GlobeNewswire Inc | Jul 28, 2021 07:00AM EDT

July 28, 2021

ST. LOUIS, July 28, 2021 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $189.8 million, or $1.60 per diluted common share on net revenues of $1.2 billion for the three months ended June 30, 2021, compared with net income available to common shareholders of $103.0 million, or $0.92 per diluted common share (1) on net revenues of $895.8 million for the second quarter of 2020. For the three months ended June 30, 2021, the Company reported non-GAAP net income available to common shareholders of $202.1 million, or $1.70 per diluted common share. The Companys reported GAAP net income for the three months ended June 30, 2021 was primarily impacted by merger-related expenses.

Ronald J. Kruszewski, Chairman and Chief Executive Officer, said Our results in the first half of 2021 are impressive. We generated consecutive quarters of record net revenue and our improved operating scale drove record non-GAAP earnings for both the quarter and the first half of the year. With both of the firms operating segments driving our performance, I am optimistic that these results can be sustained, as illustrated by our increased guidance for the remainder of the year.

Highlights

-- Record net revenues of $1.2 billion, increased 29% compared with the year-ago quarter. Year-to-date record net revenues of $2.3 billion, increased 27% over the comparable period last year. -- Record net income available to common shareholders of $1.60 per diluted common share, or $1.70 per diluted common share excluding the impact of merger-related expenses. This represents an increase of 74% over the year-ago quarter. -- Year-to-date record net income available to common shareholders of $3.00 per diluted common share, or $3.20 per diluted common share excluding the impact of merger-related expenses. This represents an increase of 84% over the comparable period last year. -- Record client assets of $402.4 billion, increased 31% compared with the year-ago quarter. -- Annualized return on average tangible shareholders equity (ROTCE) (6) was 29%, or 31% excluding the impact of merger-related expenses. -- Tangible book value per common share of $25.87 (8), up 29% compared with the year ago quarter.

Segment Highlights

-- Global Wealth Management reported record net revenues, up 26% compared with the year ago quarter reflecting growth in fee-based assets and client activity. -- Institutional Group reported record net revenues, up 31% compared with the year ago quarter as a result of strong advisory fee and capital raising revenues.

Financial Summary (Unaudited)($ in 000s) 2Q 2021 2Q 2020 6m 2021 6m 2020GAAP Financial Highlights: Net revenues $ 1,153,136 $ 895,817 $ 2,287,925 $ 1,808,851 Net income ^(2) $ 189,788 $ 103,044 $ 354,514 $ 184,789 Diluted EPS ^(^ $ 1.60 $ 0.92 $ 3.00 $ 1.63 1^) ^(^2^)Comp. ratio 60.0 % 61.1 % 60.8 % 62.2 %Non-comp. ratio 17.1 % 22.9 % 17.7 % 23.5 %Pre-tax margin 22.9 % 16.0 % 21.5 % 14.3 %Non-GAAP Financial Highlights: Net revenues $ 1,153,098 $ 895,817 $ 2,288,078 $ 1,809,030 Net income ^(2) $ 202,067 $ 115,335 $ 378,492 $ 207,268 ^(^3^)Diluted EPS ^(^ $ 1.70 $ 1.03 $ 3.20 $ 1.83 1^)^ (2) ^(^3^)Comp. ratio ^(^ 59.5 % 60.0 % 60.2 % 61.3 %3^)Non-comp. ratio 16.2 % 22.2 % 16.9 % 22.8 %^(^3^)Pre-tax margin 24.3 % 17.8 % 22.9 % 15.9 %^(^4^)ROCE ^(^5^) 20.6 % 14.1 % 19.7 % 12.7 %ROTCE ^(^6) 30.5 % 23.2 % 29.5 % 20.9 %Global Wealth Management (assets and loans in millions) Net revenues $ 637,567 $ 505,782 $ 1,269,062 $ 1,088,738 Pre-tax net $ 227,305 $ 156,325 $ 450,536 $ 350,492 incomeTotal client $ 402,442 $ 306,235 assetsFee-based $ 148,838 $ 106,218 client assetsBank loans, net $ 13,165 $ 10,923 ^(7)Institutional GroupNet revenues $ 520,811 $ 398,096 $ 1,026,892 $ 730,334 Equity $ 334,689 $ 211,044 $ 681,080 $ 406,372 Fixed Income $ 186,122 $ 187,052 $ 345,812 $ 323,962 Pre-tax net $ 141,494 $ 83,049 $ 258,682 $ 124,789 income

Global Wealth Management

Global Wealth Management reported record net revenues of $637.6 million for the three months ended June 30, 2021 compared with $505.8 million during the second quarter of 2020. Pre-tax net income was $227.3 million compared with $156.3 million in the second quarter of 2020.

