Stifel Reports Third Quarter 2018 Financial Results - Stifel Financial (NYSE:SF)

Record net income available to common shareholders of $101.5 million, or $1.25 per diluted common share.
Net revenues of $738.3 million, increased 2.4% compared with the year-ago quarter.
Record net revenues in Global Wealth Management.
Non-GAAP net income available to common shareholders of $110.1 million, or $1.35 per diluted common share.
Record client assets of $289.1 billion, increased 9.2% compared with the year-ago quarter and 4.1% sequentially.
Non-GAAP return on tangible common equity of 25.2%.
Completed the acquisition of Business Bancshares, Inc.

ST. LOUIS, Oct. 30, 2018 (GLOBE NEWSWIRE) -- Stifel Financial Corp. SF today reported record net income available to common shareholders of $101.5 million, or $1.25 per diluted common share on net revenues of $738.3 million for the three months ended September 30, 2018, compared with 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 third quarter of 2017.

For the three months ended September 30, 2018, the Company reported non-GAAP net income available to common shareholders of $110.1 million, or $1.35 per diluted common share. The Company's reported GAAP net income for the three months ended September 30, 2018 was primarily impacted by merger-related expenses. Details discussed below and in the "Non-GAAP Financial Matters" section.

Chairman's Comments

"I'm pleased with our results which highlight the strength of our diversified business model. Record Global Wealth Management revenue was driven by another record quarter for both net interest income and fee-based revenues. Additionally, our continued focus on recruiting resulted in the addition of 31 net new advisers, our highest quarterly increase in roughly 10 years, excluding acquisitions. The increased operating leverage from the growth in our recurring revenue lines and our continued focus on cost discipline enabled us to overcome slower seasonal revenues and generate pre-tax margins of nearly 21%, double digit sequential EPS growth, as well as returns on common and tangible equity of 15.5% and 25.2% respectively. Year-to-date, our EPS is up nearly 50% as our pre-tax margins have improved by nearly 300 bps to 18.8%. Looking forward, the momentum we are building in our recruiting efforts should help to drive revenue growth in our wealth management business and our investment banking pipelines remain strong. As such, assuming continued growth in the U.S. economy, I'm optimistic about our future," stated Ronald J. Kruszewski, Chairman & CEO of Stifel.

Financial Highlights (Unaudited)	Three Months Ended
(in 000s, except per share data)	GAAP 9/30/18			GAAP 9/30/17			% Change		GAAP 6/30/18			% Change			Non- GAAP ⁽¹⁾ 9/30/18			Non- GAAP ⁽¹⁾ 9/30/17			% Change
Net revenues	$	738,342		$	721,169			2.4	$	742,732			(0.6	)	$	738,367		$	721,169			2.4
Net income	$	103,858		$	66,536			56.1	$	87,287			19.0		$	112,405		$	73,949			52.0
Preferred dividend		2,343			2,343			—		2,344		n/m				2,343			2,343			—
Net income available to common shareholders	$	101,515		$	64,193			58.1	$	84,943			19.5		$	110,062		$	71,606			53.7
Earnings per diluted common share	$	1.27		$	0.82			54.9	$	1.07			18.7		$	1.38		$	0.91			51.6
Earnings per diluted common share available to common shareholders	$	1.25		$	0.79			58.2	$	1.04			20.2		$	1.35		$	0.89			51.7
Compensation ratio		57.2	%		62.2	%				59.5	%					56.5	%		61.1	%
Non-compensation ratio		23.8	%		22.8	%				24.5	%					22.9	%		22.1	%
Pre-tax operating margin ⁽²⁾		19.0	%		15.0	%				16.0	%					20.6	%		16.8	%

For the nine months ended September 30, 2018, the Company reported net income available to common shareholders of $272.9 million, or $3.35 per diluted common share on net revenues of $2.2 billion, compared with net income available to common shareholders of $177.8 million, or $2.21 per diluted share, on net revenues of $2.1 billion for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, the Company reported non-GAAP net income available to common shareholders of $302.7 million, or $3.72 per diluted common share.

