SOURCE: Stifel Financial Corp.

Stifel Financial Corp.

November 04, 2015 16:01 ET

Stifel Reports Third Quarter 2015 Financial Results

ST. LOUIS, MO--(Marketwired - November 04, 2015) -

Highlights for the three months ended September 30, 2015:

  • Net revenues of $591.6 million, increased 13.0% compared with the year-ago quarter.
  • Non-GAAP net income of $47.7 million, or $0.60 per diluted common share.
  • Net income of $17.2 million, or $0.22 per diluted common share.
  • Repurchased 1.5 million shares for approximately $65.9 million.
  • On November 3, 2015, the Board of Directors authorized an additional 5.0 million shares for repurchase under the current buyback plan.

Highlights for the nine months ended September 30, 2015:

  • Record net revenues of $1.75 billion, increased 7.4% compared with the year-ago period.
  • Non-GAAP net income of $152.7 million, or $1.95 per diluted share.
  • Net income of $81.2 million, or $1.04 per diluted share.

Stifel Financial Corp. (NYSE: SF) today reported net income of $17.2 million, or $0.22 per diluted common share on net revenues of $591.6 million for the three months ended September 30, 2015, compared with net income of $39.9 million, or $0.52 per diluted common share, on net revenues of $523.5 million for the third quarter of 2014.

For the three months ended September 30, 2015, the Company reported non-GAAP net income of $47.7 million, or $0.60 per diluted common share. These non-GAAP results exclude merger-related expenses of $30.5 million (after-tax), primarily related to the acquisition of Sterne Agee.

For the nine months ended September 30, 2015, the Company reported net income of $81.2 million, or $1.04 per diluted common share on record net revenues of $1.75 billion, compared with net income of $130.9 million, or $1.72 per diluted share, on net revenues of $1.63 billion for the comparable period in 2014.

For the nine months ended September 30, 2015, the Company reported non-GAAP net income of $152.7 million, or $1.95 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    Nine Months Ended  
(in 000s) 9/30/15  9/30/14  % Change    6/30/15  % Change    9/30/15  9/30/14  % Change  
 Net revenues $ 591,575  $ 523,455  13.0    $ 597,751  (1.0 )  $ 1,750,308  $ 1,630,348  7.4  
 Net income $ 17,179  $ 39,903  (56.9 )  $ 20,888  (17.8 )  $ 81,164  $ 130,886  (38.0 )
 Non-GAAP net income(1) $ 47,705  $ 48,508  (1.7 )  $ 55,091  (13.4 )  $ 152,734  $ 149,235  2.3  
                                        
Earnings per common share:                                       
 Basic $ 0.25  $ 0.60  (58.3 )  $ 0.31  (19.4 )  $ 1.18  $ 1.97  (40.1 )
 Diluted $ 0.22  $ 0.52  (57.7 )  $ 0.27  (18.5 )  $ 1.04  $ 1.72  (39.5 )
 Non-GAAP net income1 $ 0.60  $ 0.64  (6.3 )  $ 0.71  (15.5 )  $ 1.95  $ 1.96  (0.5 )
                                        
Weighted average number of common shares outstanding:                              
 Basic   69,633    66,691  4.4      68,370  1.8      68,675    66,344  3.5  
 Diluted   79,759    76,681  4.0      77,856  2.4      78,326    76,011  3.0  
                                        
(1) A reconciliation of the Company's GAAP results to these non-GAAP measures is discussed under "Non-GAAP Financial Measures."

Chairman's Comments

"A challenging market environment contributed to a generally slow quarter for investment banking services and fixed income trading, which negatively impacted our results. Our recent acquisitions mitigated the revenue decline in our legacy businesses and also added to our operating expenses. As a result, compared to the 2nd quarter of 2015, revenues declined by $6.1 million while non-compensation operating expenses increased $13.0 million, resulting in a decline in pre-tax operating margin from 15.5% to 12.2%," stated Ronald J. Kruszewski, Chairman and CEO of Stifel.