Highlights

-- Added 26 financial advisors, including 14 experienced advisors, with total trailing 12 month production of $12 million. -- Record client assets of $402.4 billion, up 31% over the year-ago quarter. -- Private Client fee-based assets of $148.8 billion, up 40% over the year-ago quarter. -- Bank loans of $13.2 billion, up 21% over the year-ago quarter.

Net revenues increased 26% from a year ago:

-- Asset management revenues increased 49% over the year-ago quarter reflecting higher asset values and strong fee-based asset flows. -- Brokerage revenues increased 23% over the year-ago quarter reflecting strong client activity during the quarter. -- Net interest income increased 3% over the year-ago quarter driven by higher bank lending partially offset by the impact of lower interest rates.

Total Expenses:

-- Compensation expense increased over the year-ago quarter primarily driven by higher revenues. -- Provision for credit losses was impacted by the release of the allowance for credit losses driven by improvements in the outlook for macroeconomic conditions. Approximately $4.6 million of the release relates to loans that are being sold at a premium. -- Non-compensation operating expenses increased over the year-ago quarter primarily as a result of higher professional fees, travel, entertainment, and conference-related expenses. The increase was partially offset by lower net provisions for litigation matters.

Summary Results of Operations

($ in 000s) 2Q 2021 2Q 2020Net revenues $ 637,567 $ 505,782 Asset management and service fees 295,847 198,921 Brokerage revenues 194,862 159,123 Net interest income 124,686 121,564 Investment banking 11,898 8,016 Other income 10,274 18,158 Total expenses $ 410,262 $ 349,457 Compensation expense 341,367 258,291 Provision for credit losses (9,652 ) 19,210 Non-comp. opex 78,547 71,956 Pre-tax net income $ 227,305 $ 156,325 Compensation ratio 53.5 % 51.1 %Non-compensation ratio 10.8 % 18.0 %Pre-tax margin 35.7 % 30.9 %

Institutional Group

Institutional Group reported record net revenues of $520.8 million for the three months ended June 30, 2021 compared with $398.1 million during the second quarter of 2020. Pre-tax net income was $141.5 million compared with $83.0 million in the second quarter of 2020.

Highlights

-- Investment banking pipeline at record levels. -- Pre-tax margin of 27%, up from 21% in the year-ago quarter.

Investment banking revenues increased 74% from a year ago:

-- Advisory fee revenues increased 111% over the year-ago quarter on higher completed advisory transactions. -- Equity capital raising revenues increased 62% over the year-ago quarter driven by higher volumes. -- Fixed income capital raising revenues increased 16% over the year-ago quarter driven by an increase in public finance, as well as an increase in our corporate debt issuance business.

Equity brokerage revenues decreased 3% from a year ago:

-- Equity brokerage revenues declined from the year-ago quarter due to declines in cash equities driven by lower volatility and volumes.

Fixed income brokerage revenues decreased 24% from a year ago:

-- Fixed income brokerage revenues declined from the year-ago quarter due to lower volatility as well as tighter credit spreads.

Total Expenses:

-- Compensation expense increased over the year-ago quarter primarily driven by higher compensable revenues. -- Non-compensation expenses increased over the year-ago quarter primarily as a result of higher professional fees, travel, entertainment, and conference-related expenses partially offset by lower net provisions for litigation matters.



