Stifel(US:SF)2022-11-08 16:00PART I – FINANCIAL INFORMATION Financial Statements Presents unaudited consolidated financial statements for Stifel Financial Corp., highlighting a 10.5% asset increase and Q3 2022 revenue and net income declines Notes to Consolidated Financial Statements Details accounting policies, financial data, loan portfolio growth to $20.8 billion, and revenue recognition across segments Consolidated Statement of Financial Condition Highlights (Unaudited) | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $37,612,063 | $34,049,715 | +10.5% | | Cash and cash equivalents | $1,414,543 | $1,963,326 | -28.0% | | Loans held for investment, net | $20,675,968 | $16,627,847 | +24.3% | | Bank deposits | $27,190,619 | $23,280,348 | +16.8% | | Total Liabilities | $32,384,713 | $29,014,756 | +11.6% | | Total Equity | $5,227,350 | $5,034,959 | +3.8% | Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2022 ($ thousands) | Three Months Ended Sep 30, 2021 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,045,139 | $1,144,938 | -8.7% | | Net Income | $151,169 | $192,376 | -21.4% | | Net Income to Common Shareholders | $141,849 | $182,687 | -22.4% | | Diluted EPS | $1.21 | $1.54 | -21.4% | | Metric | Nine Months Ended Sep 30, 2022 ($ thousands) | Nine Months Ended Sep 30, 2021 ($ thousands) | YoY Change | | Net Revenues | $3,269,792 | $3,432,863 | -4.8% | | Net Income | $485,534 | $563,468 | -13.8% | | Net Income to Common Shareholders | $457,573 | $537,201 | -14.8% | | Diluted EPS | $3.89 | $4.54 | -14.3% | Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Q3 and YTD 2022 financial performance, highlighting revenue decline, net interest income growth, and segment-specific results - For Q3 2022, net revenues decreased 8.7% YoY to $1.0 billion, and net income available to common shareholders decreased 22.4% to $141.8 million, or $1.21 per diluted share231 - For the first nine months of 2022, net revenues decreased 4.8% YoY to $3.3 billion, and net income available to common shareholders decreased 14.8% to $457.6 million, or $3.89 per diluted share233 - The decline in revenue was primarily driven by lower capital-raising, advisory, transactional, and asset management revenues, partially offset by a substantial increase in net interest income232234 Results of Operations Compares Q3 and YTD 2022 results, detailing net revenue sources and non-interest expenses, noting a significant rise in net interest income Net Revenues Breakdown - Q3 2022 vs Q3 2021 (thousands) | Revenue Source | Q3 2022 ($ thousands) | Q3 2021 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Transactional Revenues | $277,433 | $308,216 | -10.0% | | Investment Banking | $221,858 | $372,279 | -40.4% | | Asset Management | $300,557 | $313,862 | -4.2% | | Net Interest Income | $244,439 | $131,821 | +85.4% | | Total Net Revenues | $1,045,139 | $1,144,938 | -8.7% | Non-Interest Expenses Breakdown - Q3 2022 vs Q3 2021 (thousands) | Expense Category | Q3 2022 ($ thousands) | Q3 2021 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $611,870 | $672,385 | -9.0% | | Occupancy and equipment rental | $77,230 | $72,160 | +7.0% | | Other operating expenses | $86,416 | $89,375 | -3.3% | | Total Non-interest Expenses | $839,370 | $888,436 | -5.5% | Segment Analysis Analyzes performance across Global Wealth Management, Institutional Group, and Other segments, highlighting revenue and income trends Segment Performance - Q3 2022 vs Q3 2021 (thousands) | Segment | Net Revenues Q3 2022 ($ thousands) | Net Revenues Q3 2021 ($ thousands) | % Change | Income Before Taxes Q3 2022 ($ thousands) | Income Before Taxes Q3 2021 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Global Wealth Management | $701,820 | $655,533 | +7.1% | $279,935 | $232,119 | +20.6% | | Institutional Group | $339,408 | $492,284 | -31.1% | $40,000 | $125,092 | -68.0% | | Other | $3,911 | $(2,879) | n/m | $(114,166) | $(100,709) | -13.4% | Analysis of Financial Condition Reviews financial condition as of September 30, 2022, noting a 10.5% asset growth to $37.6 billion driven by loans - Total assets grew 10.5% to $37.6 billion from year-end 2021, primarily due to growth in the loan portfolio349 - Liabilities were dominated by $27.2 billion in bank deposits, with $11.1 billion in cash or readily convertible assets350 Liquidity and Capital Resources Details liquidity management, funding sources, regulatory capital compliance, and an ongoing share repurchase authorization - The company's liquidity management framework includes daily monitoring, stress testing, and diversification of funding sources366 - Stifel Bancorp has a borrowing capacity of $5.4 billion with the Federal Home Loan Bank and $1.1 billion with the Fed's discount window as of September 30, 2022386 - The company has an ongoing share repurchase authorization for up to 10.3 million shares as of September 30, 2022360444 Quantitative and Qualitative Disclosures About Market Risk Addresses market risks from interest rates and equity prices, detailing risk management strategies including VaR, credit, operational, and legal controls Daily Value-at-Risk (VaR) for Trading Portfolios (thousands) | Period | High ($ thousands) | Low ($ thousands) | Daily Average ($ thousands) | VaR at Sep 30, 2022 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Nine Months Ended Sep 30, 2022 | $13,709 | $5,625 | $8,071 | $6,044 | Stifel Bancorp Net Interest Income Sensitivity (as of Sep 30, 2022) | Hypothetical Change in Interest Rates (basis points) | Projected Change in Net Interest Income (%) | | :--- | :--- | | +200 | +18.7% | | +100 | +9.3% | | -100 | -3.4% | | -200 | -16.3% | - Credit risk from client activities is primarily from collateralized customer margin accounts, monitored daily, with counterparty risk managed via credit reviews and limits427428 Controls and Procedures Management affirmed the adequacy and effectiveness of disclosure controls and procedures, with no material changes to internal controls in Q3 2022 - Management concluded that as of September 30, 2022, the company's disclosure controls and procedures were adequate and effective438 - No material changes to the company's internal control over financial reporting occurred during the third quarter of 2022439 PART II – OTHER INFORMATION Legal Proceedings Details ongoing legal and regulatory proceedings, with management assessing no material adverse impact on financial position - The company is subject to various legal and regulatory proceedings arising from its business activities136 - Management believes the ultimate resolution of these matters will not have a material adverse impact on the company's financial position, though a single period's results could be materially affected138 Risk Factors Confirms no material changes to risk factors from the prior Annual Report on Form 10-K, advising investors to refer to the 10-K - There have been no material changes in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021442 Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered equity sales or common stock repurchases in Q3 2022, with an ongoing authorization for 10.3 million shares - No unregistered sales of equity securities occurred in Q3 2022443 - The company did not repurchase any of its common stock during the quarter ended September 30, 2022443 - As of September 30, 2022, the company has an ongoing authorization to repurchase a maximum of 10.3 million shares444 Exhibits Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and financial statements in iXBRL format - The report includes required certifications from the CEO and CFO under Rules 13a-14(a) and Section 1350447 - Financial statements and notes are provided in iXBRL format as part of the filing447