Kruszewski continued, "In the quarter, Stifel continued to build a premier balanced wealth management and institutional services company. Our operating model provides us tremendous leverage to invest in the future while at the same time providing shareholders a strong return. We are well positioned to take advantage of opportunities as they arrive and offer our clients excellent advice and services.

We expect the Barclays transaction, announced on June 8, 2015, to close on December 4, 2015. We are excited to welcome these highly talented associates to Stifel."

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions revenues, were $289.7 million, a 10.4% increase compared with the third quarter of 2014 and a 6.7% increase compared with the second quarter of 2015.

  • Global wealth management brokerage revenues were $169.3 million, a 7.5% increase compared with the third quarter of 2014 and a 6.6% increase compared with the second quarter of 2015.
  • Institutional equity brokerage revenues were $59.8 million, a 4.1% increase compared with the third quarter of 2014 and a 1.5% decrease compared with the second quarter of 2015.
  • Institutional fixed income brokerage revenues were $60.6 million, a 27.6% increase compared with the third quarter of 2014 and a 16.6% increase compared with the second quarter of 2015.

Investment Banking Revenues

Investment banking revenues were $118.8 million, which was consistent with the third quarter of 2014 and a 25.2% decrease compared with the second quarter of 2015.

  • Equity capital raising revenues were $36.6 million, a 29.2% decrease compared with the third quarter of 2014 and a 31.3% decrease compared with the second quarter of 2015.
  • Fixed income capital raising revenues were $32.4 million, a 101.7% increase compared with the third quarter of 2014 and a 22.8% decrease compared with the second quarter of 2015.
  • Advisory fee revenues were $49.8 million, a 2.3% decrease compared with the third quarter of 2014 and a 21.8% decrease compared with the second quarter of 2015.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were $130.6 million, a 35.2% increase compared with the third quarter of 2014 and a 8.9% increase compared with the second quarter of 2015. The increase is due to the higher value of fee-based accounts, as a result of market appreciation and new client assets and revenues from our acquisition of 1919 Investment Counsel in the fourth quarter of 2014.

Compensation and Benefits Expenses

For the quarter ended September 30, 2015, compensation and benefits expenses were $404.2 million, which included $32.2 million of merger-related expenses, compared with $331.4 million in the third quarter of 2014, and $410.0 million in the second quarter of 2015. Compensation and benefits expense included merger-related expenses of $7.2 million in the third quarter of 2014 and $39.6 million in the second quarter of 2015.

Excluding merger-related expenses, compensation and benefits as a percentage of net revenues was 62.9% in the third quarter of 2015, compared with 61.8% in the third quarter of 2014 and 62.0% in the second quarter of 2015. Transition pay, which primarily consists of amortization of retention awards, signing bonuses, and upfront notes, as a percentage of net revenues was 3.7% in the third quarter of 2015, compared with 5.1% in the third quarter of 2014 and 3.7% in the second quarter of 2015.

Non-Compensation Operating Expenses

For the quarter ended September 30, 2015, non-compensation operating expenses were $165.0 million, which included merger-related expenses of $17.4 million, compared with $126.2 million in the third quarter of 2014, and $149.7 million in the second quarter of 2015.

Excluding merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2015 was 24.9%, compared with 23.3% in the third quarter of 2014 and 22.5% in the second quarter of 2015.

Provision for Income Taxes

The effective income tax rate for the quarter ended September 30, 2015 was 23.1% compared with 39.0% in the third quarter of 2014, and 45.1% in the second quarter of 2015. The effective tax rate for the third quarter of 2015 was positively impacted by a decrease in the Company's FIN 48 reserve and adjustments associated with the filing of the 2014 Corporate tax return.

Assets and Capital

Assets

  • Assets increased 0.4% to $9.4 billion as of September 30, 2015 from $9.3 billion as of September 30, 2014. The increase is primarily attributable to acquired assets from our acquisitions and an increase in the loan portfolio at Stifel Bank, offset by a decrease in Stifel Bank's investment portfolio and financial instruments owned, at fair value.
  • At September 30, 2015, the Company's Level 3 assets of $116.3 million, or 1.2% of total assets, consisted of $57.5 million of auction rate securities and $58.8 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 6.7% at September 30, 2015.
  • Non-performing assets as a percentage of total assets as of September 30, 2015 was 0.03%.

