sf-ex991_6.htm

EX-99.1 2 sf-ex991_6.htm EX-99.1 sf-ex991_6.htm

Exhibit 99.1

January 30, 2018

FOR IMMEDIATE RELEASE

Media Contact: Neil Shapiro (212) 895-1891

Investor Contact: Joel Jeffrey (212) 271-3610

www.stifel.com/investor-relations

STIFEL REPORTS FOURTH QUARTER AND FULL-YEAR 2017 FINANCIAL RESULTS

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22^nd consecutive year of record net revenues.

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Annual net revenues of $2.9 billion, increased 13.6% compared with 2016.

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Record quarterly net revenues of $804.1 million, increased 21.6% compared with the year-ago quarter.

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Quarterly net loss attributable to common shareholders of $4.3 million, or $0.06 per diluted common share.

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Record non-GAAP net income available to common shareholders of $120.6 million, or $1.47 per diluted common share.

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Announced an increase in quarterly dividend by 20% to $0.12 per common share starting in first quarter of 2018.

ST. LOUIS, MO – Stifel Financial Corp. (NYSE: SF) today reported net loss attributable to common shareholders of $4.3 million, or $0.06 per diluted common share on record net revenues of $804.1 million for the three months ended December 31, 2017, compared with net income available to common shareholders of $24.5 million, or $0.31 per diluted common share, on net revenues of $661.4 million for the fourth quarter of 2016.

For the three months ended December 31, 2017, the Company reported record non-GAAP net income available to common shareholders of $120.6 million, or $1.47 per diluted common share. The Company’s reported GAAP net income for the three months ended December 31, 2017 was primarily impacted by 1) actions taken by the Company in response to the Tax Cuts and Jobs Act (“Tax Legislation”) that was enacted in the fourth quarter of 2017 to maximize tax savings; 2) litigation-related expenses associated with previously disclosed legal matters; 3) expected merger-related charges; 4) the revaluation of the Company’s deferred tax assets as a result of the enacted Tax Legislation; and 5) the favorable impact of the adoption of new accounting guidance during 2017 associated with stock-based compensation. Details discussed below and in the “Non-GAAP Financial Matters” section.

Chairman’s Comments

“We are pleased to announce that 2017 was our 22nd consecutive year of record net revenue of $2.9 billion that increased 14% from 2016. Both of our operating segments generated record results, as the investments we’ve made in our business generated stronger results and an improving economy provided a better operating environment than we experienced in the past few years. Wealth management benefitted from the further expansion of our bank balance sheet and growth in our fee-based assets. Our institutional group’s record results were driven by record investment banking activity in both advisory and underwriting that more than offset an industry-wide slowdown in trading activity. The result of our record revenue coupled with solid expense management was record non-GAAP net income as well as return on common equity of nearly 18% in the fourth quarter. We believe that this level of operating leverage is indicative of our capabilities as Stifel is well positioned to capitalize on the current market tailwinds of the lower corporate U.S. tax rates and improved global economic growth.” stated Ronald J. Kruszewski, Chairman & CEO of Stifel.

Fourth Quarter Review

Quarterly Highlights

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Record net revenues of $804.1 million, increased 21.6% compared with the year-ago quarter.

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Record net revenues and pre-tax operating income in Global Wealth Management.

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Record net revenues and pre-tax operating income in Institutional Group.

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Net loss attributable to common shareholders of $4.3 million, or $0.06 per diluted common share.

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Record non-GAAP net income available to common shareholders of $120.6 million, or $1.47 per diluted common share.

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Record client assets of $272.6 billion, increased 15.0% compared with the year-ago quarter and 3.0% sequentially.

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Payment of regularly quarterly dividend of $0.10 per common share.

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Bank net interest margin of 2.85% increased 5 basis points sequentially.

Financial Highlights (Unaudited)	Three Months Ended
(in 000s, except per share data)	GAAP ⁽¹⁾ 12/31/17			GAAP 12/31/16			% Change			GAAP 9/30/17			% Change			Non-GAAP ⁽²⁾ 12/31/17			Non-GAAP ⁽²⁾ 12/31/16			% Change
Net revenues	$	804,085		$	661,391			21.6		$	721,169			11.5		$	804,085		$	661,392			21.6
Net income/(loss)	$	(1,988	)	$	26,880			(107.4	)	$	66,536			(103.0	)	$	122,969		$	56,528			117.5
Preferred dividend		2,344			2,343		n/m				2,343		n/m				2,344			2,343		n/m
Net income/(loss) available to common shareholders	$	(4,332	)	$	24,537			(117.7	)	$	64,193			(106.7	)	$	120,625		$	54,185			122.6
Earnings per diluted common share	$	(0.03	)	$	0.34			(108.8	)	$	0.82			(103.7	)	$	1.49		$	0.71			109.9
Earnings per diluted common share available to common shareholders	$	(0.06	)	$	0.31			(119.4	)	$	0.79			(107.6	)	$	1.47		$	0.68			116.2
Compensation ratio		77.1	%		63.6	%					62.2	%					60.0	%		62.3	%
Non-compensation ratio		23.0	%		28.1	%					22.8	%					19.9	%		24.2	%
Pre-tax operating margin ⁽⁶⁾		(0.1	%)		8.3	%					15.0	%					20.1	%		13.5	%

