SOURCE: Stifel Financial Corp.

Stifel Financial Corp.

October 30, 2017 16:01 ET

Stifel Reports Third Quarter 2017 Financial Results

ST. LOUIS, MO--(Marketwired - October 30, 2017) - Stifel Financial Corp. (NYSE: SF)

  • Net revenues of $721.2 million, increased 12.3% compared with the year-ago quarter and decreased 0.6% sequentially.
  • Record net revenues and pre-tax operating income in Global Wealth Management.
  • Record pre-tax operating margin in Institutional Group.
  • Net income available to common shareholders of $64.2 million, or $0.79 per diluted common share.
  • Non-GAAP net income available to common shareholders of $71.6 million, or $0.89 per diluted common share.
  • Record client assets of $264.7 billion, increased 12.9% compared with the year-ago quarter and 2.6% sequentially.
  • Payment of regular quarterly dividend of $0.10 per common share.
  • Issuance of $225 million of Senior Notes (settled in October 2017).
  • Assets of $20.5 billion, increased 4.9% from June 30, 2017.
  • Bank net interest margin of 2.80% increased 3 basis points sequentially.

Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $64.2 million, or $0.79 per diluted common share on net revenues of $721.2 million for the three months ended September 30, 2017, compared with net income available to common shareholders of $16.3 million, or $0.21 per diluted common share, on net revenues of $642.0 million for the third quarter of 2016.

For the three months ended September 30, 2017, the Company reported non-GAAP net income available to common shareholders of $71.6 million, or $0.89 per diluted common share.

For the nine months ended September 30, 2017, the Company reported net income available to common shareholders of $177.8 million, or $2.21 per diluted common share on record net revenues of $2.1 billion, compared with net income available to common shareholders of $53.1 million, or $0.69 per diluted share, on net revenues of $1.9 billion for the comparable period in 2016.

For the nine months ended September 30, 2017, the Company reported non-GAAP net income available to common shareholders of $202.8 million, or $2.52 per diluted common share.

Chairman's Comments

"We are pleased with our results in the third quarter, as we generated the second highest quarterly revenue in our firm's history, down modestly from our record results in the previous quarter. Additionally, we generated our highest pre-tax operating margin in nearly seven years during the quarter as our focus on expense management continues to improve our bottom line growth. Less than two years ago, I commented that we would focus on optimizing our existing business to deliver stronger top and bottom line results. Our performance in the third quarter underscores the progress we've made in a relatively short period of time as the investments we made in the business in the past few years continue to drive growth despite market cyclicality," stated Ronald J. Kruszewski, Chairman & CEO of Stifel.

    
Financial Highlights (Unaudited)  Three Months Ended  
(in 000s, except per share data)  GAAP
9/30/17
 GAAP
9/30/16
 %
Change
 GAAP 6/30/17  %
Change
   Non-
GAAP (1)
9/30/17
 Non-
GAAP (1)
6/30/17
 %
Change
 
Net revenues  $ 721,169  $ 641,986  12.3  $ 725,647  (0.6 )  $ 721,169  $ 725,647  (0.6 )
Net income  $ 66,536  $ 17,814  273.5  $ 52,811  26.0    $ 73,949  $ 73,991  (0.1 )
 Preferred dividend    2,343    1,563  49.9    2,344  (0.0 )    2,343    2,344  (0.0 )
Net income available to common shareholders  $ 64,193  $ 16,251  295.0  $ 50,467  27.2    $ 71,606  $ 71,647  (0.1 )
Earnings per diluted common share  $ 0.82  $ 0.23  256.5  $ 0.66  24.2    $ 0.91  $ 0.92  (1.1 )
Earnings per diluted common share available to common shareholders  $ 0.79  $ 0.21  276.2  $ 0.63  25.4    $ 0.89  $ 0.90  (1.1 )
 Compensation ratio    62.2%    67.6%       62.5%         61.1%    61.4%     
 Non-compensation ratio    22.8%    28.0%       26.0%         22.1%    22.3%     
 Pre-tax operating margin    15.0%    4.4%       11.5%         16.8%    16.3%     
                         