Capital

  • The Company's Tier 1 leverage capital ratio was 16.4% at September 30, 2015 and Tier 1 risk-based capital ratio was 29.4% at September 30, 2015.
  • At September 30, 2015, book value per common share was $36.63 based on 68.1 million common shares outstanding.
  • Stockholders' equity as of September 30, 2015 increased $254.5 million, or 11.4%, to $2.5 billion from $2.2 billion as of September 30, 2014.
  • The Company repurchased $65.9 million, or 1.5 million shares, of its common stock pursuant to the current buyback plan during the third quarter of 2015. On November 3, 2015, the Board of Directors authorized the repurchase of an additional 5.0 million shares. Under existing Board authorizations at November 4, 2015, the Company is permitted to buy an additional 6.8 million shares.

Conference Call Information

Stifel Financial Corp. will host its third quarter 2015 financial results conference call on Wednesday, November 4, 2015, 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 #43107515. 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     Nine Months Ended  
(in thousands, except per share amounts) 9/30/15   9/30/14   % Change   6/30/15   % Change     9/30/15   9/30/14   % Change  
Revenues:                                                  
 Commissions $ 194,083   $ 167,601     15.8   $ 184,866     5.0     $ 562,249   $ 510,070     10.2  
 Principal transactions   95,593     94,828     0.8     86,597     10.4       281,794     318,312     (11.5 )
  Brokerage revenues   289,676     262,429     10.4     271,463     6.7       844,043     828,382     1.9  
                                                   
 Investment banking   118,753     118,717     *     158,857     (25.2 )     400,302     390,848     2.4  
 Asset management and service fees   130,636     96,638     35.2     119,936     8.9       364,442     280,039     30.1  
 Other income   18,930     4,803     294.1     13,742     37.8       44,471     18,745     137.2  
   Operating revenues   557,995     482,587     15.6     563,998     (1.1 )     1,653,258     1,518,014     8.9  
 Interest revenue   43,376     52,096     (16.7 )   43,851     (1.1 )     129,964     141,035     (7.8 )
  Total revenues   601,371     534,683     12.5     607,849     (1.1 )     1,783,222     1,659,049     7.5  
 Interest expense   9,796     11,228     (12.8 )   10,098     (3.0 )     32,914     28,701     14.7  
  Net revenues   591,575     523,455     13.0     597,751     (1.0 )     1,750,308     1,630,348     7.4  
                                                   
Non-interest expenses:                                                  
 Compensation and benefits   404,205     331,440     22.0     409,998     (1.4 )     1,169,896     1,033,478     13.2  
 Occupancy and equipment rental   53,282     41,611     28.0     48,346     10.2       145,798     125,110     16.5  
 Communications and office supplies   35,678     27,464     29.9     31,114     14.7       96,026     78,151     22.9  
 Commission and floor brokerage   12,430     9,971     24.7     9,124     36.2       31,623     28,247     12.0  
 Other operating expenses   63,632     47,203     34.8     61,098     4.1       176,480     143,945     22.6  
  Total non-interest expenses   569,227     457,689     24.4     559,680     1.7       1,619,823     1,408,931     15.0  
                                                   
Income from continuing operations before income taxes   22,348     65,766     (66.0 )   38,071     (41.3 )     130,485     221,417     (41.1 )
 Provision for income taxes   5,169     25,673     (79.9 )   17,183     (69.9 )     49,321     87,774     (43.8 )
Net income from continuing operations   17,179     40,093     (57.2 )   20,888     (17.8 )     81,164     133,643     (39.3 )
                                                   
Discontinued operations:                                                  
Loss from discontinued operations, net of tax   -     (190 )   -     -     -       -     (2,757 )   *  
Net income $ 17,179   $ 39,903     (56.9 ) $ 20,888     (17.8 )   $ 81,164   $ 130,886     (38.0 )
                                                   