Brokerage Revenues

Brokerage revenues, defined as commissions and principal transactions, were $266.0 million, an 8.2% decrease compared with the fourth quarter of 2016 and a 6.6% increase compared with the third quarter of 2017.

	Three Months Ended
(in 000s)	12/31/17		12/31/16		% Change			9/30/17		% Change
Global Wealth Management brokerage revenues	$	163,421	$	160,017		2.1		$	158,334		3.2
Institutional brokerage:
Equity capital markets		49,628		64,007		(22.5	)		45,209		9.8
Fixed income capital markets		52,961		65,712		(19.4	)		46,079		14.9
Total institutional brokerage		102,589		129,719		(20.9	)		91,288		12.4
Total brokerage revenues ⁽³⁾	$	266,010	$	289,736		(8.2	)	$	249,622		6.6

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Global wealth management brokerage revenues were $163.4 million, a 2.1% increase compared with the fourth quarter of 2016 and a 3.2% increase compared with the third quarter of 2017.

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Institutional equity brokerage revenues were $49.6 million, a 22.5% decrease compared with the fourth quarter of 2016 and a 9.8% increase compared with the third quarter of 2017.

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Institutional fixed income brokerage revenues were $53.0 million, a 19.4% decrease compared with the fourth quarter of 2016 and a 14.9% increase compared with the third quarter of 2017.

Investment Banking Revenues

Investment banking revenues were a record $232.7 million, a 73.1% increase compared with the fourth quarter of 2016 and a 27.9% increase compared with the third quarter of 2017.

	Three Months Ended
(in 000s)	12/31/17		12/31/16		% Change			9/30/17		% Change
Capital raising:
Global Wealth Management	$	8,899	$	12,064		(26.2	)	$	9,072		(1.9	)

Equity capital markets		57,800		36,714		57.4			43,277		33.6
Fixed income capital markets		42,820		30,235		41.6			27,573		55.3
Institutional Group		100,620		66,949		50.3			70,850		42.0
Total capital raising ⁽³⁾		109,519		79,013		38.6			79,922		37.0
Advisory fees ⁽³⁾		123,227		55,439		122.3			101,982		20.8
Total investment banking	$	232,746	$	134,452		73.1		$	181,904		27.9

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Global wealth management capital raising revenues were $8.9 million, a 26.2% decrease compared with the fourth quarter of 2016 and a 1.9% decrease compared with the third quarter of 2017.

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Institutional equity capital raising revenues were $57.8 million, a 57.4% increase compared with the fourth quarter of 2016 and a 33.6% increase compared with the third quarter of 2017.

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Institutional fixed income capital raising revenues were $42.8 million, a 41.6% increase compared with the fourth quarter of 2016 and a 55.3% increase compared with the third quarter of 2017.

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Advisory fee revenues were $123.2 million, a 122.3% increase compared with the fourth quarter of 2016 and a 20.8% increase compared with the third quarter of 2017.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $186.6 million, a 24.8% increase compared with the fourth quarter of 2016 and a 3.7% increase compared with the third quarter of 2017.

Net Interest Income

Record net interest income of $106.8 million, a 42.9% increase compared with the fourth quarter of 2016 and a 6.5% increase compared with the third quarter of 2017.

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Interest income was $126.6 million, a 39.4% increase compared with the fourth quarter of 2016 and a 7.4% increase compared with the third quarter of 2017.

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Interest expense was $19.9 million, a 23.2% increase compared with the fourth quarter of 2016 and a 12.7% increase compared with the third quarter of 2017.

Annual Review

Annual Highlights

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Record net revenues of $2.9 billion, increased 13.6% compared with 2016.

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Record net revenues and pre-tax operating income in Global Wealth Management.

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Record net revenues and pre-tax operating income in Institutional Group.

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Net income available to common shareholders of $173.5 million, or $2.14 per diluted common share.

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Record non-GAAP net income available to common shareholders of $323.4 million, or $3.99 per diluted common share.

