Stifel Financial Corp. Reports First Quarter Results; Diluted EPS of $.35 - Return on Average Equity of 13%; Quarterly Net Income of $4.4 Million

Business Wire, May 5, 2005

ST. LOUIS -- Stifel Financial Corp. (NYSE: SF) today reported unaudited quarterly net income of $4.4 million, or $0.35 per diluted share, on net revenues of $60.2 million for the quarter ended March 31, 2005, compared to a net income of $6.9 million, or $0.57 per diluted share, on record net revenues of $67.5 million for the comparable quarter of 2004. Net income for the three-month period ended March 31, 2004 included a $1.0 million tax benefit, or $0.08 per diluted share, resulting from the settlement of a state tax matter covering a number of tax years. Excluding the prior year tax adjustment, net income decreased 26% or $0.14 per diluted share. All prior period share and earnings per share amounts have been retroactively restated to reflect the four-for-three stock split distributed in September 2004. For the quarter ended March 31, 2005, the Company achieved pre-tax margin of 12% and a 13% return on average equity.

At March 31, 2005, the Company's equity was $132.9 million, resulting in book value per share of $13.59. During the first quarter of 2005, the Company repurchased 345,914 shares, under existing Board authorization, at an average cost of $20.62 per share.

Chairman and Chief Executive Officer, Ronald J. Kruszewski, commented, "We are pleased with our performance in the quarter, despite the difficult market environment characterized by a flattening yield curve, concerns about energy prices, and declining equity markets. The Company achieved annualized return on average equity of 13% and pre-tax margins of 12%." Mr. Kruszewski continued, "The current market environment, while difficult for short-term financial performance, provides an excellent opportunity for Stifel Financial to continue to build its platform."

First Quarter Discussion

Net revenues for the quarter decreased 11% to $60.2 million from $67.5 million in the prior year first quarter, and decreased 6% from the fourth quarter of 2004. Commission and principal transaction revenues decreased 11% to $35.2 million from $39.5 million in the same period last year and decreased 2% from the fourth quarter of 2004. Investment banking revenues decreased 19% to $13.8 million in the first quarter of 2005 from $17.0 million in the prior year first quarter, and decreased 14% from the fourth quarter of 2004. Asset management and service fees increased 10% to $9.5 million from $8.6 million in the first quarter of 2004 and increased 6% from the fourth quarter of last year. Net interest increased 21% to $2.3 million from $1.9 million in the prior year first quarter, and was unchanged from the fourth quarter of 2004. Other revenues decreased $941,000 from $424,000 in the prior year first quarter, and decreased $1.5 million from the fourth quarter of 2004.

Total non-interest expenses in the 2005 first quarter were $52.9 million, down 8% from $57.7 million in the same period of 2004, and virtually unchanged from the fourth quarter of 2004. Employee compensation and benefits decreased 10% to $40.7 million from $45.1 million in the prior year first quarter and increased 7% from the fourth quarter of 2004. As a percentage of net revenues, compensation and benefits totaled 67.6% in the first quarter of 2005, 66.9% in the 2004 comparable quarter, and 59.2% in the fourth quarter of 2004. A portion of compensation and benefits includes transition pay in connection with the Company's expansion efforts. Excluding these expenses, compensation and benefits as a percentage of net revenues totaled 63.8% in the first quarter of 2005, 63.5% in the 2004 comparable quarter, and 55.7% in the fourth quarter of 2004. Excluding compensation and benefits, non-interest expenses decreased 2% from the prior year first quarter and decreased 17% from the fourth quarter of 2004.

Business Segment Results for the Three Months Ended March 31, 2005:

--Private Client Group ("PCG") net revenues for the first quarter of 2005 were $47.2 million, a decrease of 10% from the first quarter of 2004, and a 1% decrease from the fourth quarter of 2004. PCG recorded an operating contribution of $11.2 million, a 22% decrease from the first quarter of 2004, and a decrease of 3% from the 2004 fourth quarter.

--Equity Capital Markets ("ECM") recorded net revenues of $8.6 million, a 21% decrease from the same quarter last year and a 17% decrease from the fourth quarter of 2004. ECM operating contribution totaled $2.7 million, a 23% decrease from the first quarter of 2004 and a 32% decrease from the fourth quarter of 2004. The Company lead or co-managed 19 equity, debt, closed end funds, or trust preferred offerings during the first quarter 2005, compared to 22 in the same period one year earlier and 27 during the fourth quarter 2004.

--Fixed Income Capital Markets ("FICM") posted net revenues of $4.1 million, an increase of 5% from the prior year first quarter and a decrease of 17% from the previous quarter. During the 2005 first quarter, FICM recorded an operating contribution of $542,000, an increase of 54% from the prior year first quarter and a decrease of 63% from the previous quarter. The FICM senior or co-managed 27 offerings during the first quarter 2005 compared to 43 offerings in the same period one year earlier and 32 offerings during the fourth quarter 2004.