Earnings per basic common share:                                                  
 Income from continuing operations $ 0.25   $ 0.60     (58.3 ) $ 0.31     (19.4 )   $ 1.18   $ 2.01     (40.1 )
 Loss from discontinued operations   -     -     -     -     -       -     (0.04 )   *  
 Earnings per basic common share $ 0.25   $ 0.60     (58.3 ) $ 0.31     (19.4 )   $ 1.18   $ 1.97     (40.1 )
                                                   
Earnings per diluted common share:                                                  
 Income from continuing operations $ 0.22   $ 0.52     (57.7 ) $ 0.27     (18.5 )   $ 1.04   $ 1.76     (39.5 )
 Loss from discontinued operations   -     -     -     -     -       -     (0.04 )   *  
 Earnings per basic diluted share $ 0.22   $ 0.52     (57.7 ) $ 0.27     (18.5 )   $ 1.04   $ 1.72     (39.5 )
                                                   
Weighted average number of common shares outstanding:                                    
 Basic   69,633     66,691     4.4     68,370     1.8       68,675     66,344     3.5  
 Diluted   79,759     76,681     4.0     77,856     2.4       78,326     76,011     3.0  
                                                   
* Percentage not meaningful.                                                  

Statistical Information

(in thousands, except per share, employee and location amounts)
  9/30/15   9/30/14   % Change   6/30/15   % Change
Statistical Information:                            
 Book value per share $ 36.63   $ 33.92   8.0     $ 36.35   0.8  
 Financial advisors (2)   2,846     2,096   35.8       2,823   0.8  
 Full-time associates (3)   6,865     5,944   15.5       6,819   0.7  
 Locations   391     360   8.6       398   (1.8 )
 Total client assets $ 208,085,000   $ 172,742,000   20.5     $ 208,628,000   (0.3 )
(2) Includes 755, 139, and 736 independent contractors as of September 30, 2015, September 30, 2014, and June 30, 2015.
(3) Excludes independent contractors.

Business Segment Results

Summary Segment Results (Unaudited)
  Three Months Ended     Nine Months Ended  
(in 000s) 9/30/15   9/30/14   % Change   6/30/15   % Change     9/30/15   9/30/14   % Change  
Net revenues:                                                  
 Global Wealth Management $ 357,306   $ 317,241     12.6   $ 343,382     4.1     $ 1,030,097   $ 921,671     11.8  
 Institutional Group   232,125     215,160     7.9     258,538     (10.2 )     729,269     720,849     1.2  
 Other   2,144     (8,946 )   124.0     (4,169 )   (151.4 )     (9,058 )   (12,172 )   25.6  
  $ 591,575   $ 523,455     13.0   $ 597,751     (1.0 )   $ 1,750,308   $ 1,630,348     7.4  
Operating contribution: (4)                                                  
 Global Wealth Management $ 97,227   $ 94,026     3.4   $ 93,975     3.5     $ 290,049   $ 262,800     10.4  
 Institutional Group   25,853     29,500     (12.4 )   41,942     (38.4 )     100,124     117,812     (15.0 )
 Other   (51,128 )   (45,649 )   (12.0 )   (43,122 )   (18.6 )     (144,619 )   (137,034 )   (5.5 )
  $ 71,952   $ 77,877     (7.6 ) $ 92,795     (22.5 )   $ 245,554   $ 243,578     0.8  
As a percentage of net revenues:                                              
 Compensation and benefits                                                  
  Global Wealth Management   57.1     55.9           57.1             56.6     56.8        
  Institutional Group   62.0     61.2           61.9             62.2     61.5        
 Non-comp. operating expenses                                                  
  Global Wealth Management   15.7     14.5           15.5             15.2     14.7        
  Institutional Group   26.9     25.1           21.9             24.1     22.2        
 Income before income taxes                                                  
  Global Wealth Management   27.2     29.6           27.4             28.2     28.5        
  Institutional Group   11.1     13.7           16.2             13.7     16.3        
    12.2     14.8           15.5             14.1     14.9        
                                                   
