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Stifel Financial Corp. Reports Record Annual and Fourth Quarter Results
Posted by: gurufocus (IP Logged)
Date: February 12, 2009 06:04AM

ST. LOUIS--(BUSINESS WIRE)--Stifel Financial Corp. (NYSE: SF) today reported unaudited quarterly net income of $17.8 million, or $0.59 per diluted share, on record net revenues of $228.2 million for the quarter ended Press Release: Stifel Financial Corp. Reports Record Annual and Fourth Quarter Results

ST. LOUIS--(BUSINESS WIRE)--Stifel Financial Corp. (NYSE: SF) today reported unaudited quarterly net income of $17.8 million, or $0.59 per diluted share, on record net revenues of $228.2 million for the quarter ended December 31, 2008. For the comparable quarter of 2007, net income was $13.8 million, or $0.51 per diluted share, on net revenues of $212.2 million. For the year ended December 31, 2008, we posted record net income of $57.2 million, or $2.04 per diluted share, on record net revenues of $867.5 million, compared with $32.2 million, or $1.25 per diluted share, on net revenues of $763.1 million, for the same period one year earlier. All prior period share and earnings per share amounts have been retroactively restated to reflect the three-for-two stock split distributed in June 2008.

After adjusting for acquisition related charges, non-GAAP net income, our “Core earnings”, and non-GAAP earnings per diluted share were $21.7 million and $0.72, respectively, for the fourth quarter of 2008 compared to 2007 fourth quarter non-GAAP earnings of $20.5 million and non-GAAP earnings per diluted share of $0.76. For the year ended December 31, 2008, our non-GAAP earnings and non-GAAP earnings per diluted share were $73.1 million and $2.60, respectively, compared to 2007 prior year non-GAAP earnings of $66.8 million and non-GAAP earnings per diluted share of $2.60. A reconciliation between our GAAP results and non-GAAP measures is included in this release.

Our 2008 fourth quarter results include an after tax gain of approximately $0.11 per diluted share and after tax charges of approximately $0.12 per diluted share. The after tax gain resulted from the previously announced extinguishment of $12.5 million of 6.78% Stifel Financial Capital Trust IV Cumulative Trust Preferred Securities. The after tax charge includes approximately $0.10 per diluted share from unrealized losses on investments and after tax charges of approximately $0.02 per diluted share for the establishment of a charitable foundation. Our 2007 fourth quarter results include an approximate $0.07 per diluted share gain for the extinguishment of $ 10.0 million of 6.78% Stifel Financial Capital Trust IV Cumulative Trust Preferred Securities. Excluding the aforementioned items 2008 fourth quarter non-GAAP earnings per diluted share increased 6% over prior year non-GAAP earnings per diluted share to $0.73 per diluted share.

Our results include the operations of Ryan Beck and Company and Stifel Bank and Trust for the year ended December 31, 2008, compared to the prior year results, which include Ryan Beck operations for ten months and Stifel Bank and Trust for nine months, as the acquisitions were made on February 28, 2007 and April 2, 2007, respectively. Prior year results also include a significant investment banking transaction that contributed $24.7 million in revenues in the second quarter of 2007.

At December 31, 2008, our equity was $594.9 million, resulting in book value per share of $22.75. During 2008, the Company repurchased 567,953 shares of its common stock, at an average price of $27.96 per share. On September 29, 2008, the Company completed the public offering of 1,495,000 new shares of Company common stock.

Chairman’s Comments

Chairman and Chief Executive Officer, Ronald J. Kruszewski, commented, "Simply put, 2008 was uniquely challenging for the financial services industry. Our Company has been fortunate to have sidestepped many of the issues which plagued a number of our brethren. While we are mindful of this environment, we consider this a time of unparalleled opportunity for our Company."

"Going forward, we will continue to focus on the long-term building of shareholder value, primarily through the addition of talented and entrepreneurial people.” Mr. Kruszewski concluded, “I would like to congratulate and thank our hard-working associates for our record results in 2008 and also thank our clients for their continued confidence in Stifel Financial."

Stifel Financial Corp.
Summary of Results of Operations (Unaudited)
($ In Thousands, Except Per Share Amounts)
  Three Months Ended       Percent Change From           Years Ended      
  12/31/2008     9/30/2008     12/31/2007 9/30/2008         12/31/2007     12/31/2008     12/31/2007 % Change  
Total Revenues $ 230,930 $ 223,829 $ 219,122 3 % 5 % $ 886,021 $ 793,090 12 %
Net Revenues $ 228,160 $ 218,923 $ 212,186 4 % 8 % $ 867,511 $ 763,065 14 %
Net Income $ 17,756 $ 12,777 $ 13,835 39 % 28 % $ 57,212 $ 32,170 78 %
Non-GAAP Net Income (1) $ 21,738 $ 16,714 $ 20,491 30 % 6 % $ 73,090 $ 66,787 9 %
             
Per Share Information
 
Three Months Ended Percent Change From Years Ended
  12/31/2008   9/30/2008   12/31/2007 9/30/2008   12/31/2007     12/31/2008   12/31/2007 % Change  
Earnings Per Share: Diluted $ 0.59 $ 0.46 $ 0.51 28 % 16 % $ 2.04 $ 1.25 63 %
Non-GAAP Earnings Per Share: Diluted (1) $ 0.72 $ 0.60 $ 0.76 20 % -5 % $ 2.60 $ 2.60 0 %
Weighed average common equivalent share

