Stifel(SF) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Stifel Financial Corp.'s unaudited consolidated financial statements for periods ending June 30, 2025, and December 31, 2024, along with detailed accounting policy notes Consolidated Statements of Financial Condition The Consolidated Statements of Financial Condition show a slight decrease in total assets and equity, with a minor increase in total liabilities, as of June 30, 2025 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $39,859,653 | $39,895,540 | | Total Liabilities | $34,262,668 | $34,208,770 | | Total Equity | $5,596,985 | $5,686,770 | - Cash and cash equivalents decreased from $2.65 billion at December 31, 2024, to $1.86 billion at June 30, 2025[8] - Bank deposits, the largest liability, decreased from $29.10 billion to $28.67 billion[8] Consolidated Statements of Operations The Consolidated Statements of Operations indicate increased total revenues but significantly decreased net income and EPS for the six-month period due to higher non-interest expenses | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenues | $1,491,086 | $1,465,261 | $2,960,112 | $2,882,954 | | Net Revenues | $1,284,286 | $1,217,932 | $2,539,755 | $2,380,970 | | Net Income | $155,055 | $165,294 | $208,047 | $328,869 | | Net Income Available to Common Shareholders | $145,734 | $155,973 | $189,406 | $310,228 | | Basic EPS | $1.41 | $1.50 | $1.82 | $2.98 | | Diluted EPS | $1.34 | $1.41 | $1.73 | $2.82 | | Cash Dividends Declared per Common Share | $0.46 | $0.42 | $0.92 | $0.84 | - Total non-interest expenses increased by 8.0% for the three months and 16.9% for the six months ended June 30, 2025, significantly impacting net income[10] - Provision for credit losses increased by 181.9% for the three months and 147.5% for the six months ended June 30, 2025, reflecting higher reserves[10] Consolidated Statements of Comprehensive Income The Consolidated Statements of Comprehensive Income show improved other comprehensive income, driven by unrealized gains on available-for-sale securities and foreign currency adjustments, despite decreased net income | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $155,055 | $165,294 | $208,047 | $328,869 | | Total Other Comprehensive Income/(Loss), net of tax | $17,551 | $(607) | $41,438 | $(10,455) | | Comprehensive Income | $172,606 | $164,687 | $249,485 | $318,414 | - Changes in unrealized gains/(losses) on available-for-sale securities, net of tax, shifted from a loss of $8.24 million in H1 2024 to a gain of $29.83 million in H1 2025[13] - Foreign currency translation adjustment, net of tax, improved from a loss of $2.22 million in H1 2024 to a gain of $11.61 million in H1 2025[13] Consolidated Statements of Changes in Shareholders' Equity The Consolidated Statements of Changes in Shareholders' Equity reflect increased retained earnings from net income, but significant common stock repurchases led to an overall decrease in total equity | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Retained Earnings, beginning of period | $3,794,609 | $3,398,610 | | Net Income | $208,047 | $328,869 | | Common Dividends Declared | $(105,485) | $(97,420) | | Preferred Dividends Declared | $(18,641) | $(18,641) | | Treasury Stock, beginning of period | $(629,518) | $(636,699) | | Common Stock Repurchased | $(176,211) | $(78,307) | | Total Shareholders' Equity, end of period | $5,596,985 | $5,398,207 | - Common stock repurchases significantly increased to $176.21 million for the six months ended June 30, 2025, compared to $78.31 million in the prior year[18] - Accumulated other comprehensive loss improved from $(75.64) million at the beginning of the period to $(34.20) million at the end, driven by unrealized gains and foreign currency adjustments[18] Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows show operating activities providing cash, but increased cash usage in investing and financing activities resulted in an overall decrease in cash and cash equivalents | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Net Cash Provided by/(Used in) Operating Activities | $396,282 | $(132,814) | | Net Cash Used in Investing Activities | $(586,478) | $(434,091) | | Net Cash Used in Financing Activities | $(573,552) | $(297,766) | | Decrease in Cash, Cash Equivalents, and Cash Segregated | $(752,140) | $(866,889) | | Cash, Cash Equivalents, and Cash Segregated at End of Period | $1,926,063 | $2,656,960 | - Operating activities provided $396.28 million in cash for the six months ended June 30, 2025, a substantial improvement from using $132.81 million in the prior period[20] - Investing activities used more cash, increasing from $(434.09) million in H1 2024 to $(586.48) million in H1 2025, primarily due to increased purchases of held-to-maturity securities and acquisitions[23] - Financing activities used significantly more cash, increasing from $(297.77) million in H1 2024 to $(573.55) million in H1 2025, driven by a decrease in bank deposits and higher common stock repurchases[23] Notes to Consolidated Financial Statements The Notes to Consolidated Financial Statements provide detailed explanations of accounting policies, financial instrument valuations, and specific financial activities, covering operations, fair value, and various financial instruments