Stifel Financial
Annual Report 2016

Plain-text annual report

ANNUAL REPORT 2016 ABOUT STIFEL Stifel Financial Corp. is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe, Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; Century Securities Associates, Inc.; and Eaton Partners, LLC and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. The Company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. STATEMENT OF COMMITMENT TO OUR ASSOCIATES: current and future, our commitment is to provide an entrepreneurial environment that encourages unconfined, long-term thinking. We seek to reward hard-working team players that devote their energy and attention to client needs. At work, at home, and in their communities, we seek to be their Firm of Choice. TO OUR CLIENTS: individual, institutional, corporate, and municipal, our commitment is to listen and consistently deliver innovative financial solutions. Putting the welfare of clients and community first, we strive to be the Advisor of Choice in the industry. Pursuit of excellence and a desire to exceed clients’ expectations are the values that empower our Company to achieve this status. TO OUR SHAREHOLDERS: small and large, our commitment is to create value and maximize your return on investment through all market cycles. By achieving the status of Firm of Choice for our professionals and Advisor of Choice for our clients, we are able to deliver value to our shareholders as their Investment of Choice. INVESTMENT OF CHOICE ADVISOR OF CHOICE FIRM OF CHOICE FINANCIAL HIGHLIGHTS OPERATING RESULTS:1 in thousands, except per share amounts 2012 2013 2014 2015 2016 Total Revenues $1,627,483 $2,019,814 $2,249,685 $2,376,993 $2,642,370 Net Income Available to Common Shareholders $145,296 Earnings Per Diluted Share Non-GAAP Net Income2 Non-GAAP Earnings Per Diluted Share2 $2.31 $145,296 $2.31 $172,907 $2.35 $172,191 $2.34 $179,130 $2.35 $205,579 $2.69 $92,336 $1.18 $149,252 $1.90 $77,614 $1.00 $185,706 $2.39 FINANCIAL POSITION: in thousands, except per share amounts Total Assets Shareholders’ Equity Book Value Per Share 2012 2013 2014 2015 2016 $6,966,140 $9,008,870 $9,518,151 $13,326,051 $19,129,356 $1,494,661 $2,058,849 $2,322,038 $2,492,416 $2,738,408 $27.24 $32.30 $35.00 $37.19 $38.84 1 The operating results are from continuing operations. The results for SN Canada are classified as discontinued operations for all periods presented. 2 Non-GAAP Net Income and Non-GAAP Earnings Per Diluted Share represent GAAP net income and GAAP diluted earnings per share adjusted for: (1) acquisition-related charges other than duplicative expenses; (2) litigation-related expenses; and (3) the U.S. tax benefit in 2013 arising out of the Company’s investment in SN Canada. See Reconciliation of GAAP Net Income to Non-GAAP Net Income on page 16. TOTAL REVENUES (In millions) NON-GAAP NET INCOME2 (In millions) NON-GAAP EARNINGS PER DILUTED SHARE2 3,000 2,250 1,500 750 0 20,000 15,000 10,000 5,000 0 220 165 110 55 0 3.00 2.25 1.50 .75 0 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 TOTAL ASSETS (In millions) SHAREHOLDERS’ EQUITY (In millions) BOOK VALUE PER SHARE 3,000 2,250 1,500 750 0 40.00 30.00 20.00 10.00 0 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 1 RONALD J. KRUSZEWSKI Chairman of the Board Chief Executive Officer CHAIRMAN’S LETTER Dear Fellow Shareholders, Clients, and Associates In last year’s letter, I described Stifel’s results against the backdrop of a year of duality. 2016 was much the same, but in reverse order. The year began with a sharp market correction and corresponding concern about global economic growth. While markets generally improved as the year progressed, two major events shocked the system. First, the United Kingdom’s rejection of the European Union roiled financial markets while highlighting the vulnerability of democracies to non-traditional political movements. The U.S. presidential election was equally jolting – especially to pollsters – yet markets responded with exuberance. Both outcomes were unexpected and defied conventional wisdom, and they reminded us how quickly things can change, be it