Financial Highlights (Unaudited)	Nine Months Ended
(in 000s, except per share data)	GAAP 9/30/18			GAAP 9/30/17			% Change		Non- GAAP ⁽¹⁾9/30/18			Non- GAAP ⁽¹⁾9/30/17			% Change
Net revenues	$	2,231,432		$	2,122,347			5.1	$	2,231,457		$	2,124,331			5.0
Net income	$	279,906		$	184,859			51.4	$	309,683		$	209,789			47.6
Preferred dividend		7,031			7,031			—		7,031			7,031			—
Net income available to common shareholders	$	272,875		$	177,828			53.4	$	302,652		$	202,758			49.3
Earnings per diluted common share	$	3.44		$	2.29			50.2	$	3.80		$	2.60			46.2
Earnings per diluted common share available to common shareholders	$	3.35		$	2.21			51.6	$	3.72		$	2.52			47.6
Compensation ratio		59.3	%		63.1	%				58.7	%		61.6	%
Non-compensation ratio		23.8	%		24.2	%				22.5	%		22.4	%
Pre-tax operating margin ⁽³⁾		16.9	%		12.7	%				18.8	%		16.0	%

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $241.2 million, a 3.4% decrease compared with the third quarter of 2017 and a 5.8% decrease compared with the second quarter of 2018.

	Three Months Ended
(in 000s)	9/30/18		9/30/17		% Change			6/30/18		% Change
Global Wealth Management	$	158,818	$	158,334		0.3		$	159,290		(0.3	)
Institutional brokerage:
Equity capital markets		43,904		45,209		(2.9	)		45,266		(3.0	)
Fixed income capital markets		38,446		46,079		(16.6	)		51,330		(25.1	)
Total institutional brokerage		82,350		91,288		(9.8	)		96,596		(14.7	)
Total brokerage revenues	$	241,168	$	249,622		(3.4	)	$	255,886		(5.8	)

Global Wealth Management brokerage revenues were $158.8 million, a 0.3% increase compared with the third quarter of 2017 and a 0.3% decrease compared with the second quarter of 2018.
Institutional equity brokerage revenues were $43.9 million, a 2.9% decrease compared with the third quarter of 2017 and a 3.0% decrease compared with the second quarter of 2018.
Institutional fixed income brokerage revenues were $38.4 million, a 16.6% decrease compared with the third quarter of 2017 and a 25.1% decrease compared with the second quarter of 2018.

Investment Banking Revenues

Investment banking revenues were $169.0 million, a 7.1% decrease compared with the third quarter of 2017 and a 4.9% increase compared with the second quarter of 2018.

	Three Months Ended
(in 000s)	9/30/18		9/30/17		% Change			6/30/18		% Change
Capital raising:
Global Wealth Management	$	7,722	$	9,072		(14.9	)	$	7,968		(3.1	)

Equity capital markets		65,000		43,277		50.2			44,087		47.4
Fixed income capital markets		20,553		27,573		(25.5	)		22,025		(6.7	)
Institutional Group		85,553		70,850		20.8			66,112		29.4
Total capital raising ⁽⁴⁾		93,275		79,922		16.7			74,080		25.9
Advisory fees		75,717		101,982		(25.8	)		87,004		(13.0	)
Total investment banking	$	168,992	$	181,904		(7.1	)	$	161,084		4.9

Global Wealth Management capital raising revenues were $7.7 million, a 14.9% decrease compared with the third quarter of 2017 and a 3.1% decrease compared with the second quarter of 2018.
Institutional equity capital raising revenues were $65.0 million, a 50.2% increase compared with the third quarter of 2017 and a 47.4% increase compared with the second quarter of 2018.
Institutional fixed income capital raising revenues were $20.6 million, a 25.5% decrease compared with the third quarter of 2017 and a 6.7% decrease compared with the second quarter of 2018.
Advisory fee revenues were $75.7 million, a 25.8% decrease compared with the third quarter of 2017 and a 13.0% decrease compared with the second quarter of 2018.