NOTE 1 – Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies Stifel Financial Corp. operates as a diversified financial services company across the U.S., UK, Europe, and Canada, with operations in Global Wealth Management, Institutional Group, and Other segments - Stifel Financial Corp. is engaged in retail brokerage, securities trading, investment banking, investment advisory, and banking services across the U.S., UK, Europe, and Canada[25] - The company's operations are organized into three reportable segments: Global Wealth Management, Institutional Group, and Other[25] - Interim financial statements are unaudited and prepared in accordance with SEC rules, with all necessary normal, recurring adjustments made[27] NOTE 2 – Summary of Significant Accounting Policies This note refers to the full description of significant accounting policies in the 2024 Annual Report, highlighting the accounting for financial advisor loans and the allowance for doubtful accounts - Loans and advances to financial advisors are generally forgiven over a five- to ten-year period based on continued employment and performance standards[33] | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Allowance for doubtful accounts | $29,500 | $31,700 | NOTE 3 – Receivables From and Payables to Brokers, Dealers, and Clearing Organizations This note details the significant increase in both receivables from and payables to brokers, dealers, and clearing organizations, primarily driven by securities borrowing and lending activities | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Receivables from brokers, dealers, and clearing organizations | $637,057 | $486,465 | | Deposits paid for securities borrowed | $342,130 | $269,831 | | Payable to brokers, dealers, and clearing organizations | $447,632 | $215,249 | | Deposits received from securities loaned | $400,000 | $178,928 | - Receivables from brokers, dealers, and clearing organizations increased by approximately 31% from December 31, 2024, to June 30, 2025[34] - Payables to brokers, dealers, and clearing organizations more than doubled, primarily due to a significant increase in deposits received from securities loaned[34] NOTE 4 – Fair Value Measurements The company measures certain financial assets and liabilities at fair value, categorizing them into Level 1, 2, or 3 based on input observability, with total assets at fair value increasing to $3.06 billion | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets at fair value on a recurring basis | $3,055,879 | $2,941,710 | | Total liabilities at fair value on a recurring basis | $901,908 | $757,096 | - Level 3 financial instruments, which rely on unobservable inputs, include certain asset-backed securities, syndicated loans, auction-rate securities, and private company investments[40][42][50] - The fair value of held-to-maturity securities, not recorded at fair value on the balance sheet, was estimated at $6.60 billion at June 30, 2025, compared to a carrying value of $6.58 billion[62] NOTE 5 – Financial Instruments Owned and Financial Instruments Sold, But Not Yet Purchased This note details a 15% increase in financial instruments owned, driven by agency mortgage-backed securities, and a significant increase in financial instruments sold, but not yet purchased | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Financial instruments owned | $1,343,513 | $1,169,008 | | Agency mortgage-backed securities (owned) | $476,953 | $262,629 | | Financial instruments sold, but not yet purchased | $819,555 | $646,271 | | U.S. government securities (sold, but not yet purchased) | $477,514 | $370,373 | - Financial instruments owned increased by $174.5 million (14.9%) from December 31, 2024, to June 30, 2025[74] - Financial instruments sold, but not yet purchased, increased by $173.3 million (26.8%) over the same period[74] NOTE 6 – Available-for-Sale and Held-to-Maturity Securities Available-for-sale securities decreased slightly in fair value with significant unrealized losses, while held-to-maturity securities increased, predominantly maintaining high credit quality | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Available-for-sale securities (Fair Value) | $1,546,392 | $1,584,598 | | Held-to-maturity securities (Amortized Cost) | $6,584,925 | $6,524,954 | | Gross Unrealized Losses (AFS) | $(132,065) | $(170,647) | | Gross Unrealized Gains (HTM) | $20,747 | $26,498 | - At June 30, 2025, 227 AFS securities had unrealized losses totaling $132.1 million, with $131.5 million of these losses on securities held for 12 months or longer[82] - The majority of held-to-maturity asset-backed securities (over 99%) were rated AAA or AA at June 30, 2025[83] NOTE 7 – Bank Loans Gross bank loans slightly decreased, while the provision for credit losses increased significantly, and past due and nonaccrual loans rose, despite most loans being collateralized and highly rated | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Gross bank loans | $20,822,285 | $20,879,745 | | Allowance for credit losses on loans | $(135,734) | $(139,308) | | Loans held for investment, net | $20,647,094 | $20,731,796 | | Provision for credit losses (3 months) | $7,857 | $6,832 | | Provision for credit losses (6 months) | $20,408 | $11,390 | - Residential real estate loans constitute the