Summary Results of Operations

($ in 000s) 2Q 2021 2Q 2020 Net revenues $ 520,811 $ 398,096 Investment banking 364,545 209,019 Advisory fee revenue 206,665 97,838 Equity capital raising 102,460 63,277 Fixed income capital raising 55,420 47,904 Equity brokerage 61,459 63,193 Fixed income brokerage 91,855 120,731 Other 2,952 5,153 Total expenses $ 379,317 $ 315,047 Compensation expense 299,469 241,420 Non-comp. opex. 79,848 73,627 Pre-tax net income $ 141,494 $ 83,049 Compensation ratio 57.5 % 60.6 %Non-compensation ratio 15.3 % 18.5 %Pre-tax margin 27.2 % 20.9 %

Other Segment

Highlights

-- The Company issued $300.0 million 4.50% Non-Cumulative Preferred Stock (Series D) in July 2021 and announced the redemption of its 6.25% Non-Cumulative Preferred Stock (Series A). -- Total assets increased $4.1 billion, or 16%, over the year-ago quarter. -- Fitch Ratings affirmed the Companys rating at BBB with its outlook revised to positive during the second quarter. -- The Company repurchased $29.0 million of its outstanding common stock during the second quarter. -- Tier 1 leverage ratio increased 0.7% over the year-ago quarter. -- The Board of Directors declared a $0.15 quarterly dividend per share payable on June 15, 2021 to common shareholders of record on June 1, 2021. -- The Board of Directors declared a quarterly dividend on the outstanding shares of the Companys preferred stock payable on June 15, 2021 to shareholders of record on June 1, 2021.

($ in millions) 2Q 2021 2Q 2020 Net revenues $ (5,242 ) $ (8,061 )Pre-tax net loss $ (104,774 ) $ (96,414 )Stifel Financial Corp. Tier 1 common capital ratio ^(^9^) 15.8 % 15.3 %Tier 1 risk based capital ratio ^(^9^) 18.9 % 19.3 %Tier 1 leverage capital ratio ^(^9^) 11.7 % 11.0 %Tier 1 capital ^(^9^) $ 3,208 $ 2,606 Quarter end assets $ 29,745 $ 25,624 Average assets ^(^9^) $ 27,378 $ 23,684 Risk weighted assets ^(^9^) $ 16,952 $ 13,522 Common stock repurchases Repurchases ($ in 000s) $ 28,972 NM Number of shares (000s) 440 NM Average price $ 65.85 NM Period end shares (000s) ^(^1^) 104,865 102,855 Effective tax rate 25.0 % 24.5 %Agency Rating OutlookFitch Ratings BBB PositiveS&P Global Ratings BBB- Positive

Conference Call Information

Stifel Financial Corp. will host its second quarter 2021 financial results conference call on Wednesday, July 28, 2021, at 9:30 a.m. Eastern Time. The conference call may include forward-looking statements.

All interested parties are invited to listen to Stifels Chairman and CEO, Ronald J. Kruszewski, by dialing (877) 876-9938 and referencing conference ID 4838637. A live audio webcast of the call, as well as a presentation highlighting the Companys results, will be available through the Companys 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. Stifels broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated, including its Eaton Partners business division; Keefe, Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Stifel Independent Advisors, LLC. The Companys 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 and Stifel Bank & Trust offer 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 Companys website at www.stifel.com. For global disclosures, please visit www.stifel.com/investor-relations/press-releases.

A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the financial supplement. Both the earnings release and the financial supplement are available online in the Investor Relations section at www.stifel.com/investor-relations.

The information provided herein and in the financial supplement, including information provided on the Companys earnings conference calls, may include certain non-GAAP financial measures. The definition of such measures or reconciliation of such measures to the comparable U.S. GAAP figures are included in this earnings release and the financial supplement, both of which are available online in the Investor Relations section at www.stifel.com/investor-relations.

Cautionary Note Regarding 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. For information about the risks and important factors that could affect the Companys future results, financial condition and liquidity, see Risk Factors in Part I, Item 1A of the Companys Annual Report on Form 10-K for the year ended December 31, 2020. Forward-looking statements speak only as to the date they are made. The Company 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.

Statements about the effects of the COVID-19 pandemic on the Companys business, results, financial position and liquidity may constitute forward-looking statements and are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected.