   
Financial Highlights (Unaudited)  Nine Months Ended
(in 000s, except per share data)  GAAP
9/30/17
 GAAP
9/30/16
 %
Change
 Non-
GAAP (1)
9/30/17
 Non-
GAAP (1)
9/30/16
 %
Change
Net revenues  $ 2,122,347  $ 1,914,105  10.9  $ 2,124,331  $ 1,918,207  10.7
Net income  $ 184,859  $ 54,640  238.3  $ 209,789  $ 133,083  57.6
 Preferred dividend    7,031    1,563  349.8    7,031    1,563  349.8
Net income available to common shareholders  $ 177,828  $ 53,077  235.0  $ 202,758  $ 131,520  54.2
Earnings per diluted common share  $ 2.29  $ 0.71  222.5  $ 2.60  $ 1.74  49.4
Earnings per diluted common share available to common shareholders  $ 2.21  $ 0.69  220.3  $ 2.52  $ 1.72  46.5
 Compensation ratio    63.1%    68.2%       61.6%    63.0%   
 Non-compensation ratio    24.2%    27.2%       22.4%    24.2%   
 Pre-tax operating margin    12.7%    4.6%       16.0%    12.8%   

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $249.6 million, a 13.4% decrease compared with the third quarter of 2016 and a 6.8% decrease compared with the second quarter of 2017.

    
   Three Months Ended  
(in 000s)  9/30/17  9/30/16  %
Change
   6/30/17  %
Change
 
Global Wealth Management brokerage revenues  $ 158,334  $ 165,476  (4.3 )  $ 168,085  (5.8 )
Institutional brokerage:                         
 Equity    45,209    51,004  (11.4 )    50,869  (11.1 )
 Fixed income    46,079    71,794  (35.8 )    49,013  (6.0 )
Total institutional brokerage    91,288    122,798  (25.7 )    99,882  (8.6 )
Total brokerage revenues  $ 249,622  $ 288,274  (13.4 )  $ 267,967  (6.8 )
                
  • Global wealth management brokerage revenues were $158.3 million, a 4.3% decrease compared with the third quarter of 2016 and a 5.8% decrease compared with the second quarter of 2017.
  • Institutional equity brokerage revenues were $45.2 million, an 11.4% decrease compared with the third quarter of 2016 and an 11.1% decrease compared with the second quarter of 2017.
  • Institutional fixed income brokerage revenues were $46.1 million, a 35.8% decrease compared with the third quarter of 2016 and a 6.0% decrease compared with the second quarter of 2017.

Investment Banking Revenues

Investment banking revenues were $181.9 million, a 25.6% increase compared with the third quarter of 2016 and a 1.8% decrease compared with the second quarter of 2017.

       
    Three Months Ended  
(in 000s)   9/30/17     9/30/16     %
Change
    6/30/17     %
Change
 
Capital raising:                                        
 Global Wealth Management   $ 9,072     $ 12,212       (25.7 )   $ 10,641       (14.7 )
                                         
  Equity     43,277       20,782       108.2       45,664       (5.2 )
  Fixed income     27,573       25,483       8.2       46,495       (40.7 )
 Institutional Group     70,850       46,265       53.1       92,159       (23.1 )
  Capital raising     79,922       58,477       36.7       102,800       (22.3 )
Advisory fees     101,982       86,322       18.1       82,461       23.7  
Total investment banking   $ 181,904     $ 144,799       25.6     $ 185,261       (1.8 )
                     
  • Global wealth management capital raising revenues were $9.1 million, a 25.7% decrease compared with the third quarter of 2016 and a 14.7% decrease compared with the second quarter of 2017.
  • Institutional equity capital raising revenues were $43.3 million, a 108.2% increase compared with the third quarter of 2016 and a 5.2% decrease compared with the second quarter of 2017.
  • Institutional fixed income capital raising revenues were $27.6 million, an 8.2% increase compared with the third quarter of 2016 and a 40.7% decrease compared with the second quarter of 2017.
  • Advisory fee revenues were $102.0 million, an 18.1% increase compared with the third quarter of 2016 and a 23.7% increase compared with the second quarter of 2017.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $179.8 million, a 24.7% increase compared with the third quarter of 2016 and a 4.0% increase compared with the second quarter of 2017. The increase from the comparative period in 2016 is primarily attributable to the growth in the value of fee-based accounts and an increase in the Federal Funds rate, which increased fees earned on cash balances.