largest portion of the portfolio at 42.8% at June 30, 2025[88] - Total past due loans (30+ days) increased from $103.96 million at December 31, 2024, to $133.62 million at June 30, 2025, with nonaccrual loans increasing from $77.97 million to $106.73 million[96][97] NOTE 8 – Goodwill and Intangible Assets Goodwill and intangible assets increased significantly due to recent acquisitions of B. Riley Financial's wealth management business and Bryan Garnier, allocated primarily to Global Wealth Management and Institutional Group segments | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Goodwill | $1,478,887 | $1,395,218 | | Intangible assets, net | $115,455 | $113,574 | | Goodwill (Global Wealth Management) | $352,397 | $335,009 | | Goodwill (Institutional Group) | $1,126,490 | $1,060,209 | - Goodwill increased by $83.7 million, and intangible assets increased by $1.9 million, primarily due to the acquisitions of B. Riley Financial's wealth management business and Bryan Garnier[109][110] - Amortization expense related to intangible assets was $10.9 million for the six months ended June 30, 2025, compared to $11.8 million in the prior year[112] NOTE 9 – Borrowings and Federal Home Loan Bank Advances The company's short-term financing includes uncommitted secured lines and a committed unsecured credit facility, with no outstanding balances on these facilities or FHLB advances at June 30, 2025 - The company has $880.0 million in uncommitted secured lines of credit with four banks, with no outstanding balances at June 30, 2025[116] - A $750.0 million committed unsecured credit facility, maturing September 27, 2028, had no advances outstanding at June 30, 2025[119][120] - The weighted average interest rates on Federal Home Loan advances were 4.59% for the three months and 4.56% for the six months ended June 30, 2025[117] NOTE 10 – Senior Notes The company's senior notes total $625.0 million in aggregate principal, with a net carrying value of $617.0 million at June 30, 2025, and all maturities occurring after 2029 | Senior Notes (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | 4.00% senior notes, due 2030 | $400,000 | $400,000 | | 5.20% senior notes, due 2047 | $225,000 | $225,000 | | Senior notes, net | $617,030 | $616,618 | - All senior notes, totaling $625.0 million, have contractual maturities after 2029[121] NOTE 11 – Bank Deposits Bank deposits, a primary funding source, decreased slightly to $28.7 billion at June 30, 2025, with a lower weighted-average interest rate, and brokerage customers' deposits forming a significant portion | Deposit Type (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Demand deposits (interest-bearing) | $28,171,862 | $28,580,415 | | Demand deposits (non-interest-bearing) | $373,823 | $318,229 | | Certificates of deposit | $127,378 | $203,583 | | Total Deposits | $28,673,063 | $29,102,227 | - The weighted-average interest rate on deposits decreased from 3.22% at December 31, 2024, to 2.67% at June 30, 2025[122] - Brokerage customers' deposits were $24.9 billion at June 30, 2025, down from $27.1 billion at December 31, 2024[123] NOTE 12 – Derivative Instruments and Hedging Activities The company manages interest rate risk with derivatives, maintaining a 'matched book' portfolio, with derivative assets, liabilities, and notional values decreasing from December 31, 2024, to June 30, 2025 | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Derivative Assets | $82,341 | $110,814 | | Derivative Liabilities | $82,353 | $110,825 | | Notional Value of Interest Rate Contracts | $1,874,627 | $1,984,608 | - The notional value of interest rate contracts decreased by approximately 5.5% from December 31, 2024, to June 30, 2025[125][126] - The scheduled maturities of derivative instruments show $312.95 million within one year and $490.39 million in one to three years[125] NOTE 13 – Disclosures About Offsetting Assets and Liabilities This note details financial assets and liabilities subject to master netting arrangements, showing net exposures of $33.65 million for assets and $(56.71) million for liabilities after considering available offsets and collateral | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Gross amounts of recognized assets | $1,062,001 | $909,621 | | Net amount (assets) | $33,653 | $46,900 | | Gross amounts of recognized liabilities | $(1,201,785) | $(869,923) | | Net amount (liabilities) | $(56,709) | $(74,482) | - The fair value of securities received as collateral for reverse repurchase agreements was $636.0 million at June 30, 2025[127] - The fair value of securities pledged as collateral for repurchase agreements was $756.2 million at June 30, 2025[133] NOTE 14 – Commitments, Guarantees, and Contingencies The company has various commitments and guarantees in the normal course of business, including underwriting, forward commitments for mortgage-backed securities, and significant credit extensions by Stifel Bancorp - The company enters into forward commitments to purchase agency mortgage-backed securities and hedges market interest rate risk with TBA security contracts[130] - Stifel Bancorp had outstanding commitments to originate loans aggregating $299.7 million and outstanding letters of credit totaling $67.2 million at June 30, 2025[198][200] - Unused lines of credit to