Effective January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides accounting guidance on the recognition of revenues from contracts and requires gross presentation of certain costs that were previously offset against revenue. This change was applied prospectively from January 1, 2018 and there is no impact on our previously presented results. With our adoption of the new revenue recognition standard on January 1, 2018, capital raising and advisory fee revenues are no longer presented net of the related out-of-pocket deal expenses. As a result, capital raising and advisory fee revenues and other operating expenses are higher in the third quarter of 2018 by an identical $9.7 million, with no impact to net income.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $200.7 million, an 11.6% increase compared with the third quarter of 2017 and a 0.6% increase compared with the second quarter of 2018. The increase from the comparative period in 2017 is primarily attributable to the growth in fee-based accounts. See Asset Management and Service Fee Break-down table.

Net Interest Income

Record net interest income of $121.3 million, a 21.0% increase compared with the third quarter of 2017 and a 3.5% increase compared with the second quarter of 2018. The increase is primarily due to growth of interest-earning assets and interest-bearing liabilities, as well as higher interest rates.

Interest income was $169.8 million, a 44.0% increase compared with the third quarter of 2017 and a 9.9% increase compared with the second quarter of 2018.
Interest expense was $48.5 million, a 175.0% increase compared with the third quarter of 2017 and a 30.0% increase compared with the second quarter of 2018.

Compensation and Benefits Expenses

For the quarter ended September 30, 2018, compensation and benefits expenses were $422.3 million, which included $5.5 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $448.4 million in the third quarter of 2017 and $442.2 million in the second quarter of 2018. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 56.5% in the third quarter of 2018 (non-GAAP measure).

	Three Months Ended						Nine Months Ended
	9/30/18			9/30/17			9/30/18			9/30/17
GAAP compensation and benefits	$	422,324		$	448,410		$	1,322,387		$	1,338,673
As a percentage of net revenues		57.2	%		62.2	%		59.3	%		63.1	%
Non-GAAP adjustments:⁽⁵⁾
Merger-related and severance		(5,475	)		(8,056	)		(13,289	)		(30,367	)
Non-GAAP compensation and benefits	$	416,849		$	440,354		$	1,309,098		$	1,308,306
As a percentage of non-GAAP net revenues		56.5	%		61.1	%		58.7	%		61.6	%

Non-Compensation Operating Expenses

For the quarter ended September 30, 2018, non-compensation operating expenses were $175.5 million, which included $6.1 million of merger-related and litigation-related expenses (non-GAAP adjustments). This compares with $164.6 million in the third quarter of 2017 and $182.2 million in the second quarter of 2018. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended September 30, 2018 were 22.9% (non-GAAP measure).

	Three Months Ended						Nine Months Ended
	9/30/18			9/30/17			9/30/18			9/30/17
GAAP non-compensation expenses	$	175,488		$	164,620		$	530,614		$	513,318
As a percentage of net revenues		23.8	%		22.8	%		23.8	%		24.2	%
Non-GAAP adjustments:⁽⁵⁾
Merger-related		(5,277	)		(4,725	)		(20,192	)		(16,899	)
Litigation-related		(774	)		—			(6,774	)		(20,000	)
		(6,051	)		(4,725	)		(26,966	)		(36,899	)
Non-GAAP non-compensation expenses	$	169,437		$	159,895		$	503,648		$	476,419
As a percentage of non-GAAP net revenues		22.9	%		22.1	%		22.5	%		22.4	%

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended September 30, 2018 was 26.1%. This compares with an effective income tax rate of 38.5% for the third quarter of 2017 and 26.2% for the second quarter of 2018. The provision for income taxes for the three months ended September 30, 2018 was primarily impacted by the tax reform enacted in the fourth quarter of 2017 that, among other things, lowered the federal corporate income tax rate from 35% to 21%.

	Three Months Ended						Nine Months Ended
	9/30/18			9/30/17			9/30/18			9/30/17
GAAP provision for income taxes	$	36,672		$	41,603		$	98,525		$	85,497
GAAP effective tax rate		26.1	%		38.5	%		26.0	%		31.6	%
Non-GAAP adjustments:⁽⁵⁾
Merger-related, litigation-related, and severance		3,166			5,072			10,980			26,869
Other		(162	)		—			(477	)		—
Excess tax benefits from stock-based compensation		—			297			—			17,452
		3,004			5,369			10,503			44,321
Non-GAAP provision for income taxes	$	39,676		$	46,972		$	109,028		$	129,818
Non-GAAP effective tax rate		26.1	%		38.9	%		26.0	%		38.2	%