markets or politics. Events like these have happened before and will happen again. As the saying goes, the only constant is change. Change is disruptive, yet presents unexpected opportunities as well. Our strategy has always been to position ourselves to take advantage of opportunity, and to embrace a long-term view. Stifel’s 2016 results reflect this long-term view as we recorded our 21st consecutive year of record net revenue. During 2016, Stifel continued significant investments in our infrastructure, accelerated the growth of our balance sheet while remaining cognizant of credit and interest rate risk, and improved our client service capabilities through organic hiring and integrating mergers. Accounting for all this, net income under generally accepted accounting principles (“GAAP”) was $78 million, or $1.00 per diluted share. We also provide our results on a non-GAAP basis, which excludes the impact of merger-related expenses. Our long-term approach to strategic mergers is to structure transactions in order to maximize both associate retention and tax efficiency. Excluding the impact of these merger-related expenses, non-GAAP net income was $186 million, or $2.39 per diluted share, for 2016. Our non-GAAP net income includes the impact of duplicative expenses, which was $0.23 per diluted share in 2016. 2 RONALD J. KRUSZEWSKI Chairman of the Board Chief Executive Officer Global Wealth Management posted record revenue of $1.6 billion, an increase of 14% over 2015, and achieved record profitability. Stifel Bank ended the year with approximately $13 billion in assets while maintaining a conservative risk profile. Asset management and fees totaled $582 million, an increase of 18%. Strategically, we understand that as much as things change, one thing remains constant – the value and importance of the relationships between our advisors and their clients. We remain focused on the intersection of technology and personal advice. As such, we are committed to investing in systems to assist our advisors in helping their clients understand, organize, and plan their assets, liabilities, and wealth. Our focus on the advisor relationship and our investments has not gone unnoticed. We are pleased that J.D. Power ranked Stifel 6th in Investor Satisfaction with Full-Service Brokerage Firms. Our Institutional Business comprises Institutional Client Services and Investment Banking. Our strategy is to provide our institutional clients value-added services, while addressing the structural changes occurring in this sector. This business is highly correlated to the growth in the U.S. economy, and we believe we are well positioned as economic conditions improve. For 2016, Institutional revenues were in excess of a record $1 billion with solid profitability. 2016 RESULTS (in thousands) 2016 TOTAL FIRM Total Revenues Non-GAAP Net Income Non-GAAP EPS $2,642,370 185,706 2.39 GLOBAL WEALTH MANAGEMENT Net Revenues 1,563,410 Contribution AUM 430,318 236,942,000 INSTITUTIONAL Equity Net Revenues Fixed Income Net Revenues Net Revenues Contribution 582,083 432,081 1,014,164 164,143 INSTITUTIONAL CLIENT SERVICES Equity 238,775 Fixed Income Total INVESTMENT BANKING Equity Fixed Income 296,008 534,783 344,171 168,863 % 11 24 26 14 13 8 2 7 4 16 2 18 10 (2) 10 2 Total 513,034 Capital Raising Institutional Client Services (sales, trading, and research for debt and equity) recorded revenue of $535 million, an increase of 10%. We are pleased with the increase in our equity brokerage revenues, which totaled $239 million. Increased activity and volatility after Brexit and the U.S. presidential election offset otherwise tepid industry-wide volumes. Fixed income brokerage revenues, buoyed by our acquisition of Sterne Agee, were $296 million, up 18%. Our Stifel and KBW franchises combine to make us the largest provider of U.S. research. Together, we achieved the No. 1 ranking in the 2016 Thomson Reuters StarMine Analyst Awards. This marks our third No. 1 ranking since 2010 and tenth consecutive top 10 finish. In addition, Stifel Nicolaus Europe Limited won four StarMine awards for United Kingdom and Ireland, plus one