(4) 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) 9/30/15   9/30/14   % Change   6/30/15   % Change     9/30/15   9/30/14   % Change  
Revenues:                                                  
 Commissions $ 134,476   $ 113,177     18.8   $ 125,121     7.5     $ 375,811   $ 338,378     11.1  
 Principal transactions   34,843     44,373     (21.5 )   33,682     3.4       110,531     140,011     (21.1 )
  Brokerage revenues   169,319     157,550     7.5     158,803     6.6       486,342     478,389     1.7  
                                                   
 Asset management and service fees   129,032     96,354     33.9     119,734     7.8       362,432     279,671     29.6  
 Net interest   36,326     43,357     (16.3 )   37,454     (3.0 )     111,703     114,458     (2.4 )
 Investment banking   10,146     13,488     (24.8 )   15,128     (32.9 )     35,374     35,752     (1.1 )
 Other income   12,483     6,492     92.3     12,263     1.7       34,246     13,401     155.5  
  Net revenues   357,306     317,241     12.6     343,382     4.1       1,030,097     921,671     11.8  
Non-interest expenses:                                                  
 Compensation and benefits   203,959     177,296     15.0     196,234     3.9       583,436     523,188     11.5  
 Non-compensation operating expenses   56,120     45,919     22.2     53,173     5.5       156,612     135,683     15.4  
  Total non-interest expenses   260,079     223,215     16.5     249,407     4.3       740,048     658,871     12.3  
Income before income taxes $ 97,227   $ 94,026     3.4   $ 93,975     3.5     $ 290,049   $ 262,800     10.4  
                                                   
As a percentage of net revenues:                                                  
 Compensation and benefits   57.1     55.9           57.1             56.6     56.8        
 Non-compensation operating expenses   15.7     14.5           15.5             15.2     14.7        
 Income before income taxes   27.2     29.6           27.4             28.2     28.5        
Stifel Bank & Trust (Unaudited)
Key Statistical Information
(in 000s, except percentages)   9/30/15   9/30/14   % Change   6/30/15   % Change  
Other information:                            
 Assets   $ 4,619,093   $ 4,977,194   (7.2)   $ 4,786,248   (3.5)  
 Investment securities     1,749,590     2,720,860   (35.7)     1,907,282   (8.3)  
 Retained loans, net     2,706,074     1,988,076   36.1     2,626,508   3.0  
 Loans held for sale     179,588     104,277   72.2     183,991   (2.4)  
 Deposits     4,116,814     4,552,522   (9.6)     4,313,940   (4.6)  
                             
 Allowance as a percentage of loans     1.13%     1.18%         0.98%      
 Non-performing assets as a percentage of total assets     0.03%     0.07%         0.13%      
                             
Institutional Group Summary Results of Operations (Unaudited)  
  Three Months Ended     Nine Months Ended  
(in 000s) 9/30/15   9/30/14   % Change   6/30/15   % Change     9/30/15   9/30/14   % Change  
Revenues:                                                  
 Commissions $ 59,607   $ 52,013     14.6   $ 58,821     1.3     $ 182,637   $ 164,423     11.1  
 Principal transactions   60,750     52,866     14.9     53,839     12.8       175,064     185,569     (5.7 )
 Brokerage revenues   120,357     104,879     14.8     112,660     6.8       357,701     349,992     2.2  
 Capital raising   59,466     54,290     9.5     80,540     (26.2 )     203,154     185,029     9.8  
 Advisory fees   49,142     50,939     (3.5 )   63,189     (22.2 )     161,773     170,068     (4.9 )
 Investment banking   108,608     105,229     3.2     143,729     (24.4 )     364,927     355,097     2.8  
 Other (5)   3,160     5,052     (37.5 )   2,149     46.9       6,641     15,760     (57.9 )
  Net revenues   232,125     215,160     7.9     258,538     (10.2 )     729,269     720,849     1.2  
Non-interest expenses:                                                  
 Compensation and benefits   143,911     131,589     9.4     160,077     (10.1 )     453,399     443,104     2.3  
 Non-compensation operating expenses   62,361     54,071     15.3     56,519     10.3       175,746     159,933     9.9  
  Total non-interest expenses   206,272     185,660     11.1     216,596     (4.8 )     629,145     603,037     4.3  
Income before income taxes $ 25,853   $ 29,500     (12.4 ) $ 41,942     (38.4 )   $ 100,124   $ 117,812     (15.0 )
                                                   
