Stifel Financial Corporation · NYSE:SF
Stifel Financial — Q2 2010 Earnings Presentation
36 slides from Stifel Financial's earnings presentation, Aug 10, 2010
Slide 1: 2nd Quarter 2010 Earnings Conference Call
2nd Quarter 2010 Earnings Conference Call August 10, 2010 As modified on August 12, 2010
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve significant risks, assumptions, and uncertainties, including statements relating to the market opportunity and future business
Slide 3: Explanation of the Modifications to our August 10, 2010 Earnings Presentation
Explanation of the Modifications to our August 10, 2010 Earnings Presentation In an effort to provide clarity around the merger with Thomas Weisel Partners Group, Inc. (“TWPG”), which closed on July 1, 2010 and the modification of our existing deferred compensation plan, which was approved by the bo
Slide 4: Chairmen's Comments
Chairmen’s Comments “We are very pleased to report record quarterly revenue and record six-month net income and revenue results, which reflect the investments we’ve made over the past several years. The merger with Thomas Weisel Partners closed on July 1, 2010, and we are confident that through the
Slide 5: Financial Highlights
Financial Highlights
Slide 6: Three Months Ended June 30, 2010 Highlights
Three Months Ended June 30, 2010 Highlights Record net revenues of $328 million, a 25% increase over the 2nd quarter of 2009 (2Q09) and a 5% increase over the 1st quarter of 2010 (1Q10). The Global Wealth Management (GWM) segment posted net revenues of $200 million, a 47% increase over 2Q09 and
Slide 7: Six Months Ended June 30, 2010 Highlights
Six Months Ended June 30, 2010 Highlights Record net revenues of $640 million, a 33% increase over the comparable period in 2009. The GWM segment posted net revenues of $399 million, a 59% increase over the comparable period in 2009. The IG segment posted net revenues of $238 million, a 3% inc
Slide 8: Pro Forma Headcount
Stifel Financial Corp. Pro Forma Headcount % Change Proforma Proforma Stifel TWPG Proforma vs. vs. 6/30/10 Associates 6/30/10 3/31/10 6/30/09 3/31/10 6/30/09 Global Wealth Management: Financial advisors 1,916 8 1,924 1,900 1,562 1.3% 23.2% Branch support 1,067 15 1,082 1,051 849 2.9% 27.4% Asset man
Slide 9: Three months ended June 30, 2010 Results
Stifel Financial Corp. Three months ended June 30, 2010 Results Three Months Ended June 30, 2010 % Change Three Merger- Months Related ended Non- ($ in thousands) GAAP Charges Non-GAAP 6/30/2009 GAAP GAAP Net revenues $ 328,009 $ - $ 328,009 $ 261,505 25.4% 25.4% Compensation and benefits 216,907 3,
Slide 10: Six months ended June 30, 2010 Results
Stifel Financial Corp. Six months ended June 30, 2010 Results Six Months Ended June 30, 2010 % Change Merger- Six Months Related ended Non- ($ in thousands) GAAP Charges Non-GAAP 6/30/2009 GAAP GAAP Net revenues $ 640,039 $ - $ 640,039 $ 481,486 32.9% 32.9% Compensation and benefits 423,149 3,119 42
Slide 11: Source of Revenues
Source of Revenues Quarter Ended Six Months Ended % of Net Revenues % of Net Revenues % % ($ in thousands) 6/30/10 6/30/09 Change 6/30/10 6/30/09 6/30/10 6/30/09 Change 6/30/10 6/30/09 Revenues Principal transactions $ 122,923 $ 121,261 1.4% 37.4% 46.4% $ 240,343 $ 218,539 10.0% 37.5% 45.4% Commissi
Slide 12: Principal Transactions
Principal Transactions Quarter Ended Six Months Ended % % ($ in thousands) 6/30/10 6/30/09 Change 6/30/10 6/30/09 Change Principal transactions: Taxable debt $ 60,108 $ 84,830 (29.1%) $ 124,798 $ 149,986 (16.8%) Municipal debt 20,032 15,461 29.6% 36,874 31,917 15.5% Equities 29,630 12,359 139.7% 51,