For the year ended December 31, 2017, the Company reported net income available to common shareholders of $173.5 million, or $2.14 per diluted common share on record net revenues of $2.9 billion, compared with net income available to common shareholders of $77.6 million, or $1.00 per diluted share, on net revenues of $2.6 billion for the comparable period in 2016.

For the year ended December 31, 2017, the Company reported record non-GAAP net income available to common shareholders of $323.4 million, or $3.99 per diluted common share. The Company’s reported GAAP net income for the year ended December 31, 2017 was primarily impacted by 1) actions taken by the Company in response to the Tax Cuts and Jobs Act (“Tax Legislation”) that was enacted in the fourth quarter of 2017 to maximize tax savings; 2) anticipated merger-related charges; 3) litigation-related expenses associated with previously disclosed legal matters; 4) the revaluation of the Company’s deferred tax assets as a result of the enacted Tax Legislation; and 5) the favorable impact of the adoption of new accounting guidance during 2017 associated with stock-based compensation. Details discussed below and in the “Non-GAAP Financial Matters” section.

Financial Highlights (Unaudited)	Year Ended
(in 000s, except per share data)	GAAP 12/31/17			GAAP 12/31/16			% Change		Non-GAAP ⁽²⁾ 12/31/17			Non-GAAP ⁽²⁾ 12/31/16			% Change
Net revenues	$	2,926,432		$	2,575,496			13.6	$	2,928,416		$	2,579,599			13.5
Net income	$	182,871		$	81,520			124.3	$	332,758		$	189,611			75.5
Preferred dividend		9,375			3,906			140.0		9,375			3,906			140.0
Net income available to common shareholders	$	173,496		$	77,614			123.5	$	323,383		$	185,705			74.1
Earnings per diluted common share	$	2.26		$	1.05			115.2	$	4.11		$	2.44			68.4
Earnings per diluted common share available to common shareholders	$	2.14		$	1.00			114.0	$	3.99		$	2.39			66.9
Compensation ratio		66.9	%		67.0	%				61.2	%		62.8	%
Non-compensation ratio		23.9	%		27.5	%				21.7	%		24.1	%
Pre-tax operating margin ⁽⁷⁾		9.2	%		5.5	%				17.1	%		13.1	%

Brokerage Revenues

Brokerage revenues for the year ended December 31, 2017 were $1.1 billion, a 10.8% decrease compared with 2016.

	Year Ended
(in 000s)	12/31/17		12/31/16		% Change
Global Wealth Management brokerage revenues	$	661,334	$	670,635		(1.4	)
Institutional brokerage:
Equity capital markets		199,526		232,292		(14.1	)
Fixed income capital markets		214,870		302,491		(29.0	)
Total institutional brokerage		414,396		534,783		(22.5	)
Total brokerage revenues ⁽³⁾	$	1,075,730	$	1,205,418		(10.8	)

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Global wealth management brokerage revenues were $661.3 million, a 1.4% decrease compared with 2016.

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Institutional equity brokerage revenues were $199.5 million, a 14.1% decrease compared with 2016.

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Institutional fixed income brokerage revenues were $214.9 million, a 29.0% decrease compared with 2016.

Investment Banking

Investment banking revenues were a record $726.8 million, a 41.7% increase compared with 2016.

	Year Ended
(in 000s)	12/31/17		12/31/16		% Change
Capital raising:
Global Wealth Management		40,466		42,187		(4.1	)

Equity capital markets		182,728		103,443		76.6
Fixed income capital markets		142,963		110,766		29.1
Institutional Group		325,691		214,209		52.0
Total capital raising ⁽³⁾		366,157		256,396		42.8
Advisory fees ⁽³⁾		360,606		256,637		40.5
Total investment banking ⁽³⁾	$	726,763	$	513,033		41.7

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Global wealth management capital raising revenues were $40.5 million, a 4.1% decrease compared with 2016.

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Institutional equity capital raising revenues were $182.7 million, a 76.6% increase compared with 2016.

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Institutional fixed income capital raising revenues were $143.0 million, a 29.1% increase compared with 2016.

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Advisory fee revenues were $360.6 million, a 40.5% increase compared with 2016.

Asset Management and Service Fee Revenues

Asset management and service fee revenues were a record $702.1 million, a 20.5% increase compared with 2016.

Net Interest Income

Record net interest income of $384.4 million, a 69.0% increase compared with 2016.

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Interest income was $454.4 million, a 54.4% increase compared with 2016.

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Interest expense was $70.0 million, a 4.7% increase compared with 2016.

Fourth Quarter &Full Year 2017

Compensation and Benefits Expenses

For the quarter ended December 31, 2017, compensation and benefits expenses were $620.3 million, which included $137.5 million of tax reform, merger-related, and severance expenses (collectively, non-GAAP adjustments). This compares with $420.6 million in the fourth quarter of 2016 and $448.4 million in the third quarter of 2017. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 60.0% in the fourth quarter of 2017 (non-GAAP measure).