award in its Europe rankings. With respect to Fixed Income, Greenwich Associates’ U.S. Investment Grade Credit study ranked Stifel No. 1 in quality of service among its mid-tier, non-bulge-bracket peers. Percent represents the increase/(decrease) over prior year results. Advisory 256,397 256,637 (17) 31 Investment Banking revenues totaled $513 million, an increase of 2% from 2015. Banking revenues were equally divided between capital raising and advisory revenue. However, it was a difficult year for capital raising, especially in several of Stifel’s strongest verticals, as these revenues declined 17%. Offsetting this decline was an exceptional year for advisory services, with advisory revenue of $257 million, up 31% from 2015. Stifel’s debt financing business is anchored by our public finance business, driven by both geographic and sector diversification. For the third consecutive year, Stifel led the nation in the number of municipal negotiated issues, serving as sole or senior manager for 801 transactions with a total par value of approximately $17 billion. In addition, Stifel ranked No. 1 nationally in underwriting bonds for primary education (K-12) with 409 issues totaling nearly $8 billion, issues supporting economic development and redevelopment with 118 issues raising $2.9 billion, and issues to finance the construction or renovation of affordable housing projects with 56 issues raising over $600 million across the country. With respect to equity, we managed or co-managed more than 150 offerings, of which nearly 50% were book-run deals. Our strength across key sectors, including Financial Institutions, Healthcare, and Technology, continued with book-managed transactions for a number of clients, including Achoagen, TherapeuticsMD, Everspin Technologies, and Ichor Systems. 3 CHAIRMAN’S LETTER The power of our KBW franchise was highlighted by our leading position in raising equity after the 2016 U.S. presidential election. KBW raised over $1.0 billion of equity and book ran 14 transactions, four times more than any other firm in the 2016 post-election period, including transactions for Iberiabank Corporation, Renasant Corporation, and Valley National Bancorp. In the United Kingdom, Stifel was the fourth leading capital raiser across all U.K. equity markets. The investment funds team had over 26% of market share in 2016, including banner transactions for Secure Income REIT plc and two follow-ons for Sequoia Economic Infrastructure Income Fund Limited. On the advisory front, we were involved in several marquee transactions, including MicroSemi’s $2.5 billion acquisition of PMC, Talmer Bancorp’s $1.65 billion merger with Chemical Financial Corporation, and Aéropostale, Inc.’s unique restructuring and Section 363 sale. As planned, 2016 represented a year of growth in company assets, primarily interest-earning assets in Stifel Bank. We grew our assets by 43%, ending the year with over $19 billion. In addition, we achieved our stated capital ratio goals, ending the year with a Tier 1 leverage ratio of 10.2% and risk-based capital ratio of 20.3%. Looking forward, our future organic asset growth will be funded primarily by retained earnings. Stifel has long approached mergers and acquisitions opportunistically and with patience. We are not motivated to achieve growth for growth’s sake, and our philosophy is to wait for the right opportunities. Each opportunity that we consider must satisfy the following criteria: (1) the business needs to be a strategic fit, (2) the people need to be a cultural fit, and (3) the merger needs to be shareholder accretive in a reasonable period of time. The following depicts our key acquisitions since 2005: 2005 2006 2007 2008 2009 56 UBS Branches 2010 2015 Wealth  and  Investment   Management,  Americas   2011 2013 2014 2016 2012 2017 Since my letter to you last year, we met these criteria with the acquisition of City Securities. Through that acquisition and our other recent strategic investments, we have augmented our wealth management and public finance capabilities while enhancing our advisory platform. I am pleased to welcome these talented