commercial and consumer borrowers aggregated $5.8 billion at June 30, 2025[201] NOTE 15 – Legal Proceedings The company is involved in various legal proceedings, estimating a reasonably possible aggregate loss of approximately $100.0 million in excess of current reserves, including a $132.5 million FINRA arbitration award and class actions - The company estimates a reasonably possible aggregate loss of approximately $100.0 million in excess of current reserves for legal matters[136] - A FINRA arbitration panel entered an award of $132.5 million against Stifel's brokerage subsidiary, which the company believes is legally defective and excessive[140] - Multiple class actions have been filed alleging the company failed to pay a reasonable rate of interest on its cash sweep products[143] NOTE 16 – Regulatory Capital Requirements The company and its subsidiaries operate under stringent regulatory capital requirements, with Stifel and its banking subsidiaries categorized as 'well capitalized' and exceeding minimum net capital requirements | Entity | Capital Metric | Actual Amount (in thousands) | Actual Ratio | Minimum for Capital Adequacy | Minimum for Well Capitalized | | :----- | :------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | | Stifel Financial Corp. | Common Equity Tier 1 Capital | $3,431,336 | 14.5% | 4.5% | 6.5% | | | Tier 1 Capital | $4,116,336 | 17.5% | 6.0% | 8.0% | | | Total Capital | $4,340,889 | 18.4% | 8.0% | 10.0% | | | Tier 1 Leverage | $4,116,336 | 10.8% | 4.0% | 5.0% | | Stifel Bank & Trust | Common Equity Tier 1 Capital | $1,337,013 | 11.5% | 4.5% | 6.5% | | | Tier 1 Capital | $1,337,013 | 11.5% | 6.0% | 8.0% | | | Total Capital | $1,454,352 | 12.5% | 8.0% | 10.0% | | | Tier 1 Leverage | $1,337,013 | 7.0% | 4.0% | 5.0% | | Stifel Bank | Common Equity Tier 1 Capital | $810,648 | 12.2% | 4.5% | 6.5% | | | Tier 1 Capital | $810,648 | 12.2% | 6.0% | 8.0% | | | Total Capital | $859,871 | 12.9% | 8.0% | 10.0% | | | Tier 1 Leverage | $810,648 | 7.1% | 4.0% | 5.0% | - Stifel's net capital was $381.9 million at June 30, 2025, which was $356.6 million in excess of its minimum required net capital[145] - All banking subsidiaries were categorized as 'well capitalized' at June 30, 2025[150] NOTE 17 – Operating Leases Operating lease assets and liabilities increased slightly, with net lease costs rising, and the company recognized a $32.1 million gain from selling aircraft engines during the period | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Operating lease right-of-use assets, net | $814,952 | $809,174 | | Lease liabilities, net | $876,872 | $867,426 | | Net lease cost (3 months) | $36,340 | $34,812 | | Net lease cost (6 months) | $71,381 | $70,033 | - The company sold 6 aircraft engines during the six months ended June 30, 2025, with a net book value of $53.1 million, recognizing a gain of $32.1 million[162] - The weighted-average remaining lease term for operating leases is 12.5 years, with a weighted-average discount rate of 5.04%[158] NOTE 18 – Revenues from Contracts with Customers Revenues from contracts with customers increased, driven by commissions, investment banking, and asset management, with the United States being the largest contributor, and revenue recognition policies detailed for each category | Revenue Type (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commissions | $200,669 | $183,317 | $394,339 | $368,793 | | Investment banking | $233,460 | $233,281 | $471,402 | $447,230 | | Asset management | $403,608 | $380,757 | $813,149 | $748,233 | | Total revenue from contracts with customers | $838,918 | $798,917 | $1,681,408 | $1,567,054 | - Total revenue from contracts with customers increased by 5.0% for the three months and 7.3% for the six months ended June 30, 2025[164] - The United States accounted for $787.82 million (93.9%) of total revenue from contracts with customers for the three months ended June 30, 2025[172] NOTE 19 – Interest Income and Interest Expense Interest income decreased due to lower rates, while interest expense also decreased, primarily from lower rates on bank deposits and senior notes, despite higher interest-bearing liabilities | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Interest Income | $477,056 | $498,152 | $952,688 | $1,004,980 | | Total Interest Expense | $206,800 | $247,329 | $420,357 | $501,984 | | Interest Income from Loans held for investment, net | $310,635 | $311,079 | $615,602 | $617,221 | | Interest Expense from Bank deposits | $187,533 | $220,287 | $380,655 | $450,351 | - Interest income decreased by 4.2% for the three months and 5.2% for the six months ended June 30, 2025[178] - Interest expense decreased by 16.4% for the three months and 16.3% for the six months ended June 30, 2025[178] NOTE 20 – Employee Incentive, Deferred Compensation, and Retirement Plans The company maintains various incentive and deferred compensation plans, with $67.2 million in stock-based compensation expense and $857.3 million in unrecognized compensation cost for deferred awards | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Stock-based compensation expense | $32,000 | $36,800 | $67,200 | $70,100 | | Debentures expense | $29,500 | $30,600 | $58,400 | $58,000 | | 401(k) Plan contributions | $12,000 | $4,400 | $15,100 | $9,200 | - At June 30, 