Conference Call Information

Stifel Financial Corp. will host its third quarter 2018 financial results conference call on Tuesday, October 30, 2018, 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 (800) 651-2240 and referencing conference ID #3667649. 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. SF is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel's broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. 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 and Stifel Bank 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 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)	9/30/18		9/30/17		% Change			6/30/18		% Change			9/30/18		9/30/17		% Change
Revenues:
Commissions	$	158,016	$	162,612		(2.8	)	$	166,902		(5.3	)	$	490,693	$	510,150		(3.8	)
Principal transactions		83,152		87,010		(4.4	)		88,984		(6.6	)		269,918		299,570		(9.9	)
Brokerage Revenues		241,168		249,622		(3.4	)		255,886		(5.8	)		760,611		809,720		(6.1	)

Capital raising		93,295		79,922		16.7			74,059		26.0			246,044		256,638		(4.1	)
Advisory fees		75,717		101,982		(25.8	)		87,004		(13.0	)		260,393		237,379		9.7
Investment banking		169,012		181,904		(7.1	)		161,063		4.9			506,437		494,017		2.5
Asset management and service fees		200,743		179,848		11.6			199,568		0.6			596,112		515,501		15.6
Other income		6,127		9,558		(35.9	)		9,073		(32.5	)		18,557		25,508		(27.3	)
Operating Revenue		617,050		620,932		(0.6	)		625,590		(1.4	)		1,881,717		1,844,746		2.0
Interest Revenue		169,760		117,862		44.0			154,421		9.9			461,915		327,766		40.9
Total Revenue		786,810		738,794		6.5			780,011		0.9			2,343,632		2,172,512		7.9
Interest Expense		48,468		17,625		175.0			37,279		30.0			112,200		50,165		123.7
Net Revenue		738,342		721,169		2.4			742,732		(0.6	)		2,231,432		2,122,347		5.1

Non-interest Expenses:
Compensation and benefits		422,324		448,410		(5.8	)		442,170		(4.5	)		1,322,387		1,338,673		(1.2	)
Occupancy and equipment rental		54,035		57,427		(5.9	)		53,596		0.8			165,226		167,864		(1.6	)
Communication and office supplies		33,330		34,650		(3.8	)		36,639		(9.0	)		103,468		102,686		0.8
Commissions and floor brokerage		11,338		11,232		0.9			10,095		12.3			30,798		33,187		(7.2	)
Provision for loan losses		6,924		7,990		(13.3	)		4,277		61.9			13,244		19,980		(33.7	)
Other operating expenses		69,861		53,321		31.0			77,608		(10.0	)		217,878		189,601		14.9
Total non-interest expenses		597,812		613,030		(2.5	)		624,385		(4.3	)		1,853,001		1,851,991		0.1
Income before income taxes		140,530		108,139		30.0			118,347		18.7			378,431		270,356		40.0
Provision for income taxes		36,672		41,603		(11.9	)		31,060		18.1			98,525		85,497		15.2
Net income		103,858		66,536		56.1			87,287		19.0			279,906		184,859		51.4
Preferred dividends		2,343		2,343		—			2,344	n/m				7,031		7,031		—
Net income available to common shareholders	$	101,515	$	64,193		58.1		$	84,943		19.5		$	272,875	$	177,828		53.4
Earnings per common share:
Basic	$	1.41	$	0.94		50.0		$	1.18		19.5		$	3.80	$	2.60		46.2
Diluted	$	1.25	$	0.79		58.2		$	1.04		20.2		$	3.35	$	2.21		51.6

Weighted average number of common shares outstanding:
Basic		71,919		68,522		5.0			71,692		0.3			71,824		68,488		4.9
Diluted		81,484		80,881		0.7			81,299		0.2			81,425		80,562		1.1

Cash dividends declared per common share	$	0.12	$	0.10		20.0		$	0.12		—		$	0.36	$	0.10		260.0