For the year ended December 31, 2017, compensation and benefits expenses were $2.0 billion, which included $167.8 million of tax reform, merger-related, and severance expenses, (collectively, non-GAAP adjustments) compared to $1.7 billion in 2016. Excluding the non-GAAP adjustments, compensation and benefits as a percentage of net revenues were 61.2% in the year ended December 31, 2017 (non-GAAP measure).

	Three Months Ended 12/31/17			Year Ended 12/31/17
GAAP compensation and benefits	$	620,256		$	1,958,929
As a percentage of net revenues		77.1	%		66.9	%
Non-GAAP adjustments:⁽⁴⁾
Tax reform		(133,319	)		(133,319	)
Merger-related		(2,729	)		(23,603	)
Severance		(1,432	)		(10,925	)
		(137,480	)		(167,847	)
Non-GAAP compensation and benefits	$	482,776		$	1,791,082
As a percentage of non-GAAP net revenues		60.0	%		61.2	%

Non-Compensation Operating Expenses

For the quarter ended December 31, 2017, non-compensation operating expenses were $184.6 million, which included litigation-related, merger-related, and tax reform expenses (collectively, non-GAAP adjustments) of $24.9 million. This compares with $185.9 million in the fourth quarter of 2016 and $164.6 million in the third quarter of 2017. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2017 were 19.9% (non-GAAP measure).

For the year ended December 31, 2017, non-compensation operating expenses were $698.0 million, which included litigation-related, merger-related, and tax reform expenses (collectively, non-GAAP adjustments) of $61.8 million, compared with $706.9 million in 2016. Excluding the non-GAAP adjustments, non-compensation operating expenses as a percentage of net revenues for the quarter ended December 31, 2017 were 21.7% (non-GAAP measure).

	Three Months Ended 12/31/17			Year Ended 12/31/17
GAAP non-compensation expenses	$	184,649		$	697,967
As a percentage of net revenues		23.0	%		23.9	%
Non-GAAP adjustments:⁽⁴⁾
Litigation-related		(15,961	)		(35,961	)
Merger-related		(6,718	)		(23,617	)
Tax reform		(2,206	)		(2,206	)
		(24,885	)		(61,784	)
Non-GAAP non-compensation expenses	$	159,764		$	636,183
As a percentage of non-GAAP net revenues		19.9	%		21.7	%

Provision for Income Taxes

The GAAP effective income tax rate for the quarter ended December 31, 2017 was (142.4%). This compares with an effective income tax rate of 51.0% for the fourth quarter of 2016 and 38.5% for the third quarter of 2017. The adjusted non-GAAP effective income tax rate for the quarter ended December 31, 2017 was 23.9%.

The GAAP effective income tax rate for the year ended December 31, 2017 was 32.2%, compared with 42.8% in 2016. The adjusted non-GAAP effective income tax rate for the year ended December 31, 2017 was 33.6%.

The provision for income taxes for the three and twelve months ended December 31, 2017 was primarily impacted by 1) actions taken by the Company in response to the Tax Legislation that was enacted in the fourth quarter of 2017 to maximize tax savings; 2) the favorable impact of the adoption of new accounting guidance during 2017 associated with stock-based compensation; and 3) the revaluation of the Company’s deferred tax assets as a result of the enacted Tax Legislation.

	Three Months Ended 12/31/17			Year Ended 12/31/17
GAAP provision for income taxes	$	1,168		$	86,665
GAAP effective tax rate		(142.4	%)		32.2	%
Non-GAAP adjustments:⁽⁴⁾
Tax reform		53,328			53,328
Excess tax benefits from stock-based compensation ⁽⁵⁾		21,144			38,596
Litigation and merger-related and severance		5,379			32,248
Revaluation of deferred tax assets		(42,443	)		(42,443	)
		37,408			81,729
Non-GAAP provision for income taxes	$	38,576		$	168,394
Non-GAAP effective tax rate		23.9	%		33.6	%

Conference Call Information

Stifel Financial Corp. will host its fourth quarter 2017 financial results conference call on Tuesday, January 30, 2018, at 8:00 a.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 #5299459. 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; 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													Year Ended
(in 000s, except per share amounts)	12/31/17			12/31/16		% Change			9/30/17		% Change			12/31/17		12/31/16		% Change
Revenues:
Commissions	$	168,754		$	178,683		(5.6	)	$	162,612		3.8		$	678,904	$	729,989		(7.0	)
Principal transactions		97,256			111,052		(12.4	)		87,010		11.8			396,826		475,428		(16.5	)
Brokerage revenues		266,010			289,735		(8.2	)		249,622		6.6			1,075,730		1,205,417		(10.8	)