Slide 13: Non-Interest Expenses
Stifel Financial Corp. Non-Interest Expenses Quarter Ended Six Months Ended % of Net revenues % of Net revenues % ($ in thousands) 6/30/10 6/30/09 % Change 6/30/10 6/30/09 6/30/10 6/30/09 Change 6/30/10 6/30/09 Net revenues $ 328,009 $ 261,505 25.4% 100.0% 100.0% $ 640,039 $ 481,486 32.9% 100.0% 100
Slide 14: Segment Comparison
Segment Comparison Quarter Ended Six Months Ended ($ in thousands) 6/30/10 6/30/09 % Change 6/30/10 6/30/09 % Change Net revenues: Global Wealth Management $ 199,940 $ 136,200 46.8% $ 399,361 $ 251,252 58.9% Institutional Group 124,602 125,136 (0.4%) 237,894 230,608 3.2% Other 3,467 169 * 2,784 (374
Slide 15: Global Wealth Management
Global Wealth Management Quarter Ended Six Months Ended ($ in thousands) 6/30/10 6/30/09 % Change 6/30/10 6/30/09 % Change Net revenues $ 199,940 $ 136,200 46.8% $ 399,361 $ 251,252 58.9% Compens a tion a nd benefits 108,436 74,244 46.1% 218,303 138,496 57.6% Tra ns i ti on pa y 15,173 9,585 58.3% 3
Slide 16: Stifel Bank & Trust
Stifel Bank & Trust Quarter Ended Six Months Ended ($ in thousands) 6/30/10 6/30/09 % Change 6/30/10 6/30/09 % Change Net revenues: Interest 8,171 3,776 116.4% 16,258 7,434 118.7% Other income 1,062 1,377 (22.9%) 3,175 2,046 55.2% Total revenues 9,233 5,153 79.2% 19,433 9,480 105.0% Interest expense
Slide 17: Stifel Bank & Trust Low Risk Asset Growth Strategy & Opportunity
Stifel Bank & Trust Low Risk Asset Growth Strategy & Opportunity Assets of $1.40 billion, up 22% from the prior year-end balance of Maintain solid asset quality: $1.14 billion Non-performing loans to gross loans of 0.24% Investment portfolio of $740 million, up 28% from the prior year- Non
Slide 18: Institutional Group
Institutional Group Quarter Ended Six Months Ended ($ in thousands) 6/30/10 6/30/09 % Change 6/30/10 6/30/09 % Change Net revenues $ 124,602 $ 125,136 (0.4%) $ 237,894 $ 230,608 3.2% Compens a ti on a nd benefi ts 68,476 70,237 (2.5%) 130,697 129,261 1.1% Tra ns i ti on pa y 4,102 4,013 2.2% 8,185 7
Slide 19: Institutional Group Revenues
Institutional Group Revenues Quarter Ended Six Months Ended % % ($ in thousands) 6/30/10 6/30/09 Change 6/30/10 6/30/09 Change Sales and trading: Equity $ 44,099 $ 38,078 15.8% $ 82,751 $ 74,865 10.5% Fixed income 44,263 63,054 (29.8%) 88,608 116,502 (23.9%) 88,362 101,132 (12.6%) 171,359 191,367 (1
Slide 20: Financial Condition
Financial Condition
Slide 21: Statement of Financial Condition
Statement of Financial Condition $956 $1,010 $4,000 $1,250 $3,371 $3,167 $1,000 $83 $3,000 $676 $83 $750 $520 $83 $2,000 $1,558 $1,499 $927 $500 $290 $95 $842 $1,085 $166 $225 $873 $1,000 $135 $70 $593 $412 $382 $250 $35 $425 $35 $70 $131 $155 $220 $100 $0 $0 2003 2004 2005 2006 2007 2008 2009 Q2 20
Slide 22: Capital Structure
Capital Structure As of June 30, 2010 ($ in thousands) Total Assets $ 3,370,707 Stockholders' Equity $ 927,087 Debentures to: Stifel Financial Capital Trust II - LIBOR plus 1.70% (fixed at 6.38% until 9/30/10), due 9/30/35 $ 35,000 Stifel Financial Capital Trust III - LIBOR plus 1.85% (fixed at 6.79
Slide 23: Level 3 Assets
Level 3 Assets Carrying Value ($ in thousands) 6/30/10 12/31/09 Auction Rate Securities (ARS) $ 73,634 $ 56,003 Stifel Bank & Trust Investments - 2,693 Trading Securities 9,124 1,243 Other Investments 6,935 5,426 Level 3 assets (excluding ARS) 16,059 9,362 Total Level 3 assets $ 89,693 $ 65,365 Perc