Net Interest Income

Record net interest income of $100.2 million, an 80.6% increase compared with the third quarter of 2016 and an 8.6% increase compared with the second quarter of 2017.

  • Interest income was $117.9 million, a 57.4% increase compared with the third quarter of 2016 and an 8.2% increase compared with the second quarter of 2017. Interest income was impacted by the continued growth of interest-earning assets.
  • Interest expense was $17.6 million, a 9.1% decrease compared with the third quarter of 2016 and a 5.9% increase compared with the second quarter of 2017.

Compensation and Benefits Expenses

For the quarter ended September 30, 2017, compensation and benefits expenses were $448.4 million, which included $8.1 million of merger-related and severance expenses. This compares with $434.2 million in the third quarter of 2016 and $453.9 million in the second quarter of 2017. Excluding merger-related expenses, compensation and benefits as a percentage of net revenues were 61.1% in the third quarter of 2017.

             
    Three Months
Ended 9/30/17
    Nine Months
Ended 9/30/17
 
GAAP compensation and benefits   $ 448,410     $ 1,338,673  
 As a percentage of net revenues     62.2 %     63.1 %
Non-GAAP adjustments:(2)                
 Merger-related     (5,518 )     (20,874 )
 Severance     (2,538 )     (9,493 )
      (8,056 )     (30,367 )
Non-GAAP compensation and benefits   $ 440,354     $ 1,308,306  
 As a percentage of non-GAAP net revenues     61.1 %     61.6 %
          

Non-Compensation Operating Expenses

For the quarter ended September 30, 2017, non-compensation operating expenses were $164.6 million, which included merger-related expenses of $4.7 million. This compares with $179.8 million in the third quarter of 2016 and $188.6 million in the second quarter of 2017. Excluding litigation and merger-related expenses, non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2017 were 22.1%.

          
  Three Months
Ended 9/30/17
   Nine Months
Ended 9/30/17
 
GAAP non-compensation expenses $ 164,620    $ 513,318  
 As a percentage of net revenues   22.8 %    24.2 %
Non-GAAP adjustments:(2)             
 Merger-related   (4,725 )    (16,899 )
 Litigation-related   -      (20,000 )
    (4,725 )    (36,899 )
Non-GAAP non-compensation expenses $ 159,895    $ 476,419  
 As a percentage of non-GAAP net revenues   22.1 %    22.4 %
         

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended September 30, 2017 was 38.5%. This compares with an effective income tax rate of 36.3% for the third quarter of 2016 and 36.5% for the second quarter of 2017. The adjusted non-GAAP effective income tax rate for the quarter ended September 30, 2017 was 38.9%.

          
  Three Months
Ended 9/30/17
   Nine Months
Ended 9/30/17
 
GAAP provision for income taxes $ 41,603    $ 85,497  
 GAAP effective tax rate   38.5 %    31.6 %
Non-GAAP adjustments:(2)             
 Litigation and merger-related and severance   5,072      26,869  
 Excess tax benefits from stock-based compensation (3)   297      17,452  
    5,369      44,321  
Non-GAAP provision for income taxes $ 46,972    $ 129,818  
 Non-GAAP effective tax rate   38.9 %    38.2 %
         