2025, unrecognized compensation cost for deferred awards was approximately $857.3 million, with a weighted-average recognition period of 2.8 years[185] - The total number of restricted stock units, PRSUs, and restricted stock awards outstanding was 12.4 million, with 11.4 million unvested, at June 30, 2025[184] NOTE 21 – Off-Balance Sheet Credit Risk The company is exposed to off-balance sheet credit risk from customer and proprietary securities transactions, and Stifel Bancorp has significant unfunded lending commitments totaling $5.8 billion in unused lines of credit - At June 30, 2025, the fair value of securities accepted as collateral where the company is permitted to sell or repledge was $2.1 billion, with $719.4 million having been sold or repledged[194][442] | Commitment Type (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Commitments to originate loans | $299,700 | $207,200 | | Standby letters of credit | $67,200 | $40,600 | | Unused lines of credit | $5,800,000 | $5,400,000 | - Expected credit losses for unfunded lending commitments were $30.7 million at both June 30, 2025, and December 31, 2024[202] NOTE 22 – Segment Reporting The Global Wealth Management and Institutional Group segments reported net revenue growth, while the 'Other' segment continued to report losses before income taxes for both periods | Segment (in thousands) | 3 Months Ended June 30, 2025 Net Revenues | 3 Months Ended June 30, 2024 Net Revenues | 6 Months Ended June 30, 2025 Net Revenues | 6 Months Ended June 30, 2024 Net Revenues | | :--------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Global Wealth Management | $845,631 | $801,135 | $1,696,190 | $1,591,635 | | Institutional Group | $419,779 | $390,721 | $804,708 | $742,097 | | Other | $18,876 | $26,076 | $38,857 | $47,238 | | Consolidated Net Revenues | $1,284,286 | $1,217,932 | $2,539,755 | $2,380,970 | - Global Wealth Management income before income taxes increased 2.3% for the three months but decreased 26.7% for the six months ended June 30, 2025[211] - Institutional Group income before income taxes increased 25.0% for the three months and 3.0% for the six months ended June 30, 2025[211] NOTE 23 – Earnings Per Share ("EPS") Basic and diluted EPS decreased for both the three and six months ended June 30, 2025, primarily due to lower net income available to common shareholders | Metric (in thousands, except per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income available to common shareholders | $145,734 | $155,973 | $189,406 | $310,228 | | Basic EPS | $1.41 | $1.50 | $1.82 | $2.98 | | Diluted EPS | $1.34 | $1.41 | $1.73 | $2.82 | | Weighted-average number of common shares outstanding (Basic) | 103,349 | 104,150 | 104,049 | 104,217 | - Diluted EPS decreased by 5.0% for the three months and 38.7% for the six months ended June 30, 2025[214] - Cash dividends declared per common share increased to $0.46 for the three months and $0.92 for the six months ended June 30, 2025[215] NOTE 24 – Shareholders' Equity The company's share repurchase program saw significantly increased activity, with 8.2 million shares remaining authorized, and 1.9 million shares issued from treasury during the six-month period | Metric (in thousands, except average price) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Share repurchases | $83,038 | $17,597 | $176,211 | $78,306 | | Number of shares repurchased | 970 | 229 | 1,895 | 1,069 | | Average price | $85.62 | $76.97 | $93.00 | $73.28 | - The maximum number of shares authorized for repurchase under the plan was 8.2 million at June 30, 2025[216] - 1.9 million shares of common stock were issued from treasury during the six months ended June 30, 2025, primarily due to vesting and exercise of incentive stock awards[218] NOTE 25 – Variable Interest Entities The company consolidates VIEs where it is the primary beneficiary, such as those holding aircraft engines, and limits its maximum exposure to loss for non-consolidated VIEs to the carrying value of its investments | VIE Type (in thousands) | June 30, 2025 Aggregate Assets | June 30, 2025 Aggregate Liabilities | June 30, 2025 Maximum Exposure to Loss | | :---------------------- | :----------------------------- | :---------------------------------- | :------------------------------------- | | Securitization interests (consolidated) | $95,327 | $52,593 | N/A | | Debt and Equity Investments (non-consolidated) | $427,121 | $196,952 | $45,506 | - The company consolidated Turbine Engines Securitization Ltd. and Stifel Aviation Finance II, LLC, whose assets primarily consist of aircraft engines[221] - For non-consolidated VIEs, the maximum exposure to loss from debt and equity investments was $45.51 million at June 30, 2025[225] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting increased net revenues but decreased net income due to higher non-interest expenses, particularly legal-related provisions Executive Summary Stifel Financial Corp. is a diversified financial services and bank holding company focused on growth through advisor recruitment, product diversification, and opportunistic acquisitions in the U.S., Europe, and Canada - Stifel Financial Corp. is a diversified financial services and bank holding company with operations in the U.S., Europe, and Canada[235][238] - The company's growth strategy