Summary Results of Operations (Unaudited)

Three Months Ended Six Months Ended($ in 000s, except 6/30/21 6/30/20 % 3/31/21 % 6/30/21 6/30/20 % per share amounts) Change Change ChangeRevenues: Commissions $ 195,579 $ 177,028 10.5 $ 213,614 (8.4 ) $ 409,193 $ 388,126 5.4 Principal 152,597 166,017 (8.1 ) 165,006 (7.5 ) 317,603 304,683 4.2 transactionsInvestment banking 376,443 217,035 73.4 339,288 11.0 715,731 396,503 80.5 Asset management 295,869 198,939 48.7 278,147 6.4 574,016 436,714 31.4 and service feesOther income 13,235 21,514 (38.5 ) 25,634 (48.4 ) 38,869 30,721 26.5 Operating revenues 1,033,723 780,533 32.4 1,021,689 1.2 2,055,412 1,556,747 32.0 Interest revenue 133,591 128,368 4.1 127,540 4.7 261,131 289,545 (9.8 ) Total revenues 1,167,314 908,901 28.4 1,149,229 1.6 2,316,543 1,846,292 25.5 Interest expense 14,178 13,084 8.4 14,440 (1.8 ) 28,618 37,441 (23.6 ) Net revenues 1,153,136 895,817 28.7 1,134,789 1.6 2,287,925 1,808,851 26.5 Non-interest expenses: Compensation 692,054 547,174 26.5 697,914 (0.8 ) 1,389,968 1,124,353 23.6 and benefitsNon-compensation 197,057 205,683 (4.2 ) 208,983 (5.7 ) 406,040 426,432 (4.8 ) operating expensesTotal non-interest 889,111 752,857 18.1 906,897 (2.0 ) 1,796,008 1,550,785 15.8 expensesIncome before 264,025 142,960 84.7 227,892 15.9 491,917 258,066 90.6 income taxesProvision for income 65,948 35,073 88.0 54,877 20.2 120,825 63,590 90.0 taxesNet income 198,077 107,887 83.6 173,015 14.5 371,092 194,476 90.8 Preferred dividends 8,289 4,843 71.2 8,289 ? 16,578 9,687 71.1 Net income availableto common $ 189,788 $ 103,044 84.2 $ 164,726 15.2 $ 354,514 $ 184,789 91.8 shareholdersEarnings per common share: ^(^1^) Basic $ 1.76 $ 0.97 81.4 $ 1.53 15.0 $ 3.29 $ 1.74 89.1 Diluted $ 1.60 $ 0.92 73.9 $ 1.40 14.3 $ 3.00 $ 1.63 84.0 Cash dividends declared $ 0.15 $ 0.11 36.4 $ 0.15 ? $ 0.30 $ 0.22 36.4 per common share ^(^1^)Weighted average number of common shares outstanding: ^(^1^) Basic 107,837 105,791 1.9 107,746 0.1 107,795 106,358 1.4 Diluted 118,602 111,581 6.3 117,875 0.6 118,279 113,477 4.2

Non-GAAP Financial Measures

The Company utilized certain non-GAAP calculations as additional measures to aid in understanding and analyzing the Companys financial results for the three months ended June 30, 2021, June 30, 2020, and March 31, 2021. Specifically, the Company believes that the non-GAAP measures provide useful information by excluding certain items that may not be indicative of the Companys 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 Companys 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 Companys 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 Companys 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 Companys financial performance should be considered together.

The following tables provide details with respect to reconciling net income and earnings per diluted common share on a GAAP basis for the three and six months ended June 30, 2021 and 2020, and the three months ended March 31, 2021 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

Three Months Ended Six Months Ended($ in 000s, except per 6/30/21 6/30/20 6/30/21 6/30/20 share amounts)GAAP net income $ 198,077 $ 107,887 $ 371,092 $ 194,476 Preferred dividend 8,289 4,843 16,578 9,687 Net income available to 189,788 103,044 354,514 184,789 common shareholders Non-GAAP adjustments: Merger-related ^(^10^) 16,368 16,259 31,797 29,769 Provision for income (4,089 ) (3,968 ) (7,819 ) (7,290 )taxes ^(^11^)Total non-GAAP 12,279 12,291 23,978 22,479 adjustmentsNon-GAAP net incomeavailable $ 202,067 $ 115,335 $ 378,492 $ 207,268 to common shareholders Weighted averagediluted shares 118,602 111,581 118,279 113,477 outstanding ^(^1^) GAAP earnings perdiluted common share ^ $ 1.67 $ 0.97 $ 3.14 $ 1.71 (^1^)Non-GAAP adjustments ^ 0.10 0.11 0.20 0.20 (^1^)Non-GAAP earnings perdiluted common share ^ $ 1.77 $ 1.08 $ 3.34 $ 1.91 (^1^) GAAP earnings perdiluted common share $ 1.60 $ 0.92 $ 3.00 $ 1.63 available to commonshareholders ^(^1^)Non-GAAP adjustments ^ 0.10 0.11 0.20 0.20 (^1^)Non-GAAP earnings perdiluted common shareavailable to $ 1.70 $ 1.03 $ 3.20 $ 1.83 common shareholders ^(^1^)