associates to Stifel. Stifel’s growth over the past 20 years would not have been possible without a strong and capable Board of Directors. Bruce Beda, who is retiring this year, exemplifies these characteristics, and I have been honored to work with him since I joined Stifel in 1997. In fact, I owe a debt of gratitude to Bruce, as he was the Director who first recruited me as CEO. Recently, Bruce has 4 served as Audit Committee chair and provided leadership as Lead Director to Stifel’s Board. Thank you, Bruce, for your service and friendship. I am also pleased to welcome David Peacock, former President of Anheuser-Busch, to our Board. Dave will bring entrepreneurial, corporate, manufacturing, and marketing expertise to the Board of Directors. In addition, through his service as president of a global consumer brand, Dave will bring an in-depth knowledge and expertise in corporate governance, branding, marketing, and market presence. The events of the past year are a reminder that the unexpected happens – consistently. Risk is everywhere and omnipresent. Global issues, including geopolitical risk, the sustainability of the Eurozone, populist backlash against globalization and free trade, and environmental concerns, pose significant challenges individually and collectively. In addition, our industry faces challenges, including the trend toward passive investing, global regulations regarding research payments (MiFID II), and the Department of Labor Fiduciary Rule. The market changes influenced by passive investment and regulations have caused many in our industry to exit sales and trading. However, we believe that the pendulum will swing back to active investment (I have stated I want to be the only active investor in a passive world), and we are committed to providing value to our clients. A HISTORY OF GROWTH – NET REVENUES, IN MILLIONS 1 7 . 4 % C A G R 3 2 1 $ 7 2 1 $ 1 4 1 $ 7 7 1 $ 7 7 1 $ 8 8 1 $ 7 1 2 $ 7 4 2 $ 4 6 2 $ 3 6 7 2 $ 5 4 $ 5 7 5 , 2 $ 2 2 3 , 2 $ 8 0 2 , 2 3 $ 7 9 , 1 4 $ 9 5 , 1 $ 2 8 3 , 1 $ 3 9 3 , 1 $ 1 9 0 , 1 $ 0 7 8 $ $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Opportunities are myriad. At home, the possibility of tax reform and increased infrastructure spending, coupled with less burdensome regulations, provides a foundation for increased and sustained economic growth. If these events do indeed occur, Stifel will benefit along with the broader financial services industry. In the meantime, we will continue to focus on growing our business organically, controlling costs while preserving optionality for business improvement, and remaining diligent for opportunistic acquisitions. Looking forward, we are reminded of the value of our long-term strategy, which since 1997, has grown the firm from 700 associates to over 7,000; from $110 million in revenue to over $2.6 billion; from $40 million in market capitalization to over $3 billion. By remaining true to our values and traditions, which have guided us for over 125 years, we believe we are well- positioned to meet challenges while remaining poised to seize the opportunities borne of change. As always, we sincerely thank our shareholders and clients for their support, as well as our more than 7,000 associates for their commitment to excellence. RONALD J. KRUSZEWSKI Chairman of the Board and Chief Executive Officer 5 WEALTH MANAGEMENT PRIVATE CLIENT GROUP An industry leader with a client-first, advisor-centric culture Through a combination of strategic acquisitions and organic growth, Stifel has grown to become one of the nation’s largest full-service investment firms, ranking No. 7 in terms of financial advisors, and J.D. Power ranked Stifel 6th in Investor Satisfaction with Full-Service Brokerage Firms. Our impressive standing is no accident. It’s a reflection of the highly appealing culture we’ve built here at Stifel. We value our advisors and the client relationships they’ve worked so hard to build. As such, we seek to provide our advisors with the tools they need to strengthen those relationships as we continually work to eliminate bureaucracy and other impediments to success. We know that by offering an environment in which advisors are empowered to do what’s best for their clients, we will continue to attract creative, entrepreneurial professionals who share our commitment to client service. 