Summary Segment Results (Unaudited)
	Three Months Ended															Nine Months Ended
(in 000s)	9/30/18			9/30/17			% Change			6/30/18			% Change			9/30/18			9/30/17			% Change
Net revenues:
Global Wealth Management	$	498,161		$	453,558			9.8		$	497,327			0.2		$	1,481,063		$	1,348,280			9.8
Institutional Group		245,952			264,747			(7.1	)		252,825			(2.7	)		768,855			778,367			(1.2	)
Other		(5,771	)		2,864			(301.5	)		(7,420	)		22.2			(18,486	)		(4,300	)		(329.9	)
Total net revenues	$	738,342		$	721,169			2.4		$	742,732			(0.6	)	$	2,231,432		$	2,122,347			5.1

Operating expenses:
Global Wealth Management	$	314,784		$	291,802			7.9		$	309,432			1.7		$	933,020		$	891,235			4.7
Institutional Group		211,647			213,030			(0.6	)		216,801			(2.4	)		653,956			633,886			3.2
Other		71,381			108,198			(34.0	)		98,152			(27.3	)		266,025			326,870			(18.6	)
Total operating expenses	$	597,812		$	613,030			(2.5	)	$	624,385			(4.3	)	$	1,853,001		$	1,851,991			0.1

Operating contribution:
Global Wealth Management	$	183,377		$	161,756			13.4		$	187,895			(2.4	)	$	548,043		$	457,045			19.9
Institutional Group		34,305			51,717			(33.7	)		36,024			(4.8	)		114,899			144,481			(20.5	)
Other		(77,152	)		(105,334	)		(26.8	)		(105,572	)		(26.9	)		(284,511	)		(331,170	)		(14.1	)
Income before income taxes	$	140,530		$	108,139			30.0		$	118,347			18.7		$	378,431		$	270,356			40.0

As a percentage of net revenues:
Compensation and benefits
Global Wealth Management		48.5			49.1						47.8						48.7			50.5
Institutional Group		59.4			60.0						59.3						59.2			60.0
Non-comp. operating expenses
Global Wealth Management		14.7			15.2						14.4						14.3			15.6
Institutional Group		26.7			20.5						26.5						25.9			21.4
Income before income taxes
Global Wealth Management		36.8			35.7						37.8						37.0			33.9
Institutional Group		13.9			19.5						14.2						14.9			18.6
Consolidated pre-tax margin		19.0			15.0						16.0						16.9			12.7


Stifel Financial Corp.

Financial metrics (unaudited):	As of and For the Three Months Ended
(in 000s, except percentages and per share amounts)	9/30/18			9/30/17			6/30/18
Total assets	$	23,760,048		$	20,484,080		$	22,608,169
Total equity		3,161,569			2,932,405			2,954,362
Book value per common share	$	41.25		$	40.67		$	39.34
Return on common equity ⁽⁶⁾		14.3	%		9.7	%		12.5	%
Non-GAAP return on common equity ^{(1) (6)}		15.5	%		10.8	%		14.5	%
Return on tangible common equity ⁽⁷⁾		23.3	%		16.1	%		20.7	%
Non-GAAP return on tangible common equity ^{(1) (7)}		25.2	%		17.8	%		24.0	%
Tier 1 common capital ratio ⁽⁸⁾		16.6	%		18.3	%		16.4	%
Tier 1 risk based capital ratio ⁽⁸⁾		17.9	%		20.5	%		18.4	%
Tier 1 leverage capital ratio ⁽⁸⁾		9.6	%		10.4	%		9.5	%
Pre-tax margin on net revenues		19.0	%		15.0	%		16.0	%
Non-GAAP pre-tax margin on net revenues ^{(1) (2)}		20.6	%		16.8	%		18.5	%
Effective tax rate		26.1	%		38.5	%		26.2	%
Non-GAAP effective tax rate ⁽¹⁾		26.1	%		38.9	%		26.2	%

Statistical Information (unaudited):	As of and For the Three Months Ended
(in 000s, except financial advisors and locations)	9/30/18		9/30/17			% Change			6/30/18			% Change
Financial advisors ⁽⁹⁾		2,298			2,252		2.0				2,267		1.4
Locations		404			395		2.3				398		1.5
Total client assets	$	289,136,000		$	264,717,000		9.2			$	277,708,000		4.1
Fee-based client assets	$	96,008,000		$	82,999,000		15.7			$	91,275,000		5.2
Client money market and insured product	$	15,121,000		$	17,420,000		(13.2	)		$	15,703,000		(3.7	)
Secured client lending ⁽¹⁰⁾	$	3,185,710		$	3,037,158		4.9			$	3,174,639		0.3