Capital raising		109,509			78,204		40.0			79,922		37.0			366,147		256,397		42.8
Advisory fees		123,237			56,248		119.1			101,982		20.8			360,616		256,637		40.5
Investment banking		232,746			134,452		73.1			181,904		27.9			726,763		513,034		41.7
Asset management and service fees		186,563			149,484		24.8			179,848		3.7			702,064		582,789		20.5
Other income		12,016			12,994		(7.5	)		9,558		25.7			37,524		46,798		(19.8	)
Operating revenues		697,335			586,665		18.9			620,932		12.3			2,542,081		2,348,038		8.3
Interest revenue		126,615			90,844		39.4			117,862		7.4			454,381		294,332		54.4
Total revenues		823,950			677,509		21.6			738,794		11.5			2,996,462		2,642,370		13.4
Interest expense		19,865			16,118		23.2			17,625		12.7			70,030		66,874		4.7
Net revenues		804,085			661,391		21.6			721,169		11.5			2,926,432		2,575,496		13.6

Non-interest expenses:
Compensation and benefits		620,256			420,644		47.5			448,410		38.3			1,958,929		1,726,016		13.5
Occupancy and equipment rental		54,844			52,869		3.7			57,427		(4.5	)		222,708		231,324		(3.7	)
Communication and office supplies		30,807			34,376		(10.4	)		34,650		(11.1	)		133,493		139,644		(4.4	)
Commissions and floor brokerage		10,945			9,662		13.3			11,232		(2.6	)		44,132		44,315		(0.4	)
Provision for loan losses		5,340			6,016		(11.2	)		7,990		(33.2	)		25,320		15,659		61.7
Other operating expenses		82,713			82,930		(0.3	)		53,321		55.1			272,314		275,956		(1.3	)
Total non-interest expenses		804,905			606,497		32.7			613,030		31.3			2,656,896		2,432,914		9.2
Income before income taxes		(820	)		54,894		(101.5	)		108,139		(100.8	)		269,536		142,582		89.0
Provision for income taxes		1,168			28,014		(95.8	)		41,603		(97.2	)		86,665		61,062		41.9
Net income/(loss)		(1,988	)		26,880		(107.4	)		66,536		(103.0	)		182,871		81,520		124.3
Preferred dividends		2,344			2,343	n/m				2,343	n/m				9,375		3,906		140.0
Net income/(loss) available to common shareholders	$	(4,332	)	$	24,537		(117.7	)	$	64,193		(106.7	)	$	173,496	$	77,614		123.5
Earnings per common share: ⁽¹⁾
Basic	$	(0.06	)	$	0.37		(116.2	)	$	0.94		(106.4	)	$	2.53	$	1.16		118.1
Diluted	$	(0.06	)	$	0.31		(119.4	)	$	0.79		(107.6	)	$	2.14	$	1.00		114.0

Weighted average number of common shares outstanding:
Basic		68,782			66,636		3.2			68,522		0.4			68,562		66,871		2.5
Diluted		68,782			79,539		(13.5	)		80,881		(15.0	)		81,035		77,563		4.5

Cash dividends declared per common share	$	0.10		$	—	n/m			$	0.10	n/m			$	0.20	$	—	n/m

Summary Business Segment Results (Unaudited)
	Three Months Ended															Year Ended
(in 000s)	12/31/17			12/31/16			% Change			9/30/17			% Change			12/31/17			12/31/16			% Change
Net revenues:
Global Wealth Management	$	473,938		$	407,535			16.3		$	453,558			4.5		$	1,822,218		$	1,563,410			16.6
Institutional Group		332,401			253,168			31.3			264,747			25.6			1,110,768			1,014,164			9.5
Other		(2,254	)		688			(427.6	)		2,864			(178.7	)		(6,554	)		(2,078	)		(215.4	)
Total net revenues	$	804,085		$	661,391			21.6		$	721,169			11.5		$	2,926,432		$	2,575,496			13.6

Operating expenses:
Global Wealth Management	$	304,077		$	284,683			6.8		$	291,802			4.2		$	1,195,312		$	1,133,092			5.5
Institutional Group		258,901			205,653			25.9			213,030			21.5			892,787			850,021			5.0
Other		241,927			116,161			108.3			108,198			123.6			568,797			449,801			26.5
Total operating expenses	$	804,905		$	606,497			32.7		$	613,030			31.3		$	2,656,896		$	2,432,914			9.2