GAAP to Non-GAAP Reconciliation

Three Months Ended Six Months Ended($ in 000s) 6/30/21 6/30/20 6/30/21 6/30/20GAAP compensation $ 692,054 $ 547,174 $ 1,389,968 $ 1,124,353 and benefitsAs a percentage of 60.0 % 61.1 % 60.8 % 62.2 %net revenuesNon-GAAP adjustments:Merger-related ^ (6,119 ) (9,710 ) (12,293 ) (16,137 )(10) Non-GAAPcompensation and $ 685,935 $ 537,464 $ 1,377,675 $ 1,108,216 benefitsAs a percentage ofnon-GAAP net 59.5 % 60.0 % 60.2 % 61.3 %revenues GAAPnon-compensation $ 197,057 $ 205,683 $ 406,040 $ 426,432 expensesAs a percentage of 17.1 % 22.9 % 17.7 % 23.5 %net revenuesNon-GAAP adjustments:Merger-related ^ (10,287 ) (6,549 ) (19,351 ) (13,453 )(10) Non-GAAPnon-compensation $ 186,770 $ 199,134 $ 386,689 $ 412,979 expensesAs a percentage ofnon-GAAP net 16.2 % 22.2 % 16.9 % 22.8 %revenuesTotalmerger-related $ 16,368 $ 16,259 $ 31,797 $ 29,769 expenses

Footnotes

^(1) All share and per share information has been retroactively adjusted to reflect the December 2020 three-for-two stock split. ^(2) Represents available to common shareholders. ^(3) Reconciliations of the Company?s GAAP results to these non-GAAP measures are discussed within and under ?Non-GAAP Financial Measures.? Non-GAAP pre-tax margin for the three months ended June 30, 2021 of 24.3% is calculated by adding non-GAAP adjustments of $16.4 million to our GAAP income before income taxes of $264.0 million and dividing it by non-GAAP net revenues for the quarter of $1.2 billion. Non-GAAP pre-tax ^(4) margin for the six months ended June 30, 2021 of 22.9% is calculated by adding non-GAAP adjustments of $31.8 million to our GAAP income before income taxes of $491.9 million and dividing it by non-GAAP net revenues for the period of $2.3 billion. Reconciliations of the Company?s GAAP results to certain non-GAAP measures is discussed within and under ?Non-GAAP Financial Measures.? Annualized return on average common shareholders? equity (?ROCE?) is calculated by dividing annualized net income applicable to common ^(5) shareholders by average common shareholders? equity or, in the case of non-GAAP ROE, calculated by dividing non-GAAP net income applicable to commons shareholders by average common shareholders? equity. Annualized return on average tangible common shareholders? equity (?ROTCE?) is calculated by dividing annualized net income applicable to common shareholders by average tangible shareholders? equity or, in the case of non-GAAP ROTE, calculated by dividing non-GAAP net income applicable to common shareholders by average tangible shareholders? ^(6) equity. Tangible common shareholders? equity equals total common shareholders? equity less goodwill and identifiable intangible assets and the deferred taxes on goodwill and intangible assets. Average deferred taxes on goodwill and intangible assets was $53.1 million, $48.5 million, and $51.7 million, as of June 30, 2021 and 2020, and March 31, 2021, respectively. ^(7) Includes loans held for sale. Tangible book value per common share represents shareholders? equity (excluding preferred stock) divided by period end common shares ^(8) outstanding. Tangible common shareholders? equity equals total common shareholders? equity less goodwill and identifiable intangible assets and the deferred taxes on goodwill and intangible assets. ^(9) Capital ratios are estimates at time of the Company?s earnings release. Primarily related to charges attributable to integration-related activities, signing bonuses, amortization of restricted stock awards and ^ promissory notes issued as retention, and amortization of intangible (10) 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. ^ Primarily represents the Company?s effective tax rate for the period (11) applied to the non-GAAP adjustments.

Media Contact: Neil Shapiro (212) 271-3447Investor Contact: Joel Jeffrey (212) 271-3610www.stifel.com/investor-relations