Conference Call Information

Stifel Financial Corp. will host its third quarter 2017 financial results conference call on Monday, October 30, 2017, 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 (888) 676-3684 and referencing conference ID #3699219. 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 Eaton Partners LLC, and in the United Kingdom and Europe through Stifel Nicolaus Europe 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. and Stifel Trust Company Delaware, N.A. offer 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 000s, except per share amounts) 9/30/17  9/30/16  %
Change
   6/30/17  %
Change
   9/30/17  9/30/16  %
Change
 
Revenues:                                       
 Commissions $ 162,612  $ 171,272  (5.1 )  $ 172,264  (5.6 )  $ 510,150  $ 551,306  (7.5 )
 Principal transactions   87,010    117,002  (25.6 )    95,703  (9.1 )    299,570    364,376  (17.8 )
  Brokerage Revenues   249,622    288,274  (13.4 )    267,967  (6.8 )    809,720    915,682  (11.6 )
                                        
 Capital raising   79,922    58,477  36.7      102,800  (22.3 )    256,638    178,193  44.0  
 Advisory fees   101,982    86,322  18.1      82,461  23.7      237,379    200,389  18.5  
  Investment banking   181,904    144,799  25.6      185,261  (1.8 )    494,017    378,582  30.5  
 Asset management and service fees   179,848    144,206  24.7      172,914  4.0      515,501    433,305  19.0  
 Other income   9,558    9,209  3.8      7,198  32.8      25,508    33,804  (24.5 )
Operating Revenue   620,932    586,488  5.9      633,340  (2.0 )    1,844,746    1,761,373  4.7  
 Interest Revenue   117,862    74,881  57.4      108,951  8.2      327,766    203,488  61.1  
Total Revenue   738,794    661,369  11.7      742,291  (0.5 )    2,172,512    1,964,861  10.6  
 Interest Expense   17,625    19,383  (9.1 )    16,644  5.9      50,165    50,756  (1.2 )
Net Revenue   721,169    641,986  12.3      725,647  (0.6 )    2,122,347    1,914,105  10.9  
                                        
Non-interest Expenses:                                       
 Compensation and benefits   448,410    434,236  3.3      453,876  (1.2 )    1,338,673    1,305,372  2.6  
 Occupancy and equipment rental   57,427    62,453  (8.0 )    57,892  (0.8 )    167,864    178,455  (5.9 )
 Communication and office supplies   34,650    31,182  11.1      34,192  1.3      102,686    105,268  (2.5 )
 Commissions and floor brokerage   11,232    10,777  4.2      11,232  -      33,187    34,653  (4.2 )
 Provision for loan losses   7,990    3,561  124.4      5,856  36.4      19,980    9,643  107.2  
 Other operating expenses   53,321    71,795  (25.7 )    79,401  (32.8 )    189,601    193,026  (1.8 )
   Total non-interest expenses   613,030    614,004  (0.2 )    642,449  (4.6 )    1,851,991    1,826,417  1.4  
Income before income taxes   108,139    27,982  286.5      83,198  30.0      270,356    87,688  208.3  
 Provision for income taxes   41,603    10,168  309.2      30,387  36.9      85,497    33,048  158.7  
Net income   66,536    17,814  273.5      52,811  26.0      184,859    54,640  238.3  
 Preferred dividends   2,343    1,563  49.9      2,344  (0.0 )    7,031    1,563  349.8  
Net income available to common shareholders $ 64,193  $ 16,251  295.0    $ 50,467  27.2    $ 177,828  $ 53,077  235.0  
Earnings per common share:                                       
 Basic $ 0.94  $ 0.24  291.7    $ 0.74  27.0    $ 2.60  $ 0.79  229.1  
 Diluted $ 0.79  $ 0.21  276.2    $ 0.63  25.4    $ 2.21  $ 0.69  220.3  
                                        
Weighted average number of common shares outstanding:                              
 Basic   68,522    66,482  3.1      68,556  (0.0 )    68,488    66,950  2.3  
 Diluted   80,881    77,544  4.3      80,021  1.1      80,562    76,612  5.2  
                        
   
Summary Segment Results (Unaudited)  
  