	Asset Management and Service Fee Break-down (unaudited)
Asset Management and Service Fee Revenues:	Three Months Ended
(in 000s)	9/30/18			9/30/17			% Change			6/30/18			% Change
Private Client Group ⁽¹¹⁾	$	152,021		$	130,351			16.6		$	149,457			1.7
Asset Management		27,555			26,252			5.0			27,606			(0.2	)
Third-party Bank Sweep Program		11,029			13,355			(17.4	)		11,601			(4.9	)
Other ⁽¹²⁾		10,138			9,890			2.5			10,904			(7.0	)
Total asset management and service fee revenues	$	200,743		$	179,848			11.6		$	199,568			0.6

Fee-based Assets:	Three Months Ended
(in millions)	9/30/18			9/30/17			% Change			6/30/18			% Change
Private Client Group ⁽¹¹⁾	$	71,463		$	61,595			16.0		$	67,807			5.4
Asset Management		31,091			28,787			8.0			29,679			4.8
Elimination ⁽¹³⁾		(6,546	)		(7,383	)		(11.3	)		(6,211	)		5.4
Total fee-based assets	$	96,008		$	82,999			15.7		$	91,275			5.2

Individual Program Banks	$	2,953		$	4,530			(34.8	)	$	3,153			(6.3	)

ROA (bps) ⁽¹⁴⁾
Private Client Group ⁽¹¹⁾		89.7			89.7						90.2
Asset Management		35.5			36.5						37.2
Individual Program Banks		134.0			109.2						134.0


Stifel Bancorp, Inc ⁽¹⁵⁾ - a component of Global Wealth Management

Selected operating data (unaudited):	Three Months Ended															Nine Months Ended
(in 000s, except percentages)	9/30/18			9/30/17			% Change			6/30/18			% Change			9/30/18			9/30/17			% Change
Net Interest Income	$	116,204		$	97,300			19.4		$	114,200			1.8		$	338,031		$	272,114			24.2
Bank loan loss provision		6,924			7,990			(13.3	)		4,277			61.9			13,244			19,980			(33.7	)
Charge-offs		—			—		n/m				—		n/m				(14	)		2,953		n/m
Net Interest Margin		2.87	%		2.80	%		2.5			2.97	%		(3.4	)		2.91	%		2.74	%		6.2

Financial Metrics (unaudited):	As of
(in 000s, except percentages)	9/30/18			9/30/17			6/30/18
Total Assets	$	16,989,337		$	14,538,750		$	15,844,499
Total Equity		1,185,935			1,019,257			1,089,624
Total Loans, net (includes loans held for sale)		8,516,052			6,949,369			7,557,982
Total Deposits		14,502,952			12,883,961			13,890,849
Available-for-sale securities, at fair value		3,343,170			3,687,248			3,468,832
Held-to-maturity securities, at amortized cost		4,562,021			3,550,962			4,516,441
Residential real estate		2,792,269			2,517,543			2,703,935
Commercial and industrial		3,127,435			2,380,417			2,677,096
Securities-based loans		1,836,450			1,839,981			1,845,592
Commercial real estate		328,814			78,614			127,253
Loans held for sale		262,063			166,335			210,611
Stifel Bank & Trust:
Common equity tier 1 capital ratio ⁽⁸⁾		14.2	%		14.4	%		14.4	%
Tier 1 capital ratio ⁽⁸⁾		14.2	%		14.4	%		14.4	%
Total capital ratio ⁽⁸⁾		15.2	%		15.3	%		15.4	%
Tier 1 leverage ratio ⁽⁸⁾		7.0	%		7.1	%		7.2	%
Stifel Bank:
Common equity tier 1 capital ratio ⁽⁸⁾		13.8	%	n/a			n/a
Tier 1 capital ratio ⁽⁸⁾		13.8	%	n/a			n/a
Total capital ratio ⁽⁸⁾		15.0	%	n/a			n/a
Tier 1 leverage ratio ⁽⁸⁾		12.5	%	n/a			n/a