Operating contribution:
Global Wealth Management	$	169,861		$	122,852			38.3		$	161,756			5.0		$	626,906		$	430,318			45.7
Institutional Group		73,500			47,515			54.7			51,717			42.1			217,981			164,143			32.8
Other		(244,181	)		(115,473	)		111.5			(105,334	)		131.8			(575,351	)		(451,879	)		27.3
Income/(loss) before income taxes	$	(820	)	$	54,894			(101.5	)	$	108,139			(100.8	)	$	269,536		$	142,582			89.0

As a percentage of net revenues:
Compensation and benefits
Global Wealth Management		48.9			52.9						49.1						50.0			55.7
Institutional Group		59.7			57.7						60.0						59.9			60.0
Non-compensation operating expenses
Global Wealth Management		15.3			17.0						15.2						15.6			16.8
Institutional Group		18.2			23.5						20.5						20.5			23.8
Income before income taxes
Global Wealth Management		35.8			30.1						35.7						34.4			27.5
Institutional Group		22.1			18.8						19.5						19.6			16.2
Consolidated pre-tax margin		(0.1	)		8.3						15.0						9.2			5.5

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)	12/31/17			12/31/16			9/30/17
Total assets	$	21,383,953		$	19,129,356		$	20,484,080
Total equity		2,861,576			2,738,408			2,932,405
Book value per common share	$	38.26		$	38.84		$	40.67
Return on common equity ⁽⁸⁾		(0.3	%)		4.2	%		9.7	%
Non-GAAP return on common equity ^{(2) (8)}		17.9	%		8.8	%		10.8	%
Return on tangible common equity ⁽⁹⁾		(0.5	%)		7.2	%		16.1	%
Non-GAAP return on tangible common equity ^{(2) (9)}		29.5	%		15.2	%		17.8	%
Tier 1 common capital ratio ⁽¹⁰⁾		16.9	%		18.0	%		18.3	%
Tier 1 risk based capital ratio ⁽¹⁰⁾		19.0	%		20.3	%		20.5	%
Tier 1 leverage capital ratio ⁽¹⁰⁾		9.5	%		10.2	%		10.4	%
Pre-tax margin on net revenues		(0.1	%)		8.3	%		15.0	%
Non-GAAP pre-tax margin on net revenues ⁽²⁾		20.1	%		13.5	%		16.8	%
Effective tax rate		(142.4	%)		51.0	%		38.5	%
Non-GAAP effective tax rate ⁽²⁾		23.9	%		36.6	%		38.9	%

Statistical Information
(in 000s)	12/31/17		12/31/16		% Change			9/30/17		% Change
Statistical Information:
Financial advisors ⁽¹¹⁾		2,244		2,280		(1.6	)		2,252		(0.4	)
Locations		391		396		(1.3	)		395		(1.0	)
Total client assets	$	272,591,000	$	236,942,000		15.0		$	264,717,000		3.0
Fee-based client assets	$	87,560,000	$	70,195,000		24.7		$	82,999,000		5.5
Client money market and insured product	$	17,286,000	$	19,253,000		(10.2	)	$	17,420,000		(0.8	)
Secured client lending ⁽¹²⁾	$	3,079,737	$	2,959,628		4.1		$	3,037,158		1.4

Stifel Bank & Trust - a component of Global Wealth Management
Selected Key Metrics
(Unaudited)
Selected operating data:	Three Months Ended															Year Ended
(in 000s, except percentages)	12/31/17			12/31/16			% Change			9/30/17			% Change			12/31/17			12/31/16			% Change
Net Interest Income	$	103,985		$	72,931			42.6		$	97,300			6.9		$	376,099		$	225,114			67.1
Bank loan loss provision		5,340			6,016			(11.2	)		7,990			(33.2	)		25,320			15,659			61.7
Charge-offs		105			—		n/m				—		n/m				3,058			296			933.1
Net Interest Margin		2.85	%		2.24	%		27.2			2.80	%		1.8			2.77	%		2.34	%		18.4

Financial Metrics:	As of
(in 000s, except percentages)	12/31/17			12/31/16			9/30/17
Total Assets	$	14,995,795		$	12,798,240		$	14,538,750
Total Equity		1,058,488			943,545			1,019,257
Total Loans, net (includes loans held for sale)		7,173,827			5,819,778			6,949,369
Total Deposits		13,411,935			11,527,483			12,883,961
Available-for-sale securities, at fair value		3,766,372			3,174,642			3,687,248
Held-to-maturity securities, at amortized cost		3,694,377			3,034,380			3,550,962
Residential real estate		2,593,576			2,161,400			2,517,543
Commercial and industrial		2,437,938			1,710,399			2,380,417
Securities-based loans		1,819,206			1,614,033			1,839,981
Commercial real estate		116,258			78,711			78,614
Loans held for sale		226,068			228,588			166,335
Common equity tier 1 capital ratio ⁽¹⁰⁾		14.3	%		16.0	%		14.4	%
Tier 1 capital ratio ⁽¹⁰⁾		14.3	%		16.0	%		14.4	%
Total capital ratio ⁽¹⁰⁾		15.3	%		16.8	%		15.3	%
Tier 1 leverage ratio ⁽¹⁰⁾		7.1	%		7.1	%		7.1	%