   Three Months Ended    Nine Months Ended  
(in 000s)  9/30/17    9/30/16    %
Change
   6/30/17    %
Change
   9/30/17    9/30/16    %
Change
 
Net revenues:                                                  
 Global Wealth Management  $ 453,558    $ 390,032    16.3    $ 451,990    0.3    $ 1,348,280    $ 1,155,875    16.6  
 Institutional Group    264,747      258,800    2.3      276,153    (4.1 )    778,367      760,996    2.3  
 Other    2,864      (6,846 )  141.8      (2,496 )  214.7      (4,300 )    (2,766 )  (55.5 )
  Total net revenues  $ 721,169    $ 641,986    12.3    $ 725,647    (0.6 )  $ 2,122,347    $ 1,914,105    10.9  
                                                   
Operating expenses:                                                  
 Global Wealth Management  $ 291,802    $ 280,953    3.9    $ 298,753    (2.3 )  $ 891,235    $ 848,409    5.0  
 Institutional Group    213,030      213,877    (0.4 )    223,261    (4.6 )    633,886      644,368    (1.6 )
 Other    108,198      119,174    (9.2 )    120,435    (10.2 )    326,870      333,640    (2.0 )
  Total operating expenses  $ 613,030    $ 614,004    (0.2 )  $ 642,449    (4.6 )  $ 1,851,991    $ 1,826,417    1.4  
                                                   
Operating contribution:                                                  
 Global Wealth Management  $ 161,756    $ 109,079    48.3    $ 153,237    5.6    $ 457,045    $ 307,466    48.6  
 Institutional Group    51,717      44,923    15.1      52,892    (2.2 )    144,481      116,628    23.9  
 Other    (105,334 )    (126,020 )  (16.4 )    (122,931 )  (14.3 )    (331,170 )    (336,406 )  (1.6 )
  Income before income taxes  $ 108,139    $ 27,982    286.5    $ 83,198    30.0    $ 270,356    $ 87,688    208.3  
                                                   
As a percentage of net revenues:                                                  
 Compensation and benefits                                                  
  Global Wealth Management    49.1      55.2           50.7           50.5      56.7       
  Institutional Group    60.0      61.1           59.6           60.0      60.7       
 Non-comp. operating expenses                                                  
  Global Wealth Management    15.2      16.9           15.4           15.6      16.7       
  Institutional Group    20.5      21.5           21.2           21.4      24.0       
 Income before income taxes                                                  
  Global Wealth Management    35.7      27.9           33.9           33.9      26.6       
  Institutional Group    19.5      17.4           19.2           18.6      15.3       
 Consolidated pre-tax margin (4) (5)    15.0      4.4           11.5           12.7      4.6       
                              
   
Stifel Financial Corp.  
Selected Key Metrics  
(Unaudited)  
                      
Financial metrics:  As of and For the Three Months Ended  
(in 000s, except percentages and per share amounts)  9/30/17    9/30/16    6/30/17  
 Total assets  $ 20,484,080    $ 17,204,908    $ 19,533,575  
 Total equity    2,932,405      2,691,690      2,845,309  
 Book value per common share  $ 40.67    $ 38.38    $ 39.47  
 Return on common equity (6)    9.7 %    2.8 %    7.9 %
 Non-GAAP return on common equity (1) (6)    10.8 %    8.7 %    11.1 %
 Return on tangible common equity (7)    16.1 %    5.0 %    13.4 %
 Non-GAAP return on tangible common equity (1) (7)    17.8 %    15.3 %    18.8 %
 Tier 1 common capital ratio (8)    18.3 %    19.5 %    18.2 %
 Tier 1 risk based capital ratio (8)    20.5 %    22.0 %    20.5 %
 Tier 1 leverage capital ratio (8)    10.4 %    11.8 %    10.3 %
 Pre-tax margin on net revenues    15.0 %    4.4 %    11.5 %
 Non-GAAP pre-tax margin on net revenues (1)    16.8 %    14.0 %    16.3 %
 Effective tax rate    38.5 %    36.3 %    36.5 %
 Non-GAAP effective tax rate (1)    38.9 %    39.4 %    37.3 %
             
