 )     (12,172 )     (7,298 )   (66.8 )
    $ 523,455     $ 478,639     9.4     $ 560,147     (6.6 )   $ 1,630,348     $ 1,410,921     15.6  
Operating contribution: 3                                                          
  Global Wealth Management   $ 94,026     $ 72,128     30.4     $ 89,098     5.5     $ 262,800     $ 220,551     19.2  
  Institutional Group     29,500       34,986     (15.7 )     42,690     (30.9 )     117,812       94,298     24.9  
  Other     (45,495 )     (41,669 )   9.2       (46,858 )   (2.9 )     (133,079 )     (110,192 )   20.8  
    $ 78,031     $ 65,443     19.2     $ 84,930     (8.1 )   $ 247,553     $ 204,657     21.0  
As a percentage of net revenues:                                                          
  Compensation and benefits                                                          
    Global Wealth Management     55.9       58.2             55.9             56.8       58.3        
    Institutional Group     61.2       58.4             61.6             61.5       60.5        
  Non-comp. operating expenses                                                          
    Global Wealth Management     14.5       15.5             15.1             14.7       14.9        
    Institutional Group     25.1       24.5             21.7             22.2       23.6        
  Income before income taxes                                                          
    Global Wealth Management     29.6       26.3             29.0             28.5       26.8        
    Institutional Group     13.7       17.1             16.7             16.3       15.9        
      14.9       13.6             15.1             15.1       14.5        
                                                           

2 Includes 139, 145, and 140 independent contractors at September 30, 2014, September 30, 2013, and June 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     Nine Months Ended  
(in 000s)   9/30/14   9/30/13   % Change     6/30/14   % Change     9/30/14   9/30/13   % Change  
Revenues:                                                
  Commissions   $ 108,154   $ 99,427   8.8     $ 107,438   0.7     $ 323,331   $ 306,089   5.6  
  Principal transactions     51,218     58,658   (12.7 )     54,342   (5.7 )     159,326     171,278   (7.0 )
    Brokerage revenues     159,372     158,085   0.8       161,780   (1.5 )     482657     477367   1.1  
                                                   
  Asset management and service fees     96,354     76,667   25.7       94,187   2.3       279,671     221,577   26.2  
  Net interest     43,357     27,665   56.6       35,839   21.0       114,458     73,657   55.4  
  Investment banking     11,666     9,394   24.2       9,892   17.9       31,484     35,832   (12.1 )
  Other income     6,492     2,858   127.2       5,549   17.0       13,401     15,911   (15.8 )
    Net revenues     317,241     274,669   15.5       307,247   3.3       921,671     824,344   11.8  
Non-interest expenses:                                                
  Compensation and benefits     177,296     159,949   10.8       171,724   3.2       523,188     480,701   8.8  
  Non-compensation operating expenses     45,919     42,592   7.8       46,425   (1.1 )     135,683     123,092   10.2  
    Total non-interest expenses     223,215     202,541   10.2       218,149   2.3       658,871     603,793   9.1  
Income before income taxes   $ 94,026   $ 72,128   30.4     $ 89,098   5.5     $ 262,800   $ 220,551   19.2  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     55.9     58.2           55.9           56.8     58.3      
  Non-compensation operating expenses     14.5     15.5           15.1           14.7     14.9      
  Income before income taxes     29.6     26.3           29.0           28.5     26.8      
                                                 
                                                 
                               
Stifel Bank & Trust (Unaudited)  
Key Statistical Information  
(in 000s, except percentages)   9/30/14     9/30/13     % Change     6/30/14     % Change  
Other information:                                    
  Assets   $ 4,960,572     $ 4,547,071     9.1     $ 5,050,036     (1.8 )
  Investment securities     2,720,860       2,949,080     (7.7 )     2,915,235     (6.7 )
  Retained loans, net     1,869,551       1,061,313     76.2       1,757,612     6.4  
  Loans held for sale     104,277       75,440     38.2       119,477     (12.7 )
  Deposits     4,552,522       4,228,405     7.7       4,653,656     (2.2 )
                                     
  Allowance as a percentage of loans     1.18 %     1.23 %           0.97 %      
  Non-performing assets as a percentage of total assets     0.07 %     0.32 %           0.10 %      
                                       
                                     
 
Institutional Group Summary Results of Operations (Unaudited)
   