Credit Metrics:
Allowance for loan losses	$	67,466		$	45,163		$	62,229
Allowance as a percentage of retained loans		0.96	%		0.81	%		0.92	%
Net charge-offs as a percentage of average loans		0.00	%		0.00	%		0.00	%
Total nonperforming assets		27,030			26,934			21,776
Nonperforming assets as % of total assets		0.18	%		0.21	%		0.15	%

Global Wealth Management Summary Results of Operations (Unaudited)
	Three Months Ended												Year Ended
(in 000s)	12/31/17		12/31/16		% Change			9/30/17		% Change			12/31/17		12/31/16		% Change
Revenues:
Commissions	$	118,292	$	114,824		3.0		$	115,410		2.5		$	474,623	$	491,214		(3.4	)
Principal transactions		45,129		45,193		(0.1	)		42,924		5.1			186,711		179,421		4.1
Brokerage revenues		163,421		160,017		2.1			158,334		3.2			661,334		670,635		(1.4	)

Asset management and service fees		186,373		149,998		24.3			179,830		3.6			701,756		581,862		20.6
Net interest		112,190		78,748		42.5			102,831		9.1			400,414		248,784		60.9
Investment banking		8,899		12,064		(26.2	)		9,072		(1.9	)		40,466		42,187		(4.1	)
Other income		3,055		6,708		(54.5	)		3,491		(12.5	)		18,248		19,942		(8.5	)
Net revenues		473,938		407,535		16.3			453,558		4.5			1,822,218		1,563,410		16.6
Non-interest expenses:
Compensation and benefits		231,736		215,458		7.6			222,621		4.1			911,986		870,577		4.8
Non-compensation operating expenses		72,341		69,225		4.5			69,181		4.6			283,326		262,515		7.9
Total non-interest expenses		304,077		284,683		6.8			291,802		4.2			1,195,312		1,133,092		5.5
Income before income taxes	$	169,861	$	122,852		38.3		$	161,756		5.0		$	626,906	$	430,318		45.7

As a percentage of net revenues:
Compensation and benefits		48.9		52.9					49.1					50.0		55.7
Non-compensation operating expenses		15.3		17.0					15.2					15.6		16.8
Income before income taxes		35.8		30.1					35.7					34.4		27.5

Institutional Group Summary Results of Operations (Unaudited)
	Three Months Ended											Year Ended
(in 000s)	12/31/17		12/31/16		% Change			9/30/17		% Change		12/31/17		12/31/16		% Change
Revenues:
Commissions	$	50,462	$	63,859		(21.0	)	$	47,202		6.9	$	204,281	$	238,775		(14.4	)
Principal transactions		52,127		65,860		(20.9	)		44,086		18.2		210,115		296,008		(29.0	)
Brokerage revenues		102,589		129,719		(20.9	)		91,288		12.4		414,396		534,783		(22.5	)
Capital raising		100,620		66,949		50.3			70,850		42.0		325,691		214,209		52.0
Advisory fees		123,227		55,439		122.3			101,982		20.8		360,606		256,638		40.5
Investment banking		223,847		122,388		82.9			172,832		29.5		686,297		470,847		45.8
Other ⁽¹³⁾		5,965		1,061		462.2			627		851.4		10,075		8,534		18.1
Net revenues		332,401		253,168		31.3			264,747		25.6		1,110,768		1,014,164		9.5
Non-interest expenses:
Compensation and benefits		198,416		146,056		35.8			158,926		24.8		665,514		608,171		9.4
Non-compensation operating expenses		60,485		59,597		1.5			54,104		11.8		227,273		241,850		(6.0	)
Total non-interest expenses		258,901		205,653		25.9			213,030		21.5		892,787		850,021		5.0
Income before income taxes	$	73,500	$	47,515		54.7		$	51,717		42.1	$	217,981	$	164,143		32.8

As a percentage of net revenues:
Compensation and benefits		59.7		57.7					60.0				59.9		60.0
Non-compensation operating expenses		18.2		23.5					20.5				20.5		23.8
Income before income taxes		22.1		18.8					19.5				19.6		16.2

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 December 31, 2017, September 30, 2017, and December 31, 2016 and the years ended December 31, 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 December 31, 2017, September 30, 2017, and December 31, 2016 and the years ended December 31, 2017 and 2016 to net income and earnings per diluted common share on a non-GAAP basis for the same period.