   
Statistical Information  
(in 000s)  9/30/17  9/30/16  %
Change
   6/30/17  %
Change
 
Statistical Information:                         
 Financial advisors (9)    2,252    2,280  (1.2 )    2,277  (1.1 )
 Locations    395    396  (0.3 )    399  (1.0 )
 Total client assets  $ 264,717,000  $ 234,490,000  12.9    $ 258,097,000  2.6  
 Fee-based client assets  $ 82,999,000  $ 67,927,000  22.2    $ 79,177,000  4.8  
 Client money market and insured product  $ 17,420,000  $ 18,478,000  (5.7 )  $ 17,831,000  (2.3 )
 Secured client lending (10)  $ 3,037,158  $ 2,770,783  9.6    $ 2,999,461  1.3  
                
 
Stifel Bank & Trust - a component of Global Wealth Management
Selected Key Metrics
(Unaudited)
Selected operating data:  Three Months Ended  Nine Months Ended
(in 000s, except percentages)  9/30/17    9/30/16    %
Change
 6/30/17    %
Change
 9/30/17    9/30/16    %
Change
 Net Interest Income  $ 97,300    $ 57,994    67.8  $ 90,795    7.2  $ 272,114    $ 152,183    78.8
 Bank loan loss provision    7,990      3,561    124.4    5,856    36.4    19,980      9,643    107.2
 Charge-offs    -      283    n/m    2,953    n/m    2,953      296    n/m
 Net Interest Margin    2.80 %    2.41 %  16.2    2.77 %  1.1    2.74 %    2.40 %  14.2
                           
     
Financial Metrics: As of  
(in 000s, except percentages) 9/30/17    9/30/16    6/30/17  
 Total Assets $ 14,538,750    $ 11,018,615    $ 13,598,260  
 Total Equity   1,019,257      740,348      978,626  
 Total Loans, net   6,949,369      5,173,992      6,299,669  
 Total Deposits   12,883,961      9,885,441      12,050,474  
 Available-for-sale securities, at fair value   3,687,248      3,139,438      3,448,548  
 Held-to-maturity securities, at amortized cost   3,550,962      2,237,112      3,304,090  
 Residential real estate   2,517,543      1,804,112      2,248,528  
 Commercial and industrial   2,380,417      1,558,284      2,064,052  
 Securities-based loans   1,839,981      1,452,913      1,755,592  
 Commercial real estate   78,614      63,680      71,517  
 Loans held for sale   166,335      217,316      139,676  
 Common equity tier 1 capital ratio (8)   14.4 %    13.7 %    14.9 %
 Tier 1 capital ratio (8)   14.4 %    13.7 %    14.9 %
 Total capital ratio (8)   15.3 %    14.5 %    15.7 %
 Tier 1 leverage ratio (8)   7.1 %    7.5 %    7.2 %
Credit Metrics:                    
 Allowance for loan losses $ 62,229    $ 39,145    $ 54,202  
 Allowance as a percentage of retained loans   0.92 %    0.79 %    0.88 %
 Net charge-offs as a percentage of average loans   0.00 %    0.01 %    0.05 %
 Total nonperforming assets   21,776      28,301      21,219  
 Nonperforming assets as % of total assets   0.15 %    0.25 %    0.15 %
            
   
Global Wealth Management Summary Results of Operations (Unaudited)  
   Three Months Ended    Nine Months Ended  
(in 000s)  9/30/17  9/30/16  %
Change
   6/30/17  %
Change
   9/30/17  9/30/16  %
Change
 
Revenues:                                        
 Commissions  $ 115,410  $ 117,596  (1.9 )  $ 120,344  (4.1 )  $ 356,331  $ 376,390  (5.3 )
 Principal transactions    42,924    47,880  (10.4 )    47,741  (10.1 )    141,582    134,228  5.5  
   Brokerage revenues    158,334    165,476  (4.3 )    168,085  (5.8 )    497,913    510,618  (2.5 )
                                         