As a percentage of net revenues:                                                  
 Compensation and benefits   62.0     61.2           61.9             62.2     61.5        
 Non-compensation operating expenses   26.9     25.1           21.9             24.1     22.2        
 Income before income taxes   11.1     13.7           16.2             13.7     16.3        
(5) Includes net interest, other income, and asset management & service fees.
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)
  Three Months Ended     Nine Months Ended  
(in 000s) 9/30/15   9/30/14   % Change   6/30/15   % Change     9/30/15   9/30/14   % Change  
Institutional brokerage:                                                  
 Equity $ 59,769   $ 57,408     4.1   $ 60,701     (1.5 )   $ 180,318   $ 182,847     (1.4 )
 Fixed income   60,588     47,471     27.6     51,959     16.6       177,383     167,145     6.1  
Institutional brokerage $ 120,357   $ 104,879     14.8   $ 112,660     6.8     $ 357,701   $ 349,992     2.2  
                                                   
Investment banking:                                                  
 Capital raising:                                                  
 Equity $ 33,332   $ 41,517     (19.7 ) $ 47,400     (29.7 )   $ 123,151   $ 146,913     (16.2 )
 Fixed income   26,134     12,773     104.6     33,140     (21.1 )     80,003     38,116     109.9  
  Capital raising   59,466     54,290     9.5     80,540     (26.2 )     203,154     185,029     9.8  
 Advisory fees:   49,142     50,939     (3.5 )   63,189     (22.2 )     161,773     170,068     (4.9 )
Investment banking $ 108,608   $ 105,229     3.2   $ 143,729     (24.4 )   $ 364,927   $ 355,097     2.8  
                                                   

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 nine months ended September 30, 2015. 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 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 primarily exclude acquisition related expenses which management believes are duplicative and will be eliminated, stock-based compensation and other expenses which in managements view are not representative of ongoing business.

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 nine months ended September 30, 2015 to the aforementioned expenses on a non-GAAP basis for the same period.

  Three Months Ended September 30, 2015   Nine Months Ended September 30, 2015  
(in 000s, except per share amounts) Non-GAAP   Adjustments   GAAP   Non-GAAP   Adjustments   GAAP  
Net revenues $ 591,607   $ (32)   $ 591,575   $ 1,753,051   $ (2,743)   $ 1,750,308  
                                     
Non-interest expenses:                                    
 Compensation and benefits   372,023     32,182     404,205     1,094,664     75,232     1,169,896  
 Non-compensation operating expenses   147,632     17,390     165,022     412,833     37,094     449,927  
  Total non-interest expenses   519,655     49,572     569,227     1,507,497     112,326     1,619,823  
 Income before income taxes   71,952     (49,604)     22,348     245,554     (115,069)     130,485  
 Provision for income taxes   24,247     (19,078)     5,169     92,820     (43,499)     49,321  
 Net income $ 47,705   $ (30,526)   $ 17,179   $ 152,734   $ (71,570)   $ 81,164  
                                     
Earnings per share::                                    
 Basic $ 0.69   $ (0.44)   $ 0.25   $ 2.22   $ (1.04)   $ 1.18  
 Diluted $ 0.60   $ (0.38)   $ 0.22   $ 1.95   $ (0.91)   $ 1.04  
                                     
As a percentage of net revenues:                                    
 Compensation and benefits   62.9           68.3     62.4           66.8  
 Non-compensation operating expenses   24.9           27.9     23.5           25.7  
 Income before income taxes   12.2           3.8     14.1           7.5  

Contact Information