2016 140 Financial Advisors joined Stifel 360 Private Client Group branches $237 billion in Assets Under Management J.D. Power ranked Stifel 6th in Investor Satisfaction with Full-Service Brokerage Firms ASSET MANAGEMENT Providing investment management and services to individuals and institutions and over a breadth of asset classes Stifel Asset Management Affiliates A Stifel Company 6 $237 billion in Assets Under Management 7th largest full-service investment firm in the nation in number of financial advisors RANK FIRM ADVISORS 1 2 3 4 5 6 7 8 9 Bank of America Merrill Lynch 16,069 Morgan Stanley Wealth Management 15,856 Wells Fargo Securities 15,086 Raymond James UBS JPMorgan Stifel RBC Capital Markets Oppenheimer & Co. 7,146 7,087 2,560 2,282 2,000 1,177 Source: SIFMA and publicly available information for U.S. brokerage networks. Includes full-service firms only. STIFEL BANK Delivering a full range of lending services, including mortgages and securities-based lending $ 13 billion in assets STIFEL TRUST | Offering trust and fiduciary services to clients 7 INVESTMENT BANKING Stifel is the industry’s preeminent middle-market investment bank. Our industry-focused investment banking groups provide the breadth of services typically offered by much larger firms. Today, our 400 investment banking professionals deliver the full resources of our institutional capital markets platform and retail brokerage network. In the middle market, Stifel Investment Banking is … No. 1 in Total Number of Managed Equity Deals Under $1 Billion1 No. 2 in Total Number of Bookrun Equity Deals Under $1 Billion1 No. 1 in Total Number of Preferred & Baby Bonds Under $200 Million No. 1 in Total Number of M&A Deals Under $1 Billion … since 2010 Source: Dealogic. Includes firms acquired by Stifel. 1 Rank-eligible SEC-registered IPOs and follow-on offerings since 2010 8 Keefe, Bruyette & Woods (KBW) The premier advisor on financial services industry transactions No. 1 M&A Advisor: Most completed M&A transactions since 20001 No. 1 Capital Markets Team: Most IPOs and follow-on offerings since 20002 No. 1 Sales Force: Largest financial services specialist sales force No. 1 Institutional Investor: Best Salesforce Financials Category3 1 Source: SNL Financial. Data includes Banking, Insurance, Securities & Investments, and Specialty Finance sectors; excludes government-assisted transactions. 2 Source: Dealogic. Based on SEC-registered underwritten IPOs and follow-on offerings since 2000 for financial services companies in the U.S., Puerto Rico, Bermuda, and Cayman Islands. 3 Source: Institutional Investor Buy-Side Survey Miller Buckfire A leader in restructuring and recapitalization The M&A Advisor Restructuring Deal of the Year ($250 million+) – Aéropostale Section 363 Sale of the Year ($250 million+) – Aéropostale Materials Deal of the Year ($250 million+) – Molycorp Turnaround Atlas Awards Turnaround of the Year – Aéropostale Private Equity Turnaround of the Year – Molycorp Eaton Partners One of the world’s largest fund placement and advisory firms Placed or arranged more than $60 billion of commitments since 2004 Received 1,100 commitments for 70 alternative investment funds since 2004 9 No. 1 in Total Number of Preferred & Baby Bonds Under $200 Million No. 1 in Total Number of M&A Deals Under $1 Billion INSTITUTIONAL SERVICES EQUITY RESEARCH Solid, studied investment advice has been a hallmark of Stifel’s approach since our founding in 1890, but our 2005 acquisition of Legg Mason Capital Markets transformed us into an industry leader. And while our coverage growth has been nothing short of extraordinary, it’s the quality of our research that truly sets us apart from our peers. At the heart of our research success is our analysts, many of whom have hands- on experience in the industries they cover. We stress stability, working to internally develop, train, and retain talent. Our high retention rate