 Asset management and service fees    179,830    143,152  25.6      172,889  4.0      515,383    431,864  19.3  
 Net interest    102,831    63,981  60.7      95,698  7.5      288,224    170,036  69.5  
 Investment banking    9,072    12,212  (25.7 )    10,641  (14.7 )    31,567    30,123  4.8  
 Other income    3,491    5,211  (33.0 )    4,677  (25.4 )    15,193    13,234  14.8  
  Net revenues    453,558    390,032  16.3      451,990  0.3      1,348,280    1,155,875  16.6  
Non-interest expenses:                                        
 Compensation and benefits    222,621    215,151  3.5      229,158  (2.9 )    680,250    655,119  3.8  
 Non-compensation operating expenses    69,181    65,802  5.1      69,595  (0.6 )    210,985    193,290  9.2  
  Total non-interest expenses    291,802    280,953  3.9      298,753  (2.3 )    891,235    848,409  5.0  
Income before income taxes  $ 161,756  $ 109,079  48.3    $ 153,237  5.6    $ 457,045  $ 307,466  48.6  
                                         
As a percentage of net revenues:                                        
 Compensation and benefits    49.1    55.2         50.7         50.5    56.7     
 Non-compensation operating expenses    15.2    16.9         15.4         15.6    16.7     
 Income before income taxes    35.7    27.9         33.9         33.9    26.6     
                         
   
Institutional Group Summary Results of Operations (Unaudited)  
   Three Months Ended    Nine Months Ended  
(in 000s)  9/30/17  9/30/16  %
Change
   6/30/17  %
Change
   9/30/17  9/30/16  %
Change
 
Revenues:                                        
 Commissions  $ 47,202  $ 53,676  (12.1 )  $ 51,920  (9.1 )  $ 153,819  $ 174,916  (12.1 )
 Principal transactions    44,086    69,122  (36.2 )    47,962  (8.1 )    157,988    230,148  (31.4 )
  Brokerage revenues    91,288    122,798  (25.7 )    99,882  (8.6 )    311,807    405,064  (23.0 )
 Capital raising    70,850    46,265  53.1      92,159  (23.1 )    225,071    147,260  52.8  
 Advisory fees    101,982    86,322  18.1      82,461  23.7      237,379    201,199  18.0  
  Investment banking    172,832    132,587  30.4      174,620  (1.0 )    462,450    348,459  32.7  
 Other (11)    627    3,415  (81.6 )    1,651  (62.0 )    4,110    7,473  (45.0 )
  Net revenues    264,747    258,800  2.3      276,153  (4.1 )    778,367    760,996  2.3  
Non-interest expenses:                                        
 Compensation and benefits    158,926    158,126  0.5      164,532  (3.4 )    467,098    462,115  1.1  
 Non-compensation operating expenses    54,104    55,751  (3.0 )    58,729  (7.9 )    166,788    182,253  (8.5 )
  Total non-interest expenses    213,030    213,877  (0.4 )    223,261  (4.6 )    633,886    644,368  (1.6 )
Income before income taxes  $ 51,717  $ 44,923  15.1    $ 52,892  (2.2 )  $ 144,481  $ 116,628  23.9  
                                         
As a percentage of net revenues:                                        
 Compensation and benefits    60.0    61.1         59.6         60.0    60.7     
 Non-compensation operating expenses    20.5    21.5         21.2         21.4    24.0     
 Income before income taxes    19.5    17.4         19.2         18.6    15.3     
                         

Non-GAAP Financial Measures

The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Company's financial results for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016 and the nine months ended September 30, 2017 and 2016. 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. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. These non-GAAP measures primarily exclude expenses which management believes are, in some instances, non-recurring and not representative of on-going business.

