Stifel Financial Corporation (SF)

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Stifel Financial Corp. (SF)

Q4 2012 Results Earnings Call

February 25, 2013 5:00 PM ET


Ron Kruszewski - Chairman, President and CEO

Jim Zemlyak - Chief Financial Officer


Devin Ryan - Sandler O'Neill

Hugh Miller - Sidoti

Chris Harris - Wells Fargo Securities

David Trone - JMP Securities



Good afternoon. My name is Candice, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter and Full Year 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Jim Zemlyak, CFO of Stifel. You may begin your conference.

Jim Zemlyak

Thank you, Candice, and good afternoon. I’m Jim Zemlyak, CFO of Stifel. I’d like to welcome everyone to our conference call today to discuss our fourth quarter and full year 2012 financial results.

Please note that this conference call is being recorded. If you’d like a copy of today’s presentation, you may download slides from our website at

Before we begin today’s call, I would like to remind listeners that this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are not statements of fact or guarantees of performance. They are subject to risks, uncertainties, and other factors that may cause actual future results to differ materially from those discussed in the statements.

To supplement our financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance and liquidity. These non-GAAP measures should only be considered together with the company’s GAAP results.

And finally, for a discussion of risks and uncertainties in our business, please see the business factors affecting the company and the financial services industry in the company’s annual report on Form 10-K and MD&A of results in the company’s quarterly reports on From 10-Q.

I will now turn over the call to the Chairman, CEO and President of Stifel, Ron Kruszewski.

Ron Kruszewski

Thank you, Jim. Welcome everyone and good afternoon. 2012 both the fourth quarter and year were good year. 2012 represented Stifel's 17th consecutive year of record net revenue. This was a significant accomplishment particularly given past market cycles. We remain focused on our goal delivering superior client service which has benefited all of our constituencies, clients, shareholders and our associates alike.

Our fourth quarter results finished the year with record revenues, both segments, our Global Wealth Management, our Institutional Group reflected strong underlying performance even in light of the political and economic uncertainty which was present during the fourth quarter. We continue to selectively add talent to the professionals to expand our product offering and gain market share.

At the end of the last year, we finished our acquisition so to speak of Miller Buckfire which is a preeminent franchise in restructuring advisory, and most recently closed our merger with KBW, the leading financial services investment bank. As we've done in the past, we’ll continue to position Stifel to take advantage of opportunity.

Turning to our financial results for the quarter, we posted record quarterly revenues of $426 million, which was up 17% from a year ago. Net income was $40 million or $0.63 per diluted share, which compares with net income of $27 million, or $0.43 per diluted share last year.

Results for the quarter included gains on our investment in Knight Capital of -- a little over $13 million. This gain was offset by normal compensation accruals on that gain and merger-related and other unusual expenses approximately $4 million.

Those expenses consisted of about $2 million in merger-related expenses for KBW and Miller Buckfire, $1.5 million provision for loan loss in our Bank, not quite sure I would call that unusual, we had a lot of new loan activity and you have to book for loan losses upfront when you book loans at our Bank, but that was a $1.5 million of front loading net expense so to speak, and we had $0.5 million in advertising expenses related to our new advertising campaign which I’ll discuss later.

If you take everything together, the net after tax impact of these items was a gain of $0.02 per diluted share for the quarter. Pre-tax margins were 15%, which compares with 15% in the year ago quarter.

Also we had a benefit in the quarter of an effective tax rate of 35% which was primarily due to certain tax benefits as a result of the Miller Buckfire acquisition and those tax benefits were offset by an increase in the valuation allowance for our deferred tax assets, but net net our tax rate was lower than it has been in previous quarters.

Looking at the year, as I previously said, we posted our record revenues for our 17th consecutive years. Revenues totaled $1.6 billion, which was up 14% compared to 2011, net income of nearly $139 million, or $2.20 per diluted share, compared with net income of $84 million, or $1.33 a share in 2011.

The results for 2012, as I previously stated, included our gain on investment in Knight of $39 million pre-tax, which was $0.14 per diluted share after tax. The results for 2011 also included previously disclosed litigation and merger-related expenses of $0.47 per diluted share. Our margins for the year in 2012 were 14% compared to 10% in 2011.

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