focuses on recruiting experienced financial advisors and product diversification in capital markets, including opportunistic acquisitions[237] - Recent acquisitions include a portion of B. Riley Financial, Inc.'s wealth management business (April 7, 2025) and Bryan Garnier, a European investment bank (June 2, 2025)[240][241] Results for the three and six months ended June 30, 2025 Net revenues increased for both the three and six months ended June 30, 2025, but net income available to common shareholders significantly decreased, particularly for the six-month period, due to higher non-interest expenses | Metric (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net Revenues | $1,284.3 | $1,217.9 | 5.4% | $2,539.8 | $2,381.0 | 6.7% | | Net Income Available to Common Shareholders | $145.7 | $156.0 | (6.6%) | $189.4 | $310.2 | (38.9%) | | Diluted EPS | $1.34 | $1.41 | (5.0%) | $1.73 | $2.82 | (38.7%) | - Revenue growth was primarily attributable to higher transactional revenues, asset management revenues, net interest income, and capital-raising revenues[244][246] Economic and Market Conditions The company operates in a challenging and unpredictable economic environment, with results highly correlated to U.S. equity and fixed income markets, and profitability sensitive to market activity - The company's results are highly correlated to general economic conditions and the direction of U.S. equity and fixed income markets[247] - Factors such as market volatility, interest rates, economic, political, and regulatory trends, and industry competition are unpredictable and beyond the company's control[247] - Profitability is adversely affected in periods of reduced financial market activity due to relatively fixed expenses like salaries and occupancy costs[247] RESULTS OF OPERATIONS Overall results show increased net revenues driven by transactional, asset management, and investment banking activities, but net income declined significantly due to a surge in non-interest expenses, particularly legal-related provisions Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 Net revenues increased by 5.4% to $1.28 billion, but income before income taxes and net income available to common shareholders decreased due to an 8.0% rise in total non-interest expenses | Metric (in thousands) | June 30, 2025 | June 30, 2024 | % Change | | :-------------------- | :------------ | :------------ | :------- | | Net Revenues | $1,284,286 | $1,217,932 | 5.4 | | Income before income taxes | $213,820 | $226,894 | (5.8) | | Net income available to common shareholders | $145,734 | $155,973 | (6.6) | | Total non-interest expenses | $1,070,466 | $991,038 | 8.0 | | Compensation and benefits | $774,936 | $722,719 | 7.2 | | Provision for credit losses | $8,328 | $2,954 | 181.9 | - Transactional revenues (Commissions + Principal transactions) increased by 10.8% to $373.3 million[249] - Other income decreased significantly by 77.2% to $3.7 million[249] Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 Net revenues increased by 6.7% to $2.54 billion, but income before income taxes and net income available to common shareholders significantly decreased due to a 16.9% increase in total non-interest expenses, including $180.0 million for legal matters | Metric (in thousands) | June 30, 2025 | June 30, 2024 | % Change | | :-------------------- | :------------ | :------------ | :------- | | Net Revenues | $2,539,755 | $2,380,970 | 6.7 | | Income before income taxes | $277,184 | $445,585 | (37.8) | | Net income available to common shareholders | $189,406 | $310,228 | (38.9) | | Total non-interest expenses | $2,262,571 | $1,935,385 | 16.9 | | Other operating expenses | $417,311 | $220,487 | 89.3 | - Transactional revenues increased by 7.1% to $708.6 million, and asset management revenues increased by 8.7% to $813.1 million[251] - The provision for income taxes decreased by 40.8% due to lower income before taxes[251] NET REVENUES Net revenues increased, driven by strong transactional revenues and asset management, while investment banking remained relatively flat for the three-month period, and other income significantly decreased due to reduced aircraft engine leasing and lower investment gains | Revenue Category (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Commissions | $200,669 | $183,317 | 9.5 | $394,339 | $368,793 | 6.9 | | Principal transactions | $172,603 | $153,574 | 12.4 | $314,263 | $292,588 | 7.4 | | Transactional revenues | $373,272 | $336,891 | 10.8 | $708,602 | $661,381 | 7.1 | | Investment banking | $233,460 | $233,281 | 0.1 | $471,402 | $447,230 | 5.4 | | Asset management | $403,608 | $380,757 | 6.0 | $813,149 | $748,233 | 8.7 | | Other income | $3,690 | $16,180 | (77.2) | $14,271 | $21,130 | (32.5) | - Capital-raising revenues increased by 4.2% for the three months and 5.1% for the six months, while advisory revenues decreased by 3.1% for the three months but increased by 5.6% for the six months[259][260][262] - The decrease in other income was primarily due to reduced rental income from aircraft engine leasing and lower investment gains[265] NET INTEREST INCOME Net interest income increased by 7.7% to $270.3 million for the three months and 5.8% to $532.3 million for the six months, driven by a decrease in interest expense that offset lower