A limitation of utilizing these non-GAAP measures is that the GAAP accounting effects of these 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 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 income and earnings per diluted common share on a GAAP basis for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016 and the nine months ended September 30, 2017 and 2016 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

          
   Three Months Ended   Nine Months Ended  
(in 000s)  9/30/17   9/30/16   6/30/17   9/30/17   9/30/16  
GAAP net income  $ 66,536   $ 17,814   $ 52,811   $ 184,859   $ 54,640  
 Preferred dividend    2,343     1,563     2,344     7,031     1,563  
Net income available to common shareholders    64,193     16,251     50,467     177,828     53,077  
                                
Non-GAAP adjustments:                               
 Merger-related (12)    10,244     50,446     12,400     39,758     117,790  
 Litigation-related (13)    -     11,796     20,000     20,000     11,796  
 Severance    2,538     -     2,420     9,493     -  
 Provision for income taxes    (5,369 )   (25,337 )   (13,640 )   (44,321 )   (51,143 )
Total non-GAAP adjustments    7,413     36,905     21,180     24,930     78,443  
Non-GAAP net income available to common shareholders  $ 71,606   $ 53,156   $ 71,647   $ 202,758   $ 131,520  
                                
Weighted average diluted shares outstanding    80,881     77,544     80,021     80,562     76,612  
                                
GAAP earnings per diluted common share  $ 0.82   $ 0.23   $ 0.66   $ 2.29   $ 0.71  
Non-GAAP adjustments    0.09     0.48     0.26     0.31     1.03  
Non-GAAP earnings per diluted common share  $ 0.91   $ 0.71   $ 0.92   $ 2.60   $ 1.74  
                                
GAAP earnings per diluted common share available to common shareholders  $ 0.79   $ 0.21   $ 0.63   $ 2.21   $ 0.69  
Non-GAAP adjustments    0.10     0.48     0.27     0.31     1.03  
Non-GAAP earnings per diluted common share available to common shareholders  $ 0.89   $ 0.69   $ 0.90   $ 2.52   $ 1.72  
                 

Footnotes

(1) Reconciliations of the Company's GAAP results to these non-GAAP measures are discussed within and under "Non-GAAP Financial Measures."
(2) See further discussion of non-GAAP adjustments under "Non-GAAP Financial Measures."
(3) During the first quarter of 2017, the Company adopted new accounting guidance associated with stock-based compensation.
(4) Non-GAAP pre-tax margin for the three months ended September 30, 2017 of 16.8% is calculated by adding merger-related and severance non-GAAP adjustments of $12.8 million to our GAAP income before income taxes of $108.1 million and dividing it by non-GAAP net revenues for the quarter of $721.2 million. Reconciliations of the Company's GAAP results to certain non-GAAP measures is discussed within and under "Non-GAAP Financial Measures."
(5) Non-GAAP pre-tax margin for the nine months ended September 30, 2017 of 16.0% is calculated by adding litigation and merger-related and severance non-GAAP adjustments of $69.3 million to our GAAP income before income taxes of $270.4 million and dividing it by non-GAAP net revenues for the quarter of $2,124.3 million. Reconciliations of the Company's GAAP results to certain non-GAAP measures is discussed within and under "Non-GAAP Financial Measures."
(6) Computed by dividing annualized net income by average common shareholders' equity or, in the case of non-GAAP return on common equity, computed by dividing non-GAAP net income by average common shareholders' equity.
(7) Computed by dividing annualized net income by average tangible shareholders' equity or, in the case of non-GAAP return on tangible common equity, computed by dividing non-GAAP net income by average tangible shareholders' equity. Tangible common shareholders' equity equals total common shareholders' equity less goodwill and identifiable intangible assets.
(8) Capital ratios are estimates at time of the Company's earning release.
(9) Includes 116, 125, and 119 independent contractors at September 30, 2017, September 30, 2016, and June 30, 2017, respectively.
(10) Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at Stifel Bank.
(11) Includes net interest, asset management and service fees, and other income.
(12) Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and promissory notes issued as retention, professional fees, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company's on-going business.
(13) Primarily related to costs associated with the Company's previously disclosed legal matters.

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