drives continuity and experience, leading to better research and better results for our clients and advisors. No. 1 out of 167 firms in the 2016 Thomson Reuters StarMine Analyst Awards ■ 113 analysts across 12 sectors ■ Top 10 provider of U.S. equity coverage in: – Diversified Industrials – Financial Services – Healthcare – Internet & Media – Real Estate – Technology – Transportation ■ 1,612 global stocks under coverage ■ Largest U.S. Equity Research platform ■ Second largest provider of global small-cap coverage ■ Largest global provider of financials ■ 14th largest provider of global coverage Stifel’s consistent performance has produced ten consecutive top ten finishes in the Thomson Reuters StarMine Analyst Awards, with No. 1 rankings in 2012 and 2016. Includes firms acquired by Stifel. See www.stifel.com/research for more information on the Thomson Reuters StarMine Analyst Awards. 10 ■ 113 analysts across 12 sectors ■ Top 10 provider of U.S. equity coverage in: – Diversified Industrials – Financial Services – Healthcare – Internet & Media – Real Estate – Technology – Transportation FIXED INCOME ■ 95 traders with annual client trade volume approaching $500 billion ■ 50-person Fixed Income Research and Strategy Group ■ More than 220 fixed income institutional sales professionals covering more than 8,500 accounts EQUITIES ■ Second largest equity trading platform in the U.S. outside of the bulge bracket ■ Relationships with more than 3,500 institutional accounts globally ■ Active daily market maker in more than 3,700 stocks ■ Major liquidity provider to largest equity ■ International offices in London, Zurich, money management complexes and Madrid ■ Dedicated convertible sales, trading, ■ 40 institutional fixed income offices nationwide and research desk No.1 Ranking in Greenwich Associates’ U.S. Investment Grade Credit Study for quality of service1 1Amongst our peers >7.4 billion Shares traded in 2016 11 PUBLIC FINANCE Negotiated New Issues 1st Ranked by number of issues 7th Ranked by par amount K-12 Bonds 1st Ranked by number of issues 1st Ranked by par amount Tax Increment Bonds 1st Ranked by number of issues 1st Ranked by par amount Development District Bonds 1st Ranked by number of issues 1st Ranked by par amount Issues Below $25 Million 1st Ranked by number of issues 1st Ranked by par amount Taxable New Issues 1st Ranked by number of issues 5th Ranked by par amount RANK FIRM PAR AMOUNT (BILLIONS) # OF ISSUES 1 2 3 4 5 6 7 8 9 Stifel RBC Piper Jaffray Raymond James D.A. Davidson BofA Merrill Lynch Robert W. Baird Citi JPMorgan 10 Morgan Stanley $16.9 22.6 14.2 13.7 4.4 44.7 3.2 35.2 29.8 25.1 Source: Thomson Reuters SDC as of 3/1/2017. Rankings measured by number of issues allocated to book runner. 801 650 519 449 406 337 307 288 243 228 MARKET SHARE 10.5% 8.5 6.8 5.9 5.3 4.4 4.1 3.8 3.2 3.0 TOP-RANKED PUBLIC FINANCE PLATFORM ■ No. 1 ranked senior manager of negotiated municipal bond issues ■ Funding capital projects and supporting governmental and not-for-profit clients BROAD GEOGRAPHIC AND SECTOR COVERAGE ■ 162 bankers located in 30 offices in 22 states ■ Broad diversity of experiences and depth of resources to best serve our clients ■ Dedicated quantitative resources and sector groups Stifel’s national scholarship competition awards $2,000 to 50 high school seniors who compose essays reflecting on challenges and accomplishments. 12 7 STIFEL EUROPE Stifel’s footprint continues to expand not just throughout the U.S., but globally as well. In 2014, Stifel acquired Oriel Securities, a London-based stockbroking and investment banking firm, enabling us to build out our international platform across all of our institutional businesses. In 2016, Stifel acquired ISM Capital LLP, an independent investment bank focused on debt capital markets. 