ST. LOUIS, July 30, 2018 (GLOBE NEWSWIRE) -- Stifel Financial Corp. (NYSE: SF) today reported net income available to common shareholders of $84.9 million, or $1.04 per diluted common share on net revenues of $742.7 million for the three months ended June 30, 2018, compared with net income available to common shareholders of $50.5 million, or $0.63 per diluted common share, on net revenues of $725.6 million for the second quarter of 2017.

For the three months ended June 30, 2018, the Company reported non-GAAP net income available to common shareholders of $98.8 million, or $1.22 per diluted common share. The Company’s reported GAAP net income for the three months ended June 30, 2018 was primarily impacted by merger-related and litigation-related expenses. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“I am very pleased with our performance this quarter and year-to-date as total net revenue in the second quarter was up 2% year-on-year driven by a nearly 20% increase in our recurring revenues. Additionally, the growth in higher margin businesses such as our bank helped to drive our quarterly compensation ratio to its lowest level in more than seven years. This resulted in a 36% year-on-year increase in non-GAAP EPS as well as a nearly 15% return on common equity and a 24% return on tangible common equity in the quarter. Barring a significant change in market conditions in the second half of the year, we expect that increases in investment banking and recruiting activity, along with continued balance sheet growth and a more favorable compensation ratio, will lead to improved results versus the first half of the year,” stated Ronald J Kruszewski, Chairman and CEO of Stifel.

For the six months ended June 30, 2018, the Company reported net income available to common shareholders of $171.4 million, or $2.10 per diluted common share on net revenues of $1.5 billion, compared with net income available to common shareholders of $113.6 million, or $1.41 per diluted share, on net revenues of $1.4 billion for the six months ended June 30, 2017.

For the six months ended June 30, 2018, the Company reported non-GAAP net income available to common shareholders of $192.6 million, or $2.36 per diluted common share.

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $255.9 million, a 4.5% decrease compared with the second quarter of 2017 and a 2.9% decrease compared with the first quarter of 2018.

• Global wealth management brokerage revenues were $159.3 million, a 5.2% decrease compared with the second quarter of 2017 and a 2.1% decrease compared with the first quarter of 2018.
• Institutional equity brokerage revenues were $45.3 million, an 11.0% decrease compared with the second quarter of 2017 and a 5.9% decrease compared with the first quarter of 2018.
• Institutional fixed income brokerage revenues were $51.3 million, a 4.7% increase compared with the second quarter of 2017 and a2.7% decrease compared with the first quarter of 2018.

Investment Banking Revenues

Investment banking revenues were $161.1 million, a 13.1% decrease compared with the second quarter of 2017 and an 8.7% decrease compared with the first quarter of 2018.

• Global wealth management capital raising revenues were $8.0 million, a 25.1% decrease compared with the second quarter of 2017 and a 3.6% increase compared with the first quarter of 2018.
• Institutional equity capital raising revenues were $44.1 million, a 3.5% decrease compared with the second quarter of 2017 and a 16.4% decrease compared with the first quarter of 2018.
• Institutional fixed income capital raising revenues were $22.0 million, a 52.6% decrease compared with the second quarter of 2017 and a 20.4% increase compared with the first quarter of 2018.
• Advisory fee revenues were $87.0 million, a 5.5% increase compared with the second quarter of 2017 and a 10.9% decrease compared with record advisory fee revenues in the first 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 second quarter of 2018 by an identical $7.6 million, with no impact to net income.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $199.6 million, a 15.4% increase compared with the second quarter of 2017 and a 1.9% increase compared with the first quarter of 2018. The increase from the comparative period in 2017 is primarily attributable to the growth in the value of fee-based accounts. See asset management and service fee break-down below.

Net Interest Income

Record net interest income of $117.1 million, a 26.9% increase compared with the second quarter of 2017 and a 5.3% increase compared with the first quarter of 2018. The increase is primarily due to higher interest rates, as well as growth of interest-earning assets and interest-bearing liabilities.

• Interest income was $154.4 million, a 41.7% increase compared with the second quarter of 2017 and a 12.1% increase compared with the first quarter of 2018.
• Interest expense was $37.3 million, a 124.0% increase compared with the second quarter of 2017 and a 40.9% increase compared with the first quarter of 2018.

Compensation and Benefits Expenses

For the quarter ended June 30, 2018, compensation and benefits expenses were $442.2 million, which included $4.1 million of merger-related and severance expenses (non-GAAP adjustments). This compares with $453.9 million in the second quarter of 2017 and $457.9 million in the first quarter of 2018. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 59.0% in the second quarter of 2018 (non-GAAP measure).

Non-Compensation Operating Expenses

For the quarter ended June 30, 2018, non-compensation operating expenses were $182.2 million, which included merger-related and litigation-related expenses (non-GAAP adjustments) of $14.9 million. This compares with $188.6 million in the second quarter of 2017 and $172.9 million in the first quarter of 2018. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2018 were 22.5% (non-GAAP measure).

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended June 30, 2018 was26.2%. This compares with an effective income tax rate of 36.5% for the second quarter of 2017 and 25.8% for the first quarter of 2018. The adjusted non-GAAP effective income tax rate for the quarter ended June 30, 2018 was26.2%.

The provision for income taxes for the three months ended June 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%.

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; 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.