interest revenue | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net Interest Income | $270,256 | $250,823 | 7.7 | $532,331 | $502,996 | 5.8 | | Total Interest Revenue | $477,056 | $498,152 | (4.2) | $952,688 | $1,004,980 | (5.2) | | Total Interest Expense | $206,800 | $247,329 | (16.4) | $420,357 | $501,984 | (16.3) | - Average interest-earning assets increased for both periods, but average interest rates decreased, leading to lower interest revenue[268][269] - Average interest-bearing liabilities increased, but lower average interest rates resulted in decreased interest expense[270][271] NON-INTEREST EXPENSES Total non-interest expenses increased significantly, driven by higher compensation and benefits, a substantial rise in provision for credit losses, and a $180.0 million provision for legal-related matters in other operating expenses | Expense Category (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Compensation and benefits | $774,936 | $722,719 | 7.2 | $1,507,156 | $1,402,414 | 7.5 | | Provision for credit losses | $8,328 | $2,954 | 181.9 | $20,348 | $8,222 | 147.5 | | Other operating expenses | $126,531 | $112,949 | 12.0 | $417,311 | $220,487 | 89.3 | | Total non-interest expenses | $1,070,466 | $991,038 | 8.0 | $2,262,571 | $1,935,385 | 16.9 | - Compensation and benefits as a percentage of net revenues increased to 60.3% for the three months and 59.3% for the six months ended June 30, 2025[274] - Other operating expenses for the six months ended June 30, 2025, included $180.0 million related to provisions for legal-related matters[281] SEGMENT ANALYSIS Segment performance shows net revenue growth in Global Wealth Management and Institutional Group, but Global Wealth Management's profit margin declined due to credit loss provisions and legal matters, while the 'Other' segment continued to report losses Results of Operations – Global Wealth Management The Global Wealth Management segment reported increased net revenues driven by asset management and net interest income, but income before income taxes decreased for the six-month period, and profit margins declined due to higher credit loss provisions and legal matters | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net Revenues | $845,631 | $801,135 | 5.6 | $1,696,190 | $1,591,635 | 6.6 | | Income before income taxes | $306,056 | $299,173 | 2.3 | $432,461 | $589,921 | (26.7) | | Asset management revenues | $403,574 | $380,737 | 6.0 | $813,080 | $748,187 | 8.7 | | Provision for credit losses | $8,328 | $2,954 | 181.9 | $20,348 | $7,922 | 156.9 | - Client assets increased by 8.9% to $516.5 billion, and fee-based client assets increased by 14.8% to $206.3 billion at June 30, 2025, compared to June 30, 2024[297] - Profit margins for the segment decreased to 36.2% for the three months and 25.5% for the six months ended June 30, 2025, from 37.3% and 37.1% in the prior year, primarily due to higher credit loss provisions and legal matters[324] Results of Operations – Institutional Group The Institutional Group segment reported increased net revenues from transactional and investment banking activities, leading to improved income before income taxes, though the six-month profit margin was affected by higher fixed compensation in international operations | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net Revenues | $419,779 | $390,721 | 7.4 | $804,708 | $742,097 | 8.4 | | Income before income taxes | $61,040 | $48,813 | 25.0 | $88,471 | $85,922 | 3.0 | | Transactional revenues | $190,606 | $159,592 | 19.4 | $339,541 | $302,329 | 12.3 | | Investment banking revenues | $227,236 | $227,501 | (0.1) | $459,270 | $437,170 | 5.1 | - Fixed income transactional revenues increased by 21.0% for the three months and 11.8% for the six months, driven by increased activity in securitized products[332] - Compensation and benefits expense increased by 7.8% for the three months and 12.2% for the six months, driven by higher variable compensation[343] Results of Operations – Other Segment The 'Other' segment reported increased losses before income taxes, primarily due to higher provisions for legal and regulatory matters, increased acquisition-related expenses, and severance costs | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net revenues | $18,876 | $26,076 | (27.6%) | $38,857 | $47,238 | (17.7%) | | Loss before income taxes | $(153,276) | $(121,092) | 26.6% | $(243,748) | $(230,258) | 5.9% | | Total non-interest expenses | $172,152 | $147,168 | 17.0 | $282,605 | $277,496 | 1.8 | | Acquisition-related non-interest expenses | $47,300 | $23,800 | 99.1 | $60,000 | $35,900 | 67.0 | - Core business-related compensation and benefits decreased, while acquisition-related compensation and benefits increased significantly[351] - The increase in expenses is primarily attributable to increased provisions for legal and regulatory matters and severance costs[351] Analysis of Financial Condition Total assets slightly decreased to $39.9 billion, with bank deposits as the largest liability, and the company maintained $12.6 billion in cash or readily convertible assets - Total assets were $39.9 billion at June 30, 2025, a 0.1% decrease from December 31, 2024[354] - Key liabilities included $28.7 billion in bank deposits, $579.2 million in payables to customers, and $801.9 million in