Slide 24: Other Financial Data
Other Financial Data Q2 10 vs. Q2 10 vs. 6/30/10 3/31/10 6/30/09 Q1 10 Q2 09 Total assets (000s): Stifel Nicolaus and Stifel Financial $ 1,977,879 $ 2,112,054 $ 1,755,684 (6.4%) 12.7% Stifel Bank 1,392,828 1,115,329 532,308 24.9% 161.7% $ 3,370,707 $ 3,227,383 $ 2,287,992 4.4% 47.3% Shareholders' eq
Slide 25: TWP Merger
TWP Merger
Slide 26: TWPG Merger Deal Consideration
TWPG Merger Deal Consideration (in thousands, except price to book value) Shares Value (1) TWPG common stock 3,719 $ 161,389 TWPG exchangable shares 780 33,847 Price to Less: TWPG shares held by Stifel (53) (2,308) Book Value 4,446 192,928 1.08x TWPG restricted stock units 1,868 81,064 Total conside
Slide 27: Pro Forma Combined Net Revenues
Stifel Financial Corp. Pro Forma Combined Net Revenues Six Months Ended June 30, 2010 Pro Forma ($ in thousands) Stifel TWPG Combined Revenues Principal transactions & commissions $ 449,012 $ 37,730 $ 486,742 Asset mgt and service fees 85,241 7,252 92,493 Investment banking 75,473 46,235 121,708 Oth
Slide 28: Estimated Annual Fixed Operating Expenses
TWPG Merger Estimated Annual Fixed Operating Expenses TWPG ($ in thousands) Stifel (1) Estimate (2) Total Fixed operating expenses: Occupancy and equipment rental $ 103,000 $ 10,400 $ 113,400 Communication and office supplies 60,600 10,800 71,400 Commissions and floor brokerage 22,000 2,300 24,300 O
Slide 29: Breakeven Sensitivity Model
TWPG Merger Breakeven Sensitivity Model Breakeven % of net Breakeven % of net ($ in thousands) net income revenues EPS (1) revenues Net revenues $ 109,575 100% $ 147,500 100% Fixed compensation 5,000 4.6% 5,000 3.4% Variable compensation 55,000 50.2% 73,900 50.1% Total compensation 60,000 54.8% 78,9
Slide 30: Estimated Merger-Related Costs
TWPG Merger Estimated Merger-Related Costs Quarter Ended ($ in thousands) 6/30/10 9/30/10 12/31/10 12/31/11 Operating expenses: Compensation and benefits $ 3,100 $ 177,050 (1) $ 700 - Occupancy and equipment rental - 7,000 500 500 Communication and office supplies - 5,500 1,500 1,250 Commissions and
Slide 31: Estimated Unit Modification Charge
Estimated Unit Modification Charge On August 3, 2010, the Board approved the modification of the existing Stifel Financial Corp. deferred compensation plan to align the requirements for vesting with that of the TWPG deferredThe compensation plan, whereby forfeiture would not result from an event of
Slide 32: Pro Forma Equity Roll Forward
Stifel Financial Corp. Pro Forma Equity Roll Forward Proforma Unit Stifel ($ in thousands) 6/30/10 TWPG Combined Modification Proforma Beginning Equity (1/1/2010) $ 873,500 $ - $ 873,500 $ - $ 873,500 Net income 45,000 - 45,000 - 45,000 Merger Consideration - 274,000 274,000 - 274,000 Share repurcha
Slide 33: Pro Forma Estimate and Unit Vesting
Stifel Financial Corp. Pro Forma Estimate and Unit Vesting 2010E Half Year Proforma Illustration Proforma TWPG Combined Proforma Stifel 2010E Stifel Breakeven pre-unit after Unit (in thousands, except per share data) Consensus (1) Consensus (2) EPS Vesting Unit Vesting Vesting Net revenues $ 1,352,1
Slide 34: Regulatory Reform
Regulatory Reform
Slide 35: Dodd-Frank Wall Street Reform and Consumer Protection Act
Dodd-Frank Wall Street Reform and Consumer Protection Act Provisions of Interest to Stifel Financial Corp. Fiduciary Duty SEC Authority to Restrict Mandatory Pre-Dispute Arbitration Consumer Financial Protection New Fees Higher Deposit Insurance Costs SIPC Fees Volcker Rule 34
Slide 36: Q&A
O&A STIFEL 35 FINANCIAL