	Three Months Ended									Year Ended
(in 000s)	12/31/2017			12/31/2016			9/30/2017			12/31/2017			12/31/2016
GAAP net income/(loss)	$	(1,988	)	$	26,880		$	66,536		$	182,871		$	81,520
Preferred dividend		2,344			2,343			2,343			9,375			3,906
Net income/(loss) available to common shareholders		(4,332	)		24,537			64,193			173,496			77,614

Non-GAAP adjustments:
Tax reform ⁽¹⁴⁾		135,525			—			—			135,525			—
Merger-related ⁽¹⁵⁾		9,447			14,226			10,244			49,205			132,016
Litigation-related ⁽¹⁶⁾		15,961			20,000			—			35,961			31,796
Severance		1,432			—			2,538			10,925			—
Provision for income taxes ⁽¹⁷⁾		(37,408	)		(4,578	)		(5,369	)		(81,729	)		(55,721	)
Total non-GAAP adjustments		124,957			29,648			7,413			149,887			108,091
Non-GAAP net income available to common shareholders	$	120,625		$	54,185		$	71,606		$	323,383		$	185,705

Weighted average diluted shares outstanding		82,267			79,539			80,881			81,035			77,563

GAAP earnings per diluted common share ⁽¹⁾	$	(0.03	)	$	0.34		$	0.82		$	2.26		$	1.05
Non-GAAP adjustments		1.52			0.37			0.09			1.85			1.39
Non-GAAP earnings per diluted common share	$	1.49		$	0.71		$	0.91		$	4.11		$	2.44

GAAP earnings per diluted common share available to common shareholders ⁽¹⁾	$	(0.06	)	$	0.31		$	0.79		$	2.14		$	1.00
Non-GAAP adjustments		1.53			0.37			0.10			1.85			1.39
Non-GAAP earnings per diluted common share available to common shareholders	$	1.47		$	0.68		$	0.89		$	3.99		$	2.39

Footnotes

⁽¹⁾

GAAP earnings per share for the three months ended December 31, 2017 is calculated using the basic weighted average number of common shares outstanding, not fully dilutive shares, as they are anti-dilutive in periods a loss is incurred.

⁽²⁾

Reconciliations of the Company’s GAAP results to these non-GAAP measures are discussed within and under “Non-GAAP Financial Measures.”

⁽³⁾

Excludes revenue included in the Other segment

⁽⁴⁾

See further discussion of non-GAAP adjustments under “Non-GAAP Financial Measures.”

⁽⁵⁾

During the first quarter of 2017, the Company adopted new accounting guidance associated with stock-based compensation.

⁽⁶⁾

Non-GAAP pre-tax margin for the three months ended December 31, 2017 of 20.1% is calculated by adding tax reform, merger-related and severance non-GAAP adjustments of $162.4 million to our GAAP loss before income taxes of $0.8 million and dividing it by non-GAAP net revenues for the quarter of $804.1 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”

⁽⁷⁾

Non-GAAP pre-tax margin for the year ended December 31, 2017 of 17.1% is calculated by adding tax reform, litigation and merger-related and severance non-GAAP adjustments of $231.6 million to our GAAP income before income taxes of $269.5 million and dividing it by non-GAAP net revenues for the quarter of $2,928.4 million. Reconciliations of the Company’s GAAP results to certain non-GAAP measures is discussed within and under “Non-GAAP Financial Measures.”

⁽⁸⁾

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.

⁽⁹⁾

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.

⁽¹⁰⁾

Capital ratios are estimates at time of the Company’s earnings release.

⁽¹¹⁾

Includes 112, 123, and 116 independent contractors at December 31, 2017, December 31, 2016, and September 30, 2017, respectively.

⁽¹²⁾

Includes client margin balances held by our broker-dealer subsidiaries and securities-based loans held at Stifel Bank.

⁽¹³⁾

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

⁽¹⁴⁾

Primarily related to actions taken by the Company in response to the Tax Legislation that was enacted in the fourth quarter of 2017 to maximize tax savings;

⁽¹⁵⁾

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.

⁽¹⁶⁾

Primarily related to costs associated with the Company’s previously disclosed legal matters.

⁽¹⁷⁾

Primarily related to 1) actions taken by the Company in response to the Tax Legislation that was enacted in the fourth quarter

of 2017 to maximize tax savings; 2) the favorable impact of the adoption of new accounting guidance during 2017 associated

with stock-based compensation; and 3) the revaluation of the Company’s deferred tax assets as a result of the enacted Tax Legislation.