accounts payable and accrued expenses[355] - The company had $12.6 billion of cash or assets readily convertible into cash at June 30, 2025[355] Cash Flow Cash and cash equivalents decreased by $790.6 million to $1.9 billion, with operating activities providing cash, while investing and financing activities used significant amounts - Cash and cash equivalents decreased by $790.6 million to $1.9 billion at June 30, 2025[356] - Operating activities provided $396.3 million in cash[356] - Investing activities used $586.5 million, and financing activities used $573.6 million[356] Liquidity and Capital Resources The company prioritizes liquidity and capital management through diversified funding, daily monitoring, and stress testing, maintaining adequate funding across various market conditions Liquidity Available From Subsidiaries Liquidity is primarily available from Stifel (broker-dealer) and Stifel Bancorp, both maintaining capital significantly above regulatory minimums and subject to dividend limitations - Stifel's excess net capital exceeded the minimum requirement at June 30, 2025[364] - Stifel Bancorp can pay dividends to the parent company without prior approval if it maintains targeted capital to risk-weighted asset ratios[365] Capital Management The company has an ongoing Board authorization to repurchase common stock, with 8.2 million shares remaining, used to manage equity capital, support business growth, and meet employee benefit plan obligations - The company has an ongoing authorization to repurchase common stock, with 8.2 million shares remaining at June 30, 2025[367] - The share repurchase program is utilized to manage equity capital, support business growth, and meet employee benefit plan obligations[367] Liquidity Risk Management Liquidity risk is managed through diversified funding, daily monitoring, and stress testing at both firmwide and subsidiary levels, ensuring the ability to fund operations under various market pressures - Liquidity risk is managed through diversification of funding sources, daily monitoring of liquidity needs, and stress testing[368][373][374] - Firmwide liquidity stress tests measure outflows over a 30-day horizon under idiosyncratic and macro-economic stress events[375] - Stifel Bancorp's highly liquid investments comprised approximately 14% of its assets at June 30, 2025, well in excess of its internal target[378] Funding Sources The company diversifies its funding sources, with deposits being the largest at $28.7 billion, primarily from brokerage clients, supplemented by credit facilities and access to Federal Home Loan Bank advances - Deposits are the largest funding source, totaling $28.7 billion at June 30, 2025, with $24.9 billion from brokerage clients[386][387] - The company held $1.9 billion in cash and cash equivalents and $1.55 billion in available-for-sale investment securities at June 30, 2025[383][384] - Stifel Bancorp has borrowing capacity of $5.9 billion with the Federal Home Loan Bank and $5.2 billion with the Fed's discount window[395] Credit Rating The company's credit rating depends on various factors, and a reduction could adversely affect liquidity and borrowing costs, though the company believes its liquid assets will meet future financing needs - Credit rating depends on industry dynamics, operating results, capital structure, risk management, and competitive position[402] - A reduction in credit rating could adversely affect liquidity, increase borrowing costs, and limit access to capital markets[403] Use of Capital Resources The company utilized $127.9 million in upfront notes for financial advisor transition pay and uses deferred awards as part of its retention program, with recent acquisitions funded by cash from operations - The company paid $127.9 million in upfront notes for financial advisor transition pay during the six months ended June 30, 2025[405] - Unrecognized compensation cost for deferred awards was approximately $857.3 million at June 30, 2025, expected to be recognized over 2.8 years[408] - Acquisitions of B. Riley Financial's wealth management business and Bryan Garnier were funded with cash from operations[411][412] Net Capital Requirements The company's broker-dealer and banking subsidiaries operate in a highly regulated environment, consistently exceeding capital adequacy requirements and maintaining a well-capitalized status - Stifel's net capital was $381.9 million at June 30, 2025, exceeding its minimum required net capital by $356.6 million[416] - All broker-dealer and banking subsidiaries consistently operated in excess of their capital adequacy requirements and were considered well-capitalized[415][416] Critical Accounting Policies and Estimates The company's critical accounting policies and estimates, including financial instrument valuation, contingencies, and credit losses, involve significant judgment and are regularly evaluated with no material changes - Critical accounting policies and estimates include valuation of financial instruments, contingencies, allowance for credit losses, income taxes, and goodwill and intangible assets[419][422] - Assumptions, judgments, and estimates are based on historical experience and evaluated regularly, with no material updates to critical accounting policies and estimates[418][419] [Recent