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