Computations: Diluted shares

30,215 28,045 27,033 8 % 12 % 28,073 25,723 9 %
 
(1) See “Reconciliation of Core Earnings” table

Business Highlights

YTD Highlights

  • Record net revenues of $867.5 million, a 14% increase for 2008 as compared to 2007.
  • Thirteenth consecutive annual increase in net revenues.
  • Record GAAP net income of $57.2 million, or $2.04 per diluted share, a 78% increase for 2008 as compared to 2007.
  • Book value per common share increased to $22.75 as of December 31, 2008, a 24% increase from December 31, 2007.
  • Core net income of $73.1 million, or $2.60 per diluted share, a 9% increase from the prior year core net income.
  • Our Private Client Group ("PCG") and Fixed Income Capital Markets ("FICM") net revenues increased 6% and 170%, respectively, in 2008 as compared to 2007.
  • Commissions and principal transactions revenue increased 39% to $634.4 million from the prior year.
  • Investment banking revenues declined 51% to $83.7 million from the prior year.
  • Prior year results include our largest investment banking transaction, which contributed $24.7 million in revenues.
  • Asset management and service fees revenue increased 18% to $119.9 million from the prior year.
  • For the year ended December 31, 2008 and 2007, utilizing Core earnings, pre-tax margin was 14%.
  • For the year ended December 31, 2008, utilizing Core earnings, annualized return on average equity was 15% compared to 18% from the prior year.
  • We paid a 50% stock dividend in the form of a 3-for-2 stock split distributed on June 12, 2008 to shareholders of record May 29, 2008.
  • On September 29, 2008, we successfully completed our public offering of 1,495,000 new shares of Company common stock at an offering price of $45.00 per share. The net proceeds to the Company after consideration of the underwriters discount and before any expenses were $64.4 million.
  • We closed on the acquisition of Butler Wick & Company, Inc. adding 18 private client branch offices and 75 financial advisors.

Quarterly Highlights

  • Record net revenues of $228.2 million, a 8% increase from the prior year fourth quarter and a 4% increase from the third quarter of 2008.
  • GAAP net income of $17.8 million, or $0.59 per diluted share, a 28% increase over the prior year fourth quarter and a 39% increase from the third quarter 2008.
  • Core net income of $21.7 million, or $0.72 per diluted share, a 6% increase from the prior year fourth quarter and a 30% increase from the third quarter 2008.
  • Commission and principal transactions revenue of $176.1 million increased 27% over the previous year fourth quarter and increased 12% from the third quarter of 2008.
  • Investment banking revenues declined 50% to $15.8 million from the prior year fourth quarter and decreased 37% from the third quarter of 2008.
  • Asset management and service fees revenue decreased 1% to $29.3 million as compared to the prior year fourth quarter and down 3% from the third quarter 2008.
  • The PCG segment recorded net revenues of $111.6 million, a 6% decrease over the fourth quarter 2007 and a 2% decrease from the third quarter 2008.
  • The FICM segment recorded net revenues of $58.3 million, a 145% increase over the fourth quarter 2007 and a 53% increase from the third quarter 2008.
  • The Equity Capital Markets ("ECM") commissions and principal transactions of $44.3 million, a 26% increase over the prior year fourth quarter and a 1% decrease from the third quarter 2008
  • The ECM segment net revenues decreased 8% over the fourth quarter 2007 and 13% from the third quarter 2008 resulting from decreased investment banking revenues which declined 58% from the prior year fourth quarter and decreased 44% from the third quarter 2008.
  • We recorded an after tax gain of approximately $0.11 per diluted share for the extinguishment of $12.5 million of 6.78% Stifel Financial Capital Trust IV Cumulative Trust Preferred Securities in December 2008
  • For the three months ended December 31, 2008, utilizing Core earnings, pre-tax margin was 16% compared to 16% from the previous year fourth quarter and 13% from the third quarter 2008.
  • For the three months ended December 31, 2008, utilizing Core earnings, annualized return on average equity was 15% compared to 20% from the previous year fourth quarter and 14% from the third quarter 2008.
Stifel Financial Corp.  
Summary of Results of Operations (Unaudited)
($ In Thousands, Except Per Share Amounts)
  Three Months Ended       Percent Change From

 

Years Ended

     
  12/31/2008     % of Net Revenues     9/30/2008     % of Net Revenues     12/31/2007   % of Net Revenues   9/30/2008         12/31/2007       12/31/2008     % of Net Revenues     12/31/2007   % of Net Revenues % Change  
Revenues
Commissions $ 83,599 36.7 % $ 88,727 40.5 % $ 90,584 42.7 % -6 % -8 % $ 341,090 39.3 % $ 315,514 41.4 % 8 %
Principal transactions 92,492 40.5 % 68,182 31.1 % 47,670 22.5 % 36 % 94 % 293,285 33.8 % 139,248 18.2 % 111 %
Investment banking 15,775 6.9 % 25,156 11.5 % 31,449 14.8 % -37 % -50 % 83,710 9.6 % 169,413 22.2 % -51 %
Asset management and service fees 29,346 12.9 % 30,336 13.9 % 29,592 13.9 % -3 % -1 % 119,926 13.8 % 101,610 13.3 % 18 %
Other   (1,255 ) -0.6 %   (1,391 ) -0.6 %   4,127 2.0 % n/a   n/a     (2,138 ) -0.2 %   8,234 1.1 % n/a  
Total operating revenues   219,957   96.4 %   211,010   96.4 %   203,422 95.9 % 4 % 8 %   835,873   96.3 %   734,019 96.2 % 14 %
Interest revenue   10,973   4.8 %   12,819   5.9 %   15,700 7.4 % -14 % -30 %   50,148   5.8 %   59,071 7.7 % -15 %
Total revenues   230,930   101.2 %   223,829   102.3 %   219,122 103.3 % 3 % 5 %   886,021   102.1 %   793,090 103.9 % 12 %
Less: Interest expense   2,770   1.2 %   4,906   2.3 %

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