Credit Metrics:
Allowance for loan losses	$	80,700		$	62,229		$	73,775
Allowance as a percentage of retained loans		0.97	%		0.92	%		0.99	%
Net charge-offs as a percentage of average loans		0.00	%		0.00	%		0.00	%
Total nonperforming assets	$	24,352		$	21,776		$	18,696
Nonperforming assets as % of total assets		0.14	%		0.15	%		0.12	%



	Global Wealth Management Summary Results of Operations (Unaudited)
	Three Months Ended												Nine Months Ended
(in 000s)	9/30/18		9/30/17		% Change			6/30/18		% Change			9/30/18		9/30/17		% Change
Revenues:
Commissions	$	117,795	$	115,410		2.1		$	118,129		(0.3	)	$	355,129	$	356,331		(0.3	)
Principal transactions		41,023		42,924		(4.4	)		41,161		(0.3	)		125,713		141,582		(11.2	)
Brokerage revenues		158,818		158,334		0.3			159,290		(0.3	)		480,842		497,913		(3.4	)

Asset management and service fees		200,735		179,830		11.6			199,557		0.6			596,081		515,383		15.7
Net interest		127,341		102,831		23.8			124,987		1.9			370,783		288,224		28.6
Investment banking		7,722		9,072		(14.9	)		8,049		(4.1	)		23,459		31,567		(25.7	)
Other income		3,545		3,491		1.5			5,444		(34.9	)		9,898		15,193		(34.9	)
Net revenues		498,161		453,558		9.8			497,327		0.2			1,481,063		1,348,280		9.8
Non-interest expenses:
Compensation and benefits		241,713		222,621		8.6			237,879		1.6			721,352		680,250		6.0
Non-compensation operating expenses		73,071		69,181		5.6			71,553		2.1			211,668		210,985		0.3
Total non-interest expenses		314,784		291,802		7.9			309,432		1.7			933,020		891,235		4.7
Income before income taxes	$	183,377	$	161,756		13.4		$	187,895		(2.4	)	$	548,043	$	457,045		19.9

As a percentage of net revenues:
Compensation and benefits		48.5		49.1					47.8					48.7		50.5
Non-compensation operating expenses		14.7		15.2					14.4					14.3		15.6
Income before income taxes		36.8		35.7					37.8					37.0		33.9



	Institutional Group Summary Results of Operations (Unaudited)
	Three Months Ended												Nine Months Ended
(in 000s)	9/30/18		9/30/17		% Change			6/30/18		% Change			9/30/18		9/30/17		% Change
Revenues:
Commissions	$	40,220	$	47,202		(14.8	)	$	48,773		(17.5	)	$	135,563	$	153,819		(11.9	)
Principal transactions		42,130		44,086		(4.4	)		47,823		(11.9	)		144,206		157,988		(8.7	)
Brokerage revenues		82,350		91,288		(9.8	)		96,596		(14.7	)		279,769		311,807		(10.3	)
Capital raising		85,553		70,850		20.8			66,112		29.4			222,666		225,071		(1.1	)
Advisory fees		75,717		101,982		(25.8	)		86,922		(12.9	)		260,312		237,379		9.7
Investment banking		161,270		172,832		(6.7	)		153,034		5.4			482,978		462,450		4.4
Other ⁽¹⁶⁾		2,332		627		271.9			3,195		(27.0	)		6,108		4,110		48.6
Net revenues		245,952		264,747		(7.1	)		252,825		(2.7	)		768,855		778,367		(1.2	)
Non-interest expenses:
Compensation and benefits		146,187		158,926		(8.0	)		149,984		(2.5	)		455,515		467,098		(2.5	)
Non-compensation operating expenses		65,460		54,104		21.0			66,817		(2.0	)		198,441		166,788		19.0
Total non-interest expenses		211,647		213,030		(0.6	)		216,801		(2.4	)		653,956		633,886		3.2
Income before income taxes	$	34,305	$	51,717		(33.7	)	$	36,024		(4.8	)	$	114,899	$	144,481		(20.5	)