300 institutional clients in the U.K., Europe, and North America Since 2008, Stifel in Europe has been involved in more than 180 transactions, including 22 IPOs. Fastest growing bookrunning manager Bookrunning Managers on all U.K. Markets in 2016 by Volume (minimum three deals) RANK 2015 RANK 2016 2 1 6 14 4 1 2 3 4 5 BANKS Numis Securities J.P. Morgan Cazenove Liberum Capital Stifel Nicolaus Europe Peel Hunt VOLUME 2016 VALUE (£M) 2016 CHANGE IN MARKET SHARE 32 23 19 18 15 £2,611 £3,012 £983 £1,219 £672 ▲ ▼ ▲ ▲ 2.94% -7.20% 2.28% 4.84% ▼ -0.60% Fastest growing financial advisor Financial Advisors on all U.K. Markets in 2016 by Volume (minimum two deals) RANK 2015 RANK 2016 FINANCIAL ADVISORS VOLUME 2016 VALUE (£M) 2016 CHANGE IN MARKET SHARE 1 1 20 4 3 1 2 3 3 5 N M Rothschild & Sons Numis Securities Stifel Nicolaus Europe Investec Lazard 12 6 5 5 3 £2,244 £504 £450 £376 £1,854 ▲ ▼ ▲ ▲ ▼ 2.07% -1.09% 2.25% 0.31% -1.12% Source: ECMi 2016 Report, Perfect Information Ltd., member of Mergermarket Ltd. 13 BOARD OF DIRECTORS Ronald J. Kruszewski Chairman of the Board and Chief Executive Officer Thomas W. Weisel Co-Chairman of the Board Bruce A. Beda Chief Executive Officer Kilbourn Capital Management, LLC Kathleen Brown Partner Manatt, Phelps & Phillips, LLP Michael W. Brown Former Vice President and Chief Financial Officer Microsoft Corporation John P. Dubinsky President and Chief Executive Officer Westmoreland Associates, LLC Robert E. Grady Partner and Managing Director Cheyenne Capital Fund Frederick O. Hanser Board of Managers Retired Vice Chairman St. Louis Cardinals, LLC Richard J. Himelfarb Vice Chairman of the Board Chairman, Investment Banking 14 BOARD OF DIRECTORS Maura Markus Former President and Chief Operating Officer Bank of the West Thomas B. Michaud President and Chief Executive Officer Keefe, Bruyette & Woods Thomas P. Mulroy Co-President Co-Director, Institutional Group Victor Nesi Co-President Co-Director, Institutional Group James M. Oates Chairman Hudson Castle Group, Inc. Ben A. Plotkin Vice Chairman of the Board Kelvin R. Westbrook President and Chief Executive Officer KRW Advisors, LLC James M. Zemlyak Co-President and Chief Financial Officer Michael J. Zimmerman Vice Chairman Continental Grain Company 15 SHAREHOLDER INFORMATION ANNUAL MEETING The 2017 annual meeting of shareholders will be held at Stifel’s headquarters, One Financial Plaza, 501 North Broadway, 2nd Floor, St. Louis, Missouri, on Tuesday, June 6, 2017, at 9:30 a.m. TRANSFER AGENT The transfer agent and registrar for Stifel Financial Corp. is Computershare Trust Company, n.a., Canton, Massachusetts. STOCK LISTINGS The common stock of Stifel Financial Corp. is traded on the New York Stock Exchange and Chicago Stock Exchange under the symbol “SF.” The high/low sales prices for Stifel Financial Corp. common stock for each full quarterly period for the calendar years are as follows: SALES PRICE 2016 2015 High Low High Low First Quarter $ 41.67 $ 25.00 $ 57.75 $ 45.96 Second Quarter Third Quarter Fourth Quarter 38.52 39.96 52.88 27.33 28.49 36.71 59.93 58.71 47.17 51.98 41.53 40.52 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME A reconciliation of GAAP Net Income to Non-GAAP Net Income and GAAP Net Income Per Diluted Share, the most directly comparable measure under GAAP, to Non-GAAP Earnings Per Diluted Share is included in the table below. GAAP net income available to common shareholders 145,296 172,907 179,130 92,336 GAAP net income Preferred dividends Acquisition revenues, net of tax Acquisition charges, net of tax Compensation Other non-compensation U.S. tax benefit 1 Non-GAAP Net Income GAAP earnings per diluted share Adjustments Non-GAAP Earnings Per Diluted Share 3,906 77,614 2,681 — 2012 2013 2014 2015 2016 $145,296 $172,907 $179,130 $92,336 $81,520 — — — — 3,095 3,513 2,367 — — 16,111 38,356 63,718 6,825 16,193 41,693 — — — — — — 44,193 12,149 (60,153) — — — $145,296 $172,191 $205,579 $149,252 $185,706 $2.31 — $2.31 $2.35 (0.01) $2.34 $2.35 0.34 $2.69 $1.18 0.72 $1.90 $1.00 1.39 $2.39 (in thousands, except per share amounts) 1 U.S. tax benefit in connection with discontinuing the operations of Stifel Nicolaus Canada, Inc. in 2013. 16 STIFEL LOCATIONS Public Finance Private Client Group Investment Banking Institutional Equity & Fixed Income Stifel Financial Corp. | www.stifel.com One Financial Plaza | 501 North Broadway | St. Louis, Missouri 63102 

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