    Three Months Ended     Nine Months Ended  
(in 000s)   9/30/14   9/30/13   % Change     6/30/14   % Change     9/30/14   9/30/13   % Change  
Revenues:                                                
  Commissions   $ 43,467   $ 46,410   (6.3 )   $ 45,274   (4.0 )   $ 140,418   $ 140,409   --  
  Principal transactions     58,160     63,925   (9.0 )     71,333   (18.5 )     202,188     169,875   19.0  
    Brokerage revenues     101,627     110,335   (7.9 )     116,607   (12.8 )     342,606     310,284   10.4  
  Capital raising     57,542     44,490   29.3       71,268   (19.3 )     192,415     139,205   38.2  
  Advisory fees     50,939     39,966   30.7       60,356   (15.6 )     170,068     114,162   49.0  
  Investment banking     108,481     83,456   29.3       131,624   (17.6 )     362,483     253,367   43.1  
  Other 4     5,052     11,341   (55.4 )     7,481   (32.5 )     15,760     30,224   (47.9 )
    Net revenues     215,160     205,132   4.9       255,712   (15.9 )     720,849     593,875   21.4  
Non-interest expenses:                                                
  Compensation and benefits     131,589     119,874   9.8       157,499   (16.5 )     443,104     359,091   23.4  
  Non-compensation operating expenses     54,071     50,272   7.6       55,523   (2.6 )     159,933     140,486   13.8  
    Total non-interest expenses     185,660     170,146   9.1       213,022   (12.8 )     603,037     499,577   20.7  
Income before income taxes   $ 29,500   $ 34,986   (15.7 )   $ 42,690   (30.9 )   $ 117,812   $ 94,298   24.9  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     61.2     58.4           61.6           61.5     60.5      
  Non-compensation operating expenses     25.1     24.5           21.7           22.2     23.6      
  Income before income taxes     13.7     17.1           16.7           16.3     15.9      
                                                   
                                                   
 
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
 
    Three Months Ended     Nine Months Ended
(in 000s)   9/30/14   9/30/13   % Change     6/30/14   % Change     9/30/14   9/30/13   % Change
Institutional brokerage:                                              
  Equity   $ 58,198   $ 58,677   (0.8 )   $ 62,087   (6.3 )   $ 186,053   $ 172,187   8.1
  Fixed income     43,429     51,658   (15.9 )     54,520   (20.3 )     156,553     138,097   13.4
Institutional brokerage     101,627     110,335   (7.9 )     116,607   (12.8 )     342,606     310,284   10.4
                                               
Investment banking:                                              
  Capital raising:                                              
    Equity     34,312     30,679   11.8       51,903   (33.9 )     130,603     95,501   36.8
    Fixed income     23,230     13,811   68.2       19,365   20.0       61,812     43,704   41.4
      Capital raising     57,542     44,490   29.3       71,268   (19.3 )     192,415     139,205   38.2
  Advisory fees:     50,939     38,966   30.7       60,356   (15.6 )     170,068     114,162   49.0
Investment banking   $ 108,481   $ 83,456   29.3     $ 131,624   (17.6 )   $ 362,483   $ 253,367   43.1
                                               

4 Includes net interest 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 nine months ended September 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 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 nine months ended September 30, 2014 to the aforementioned expenses on a non-GAAP basis for the same period.

         
    Three Months Ended September 30, 2014   Nine Months Ended September 30, 2014
(in 000s, except per share amounts)   Non-GAAP   Non-Core     GAAP   Non-GAAP   Non-Core     GAAP
Net revenues   $ 524,725   $ (1,270 )   $ 523,455   $ 1,634,655   $ (4,307 )   $ 1,630,348
                                         
Non-interest expenses:                                        
  Compensation and benefits     324,193     7,247       331,440     1,022,434     11,044       1,033,478
  Non-compensation operating expenses     122,501     3,748       126,249     364,688     10,765       375,453
    Total non-interest expenses     446,694     10,995       457,689     1,387,122     21,809       1,408,931
Income from continuing operations before income taxes     78,031     (12,265 )     65,766     247,533     (26,116 )     221,417
  Provision for income taxes     29,333     (3,660 )     25,673     95,541     (7,767 )     87,774
Net income from continuing operations   $ 48,698   $ (8,605 )   $ 40,093   $ 151,992   $ (18,349 )   $ 133,643
                                         
Earnings per share:                                        
  Basic   $ 0.73   $ (0.13 )   $ 0.60   $ 2.29   $ (0.28 )   $ 2.01
  Diluted   $ 0.64   $ (0.12 )   $ 0.52   $ 2.00   $ (0.24 )   $ 1.76
                                         
As a percentage of net revenues:                                        
  Compensation and benefits     61.8             63.3     62.5             63.4
  Non-compensation operating expenses     23.3             24.1     22.4             23.0
  Income before income taxes     14.9             12.6     15.1             13.6
                                           
                                           

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