As a percentage of net revenues:
Compensation and benefits		59.4		60.0					59.3					59.2		60.0
Non-compensation operating expenses		26.7		20.5					26.5					25.9		21.4
Income before income taxes		13.9		19.5					14.2					14.9		18.6

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 and nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018. 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 and nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018 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)*	9/30/18			9/30/17			6/30/18			9/30/18			9/30/17
GAAP net income	$	103,858		$	66,536		$	87,287		$	279,906		$	184,859
Preferred dividend		2,343			2,343			2,344			7,031			7,031
Net income available to common shareholders		101,515			64,193			84,943			272,875			177,828

Non-GAAP adjustments:
Merger-related ⁽¹⁷⁾		10,777			10,244			12,776			33,506			39,758
Severance		—			2,538			—			—			9,493
Litigation-related ⁽¹⁸⁾		774			—			6,000			6,774			20,000
Provision for income taxes ⁽¹⁹⁾		(3,004	)		(5,369	)		(4,932	)		(10,503	)		(44,321	)
Total non-GAAP adjustments		8,547			7,413			13,844			29,777			24,930
Non-GAAP net income available to common shareholders	$	110,062		$	71,606		$	98,787		$	302,652		$	202,758

Weighted average diluted shares outstanding		81,484			80,881			81,299			81,425			80,562

GAAP earnings per diluted common share	$	1.27		$	0.82		$	1.07		$	3.44		$	2.29
Non-GAAP adjustments		0.11			0.09			0.17			0.36			0.31
Non-GAAP earnings per diluted common share	$	1.38		$	0.91		$	1.24		$	3.80		$	2.60

GAAP earnings per diluted common share available to common shareholders	$	1.25		$	0.79		$	1.04		$	3.35		$	2.21
Non-GAAP adjustments		0.10			0.10			0.18			0.37			0.31
Non-GAAP earnings per diluted common share available to common shareholders	$	1.35		$	0.89		$	1.22		$	3.72		$	2.52

Footnotes

⁽¹⁾Reconciliations of the Company's GAAP results to these non-GAAP measures are discussed within and under "Non-GAAP Financial Measures."

⁽²⁾Non-GAAP pre-tax margin for the three months ended September 30, 2018 of 20.6% is calculated by adding non-GAAP adjustments of $11.6 million to our GAAP income before income taxes of $140.5 million and dividing it by non-GAAP net revenues for the quarter of $738.4 million. Reconciliations of the Company's GAAP results to certain non-GAAP measures is discussed within and under "Non-GAAP Financial Measures."

⁽³⁾Non-GAAP pre-tax margin for the nine months ended September 30, 2018 of 18.8% is calculated by adding non-GAAP adjustments of $40.3 million to our GAAP income before income taxes of $378.4 million and dividing it by non-GAAP net revenues for the quarter of $2.2 billion. Reconciliations of the Company's GAAP results to certain non-GAAP measures is discussed within and under "Non-GAAP Financial Measures."

⁽⁴⁾Excludes revenue included in the Other segment.

⁽⁵⁾See further discussion of non-GAAP adjustments 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 earnings release.

⁽⁹⁾Includes 104, 116, and 106 independent contractors at September 30, 2018, September 30, 2017, and June 30, 2018, respectively.

⁽¹⁰⁾Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at Stifel Bank & Trust.

⁽¹¹⁾Includes Private Client Group and Trust Business.

⁽¹²⁾Includes fund networking fees, retirement fees, transaction/handling fees, and ACAT fees.

⁽¹³⁾Asset management assets included in Private Client Group or Trust accounts.

⁽¹⁴⁾Return on assets (ROA) is calculated based on prior period-end balances for Private Client Group and Asset Management, and average quarterly balances for Individual Program Banks.

⁽¹⁵⁾Includes Stifel Bank & Trust and Stifel Bank, formerly known as The Business Bank of St. Louis, which was acquired on August 31, 2018.

⁽¹⁶⁾Includes net interest, asset management and service fees, and other income.

⁽¹⁷⁾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.

⁽¹⁸⁾Primarily related to costs associated with the Company's legal matters.

⁽¹⁹⁾See details of non-GAAP adjustments under "Provision for Income Taxes."

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

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