I would like to welcome everyone to Stifel Financial's First Quarter 2019 Financial Results Conference Call. At this time, I'd like to remind everyone that today's call may include forward-looking statements. These statements represent the firm's belief regarding the future events that, by their nature, are uncertain and outside of the firm's control. The firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the firm's future results, please see the description of risk factors in the current annual report on Form 10-K for the year ended December 2018. I would also like to direct you to read the forward-looking disclaimer in Stifel's quarterly earnings release, particularly as it relates to the firm's ability to successfully integrate acquired companies or the branch offices and financial advisors, changes in the interest rate environment, changes in legislation and regulation. You should also read the information on the calculation of non-GAAP financial measures that's posted on the Investor Relations portion of the firm's website at www.stifel.com. This audio cast is copyrighted material of Stifel Financial Corp., and may not be duplicated, reproduced or rebroadcast without the consent of Stifel Financial Corp. I would now like to turn the call over to Stifel's Chairman and Chief Executive Officer, Ron Kruszewski.

Thank you, operator. Good morning and thank you for taking the time to listen to our first quarter 2019 results. Earlier this morning we issued a earnings release and posted a slide deck on our website. Joining me on the call today are our Co-President, Jim Zemlyak and Victor Nesi, as well as our CFO Jim Marischen. I'm going to run through our quarterly highlights and our business segments. Jim Marischen will then take you through our balance sheet, net interest income and expense lines, and then I'll come back with my concluding thoughts. I'm very pleased with our first quarter results. Net revenue was a first quarter record and increased 3% over last year. The diversity of our business was highlighted by record global wealth management revenues, which offset a 3% decline in our institutional business. The decline in our institutional group was primarily due to the impact of the government shutdown on overall underwriting activity. In fact excluding underwriting revenue, our institutional group revenue would have been, up 7% from the prior year. Net revenue totaled $770 million, our revenue improvement was driven by nearly 30% improvement in net interest income to $142 million, that was driven by a 28 basis point increase in our bank net interest margin. To achieve this result, we executed on our deposit optimization strategy in the quarter and grew our balance sheet year-on-year. Asset management revenues were essentially flat at $195 million, due to the impact of our fee based asset, on our fee based assets of the 14% decline in the S&P 500 in the fourth quarter. That said given the improvement in the market's year-to-date, we expect a solid rebound in asset management revenues in our second quarter. Brokerage revenue of $260 million declined by 2% a strong results from…

Thanks, Ron. And good morning to everyone. So starting with our balance sheet, we finished the quarter with $24.2 billion of assets on our consolidated balance sheet was, which was down $340 million from the prior quarter, but firm wide, interest earning assets increased to more than $20.6 billion. The increase in interest earning assets was due to higher bank interest earning assets that I'll discuss in more detail later. We finished the quarter with the Tier 1 leverage ratio of 9.8% and a Tier 1 risk based capital ratio of 18.5%. Our Tier 1 ratios were impacted by strong growth and retained earnings, our share repurchase activity during the quarter and our preferred share offering. I would also note that the adoption of the new lease accounting standard added $680 million of a 100% risk weighted assets on our balance sheet. Excluding these assets, our Tier 1 risk based capital would have been 19.6%. Book value per share of $43.18, increased by $0.56 in the quarter. I would note that we adjusted our fourth quarter book value per share number to $42.62 and $43.04 to exclude the impact of certain non-controlling interests that are related to leasing activity to begin in the fourth quarter. Moving on to net interest income. Our net interest income totaled to $142 million, which represented a 27% increase from the first quarter of 2018. Our consolidated net interest margin was 2.75%, which was up 28 basis points sequentially due to a 28 basis point increase in our bank net interest margin to 3.17%. As Ron mentioned earlier the significant increase in our bank NIM was a result of our deposit optimization strategy, as well as increasing yields on both our loan and investment portfolios. We came in above our guidance for the quarter, as…

Thanks, Jim. So we're off to a strong start in 2019, and our share price has improved approximately 40% year to date. As I said in my annual shareholder letter, 2018 was the greatest divergence between our financial performance and our stock price that I have ever experienced in my 22 year tenure as CEO. As a result of what we thought was a significant undervaluation of our stock, we repurchased 3.4 million shares in 2018 and another 1 million shares in the first quarter of 2019, based on our view that our stock was significantly undervalued. Additionally, we have repurchased 250,000 shares so far in April. Even at our current valuation, I believe we remain undervalued relative to our peers. We expect our growth will continue this year and given the strength of our first quarter results, we continue to feel good about both our outlook and the full year guidance we gave last quarter. To summarize our wealth management business continues to benefit from the high quality financial advisors we've added and our exceptionally strong pipeline. For reasons previously stated, we expect our asset management revenue to rebound in the second quarter. People Bancorp had a very strong quarter as we executed our strategy of replacing higher costs CDs with sweep deposits and reinvesting proceeds from maturing securities into higher yielding law. Also I'm excited about the technology initiatives that we will introduce in the second quarter of 2019. We will continue to invest in our institutional group. The benefits of the diversity of this business continue to pay dividends in the first quarter as the strength of our advisory, fixed income trading and public finance businesses help to offset some of the impact of the declines in equity underwriting and trading business. In addition to our strong financial results in the quarter, we repurchased a 1 million shares, raised a $160 million in a preferred offering, increased our quarterly dividend by 25% and recently announced the acquisition of Mooreland Partners, a boutique advisory firm focused on the technology space. Before I turn the call over to the operator for questions, let me conclude with another comment from my shareholder letter. As I look forward to the next quarter, next year and next decade for Stifel, I acknowledge that it's difficult to forecast the economic and market forces we will face, we will surely navigate political and regulatory developments along the way. However, our balance business model and conservative risk profile catalyzed by the talent and dedication of our people will allow us to respond to the ever changing business environment. I'm highly optimistic that we will continue to grow and create value for our clients and shareholders in the future. And with that operator, please open the line for questions.

Thank you. [Operator Instructions] Thank you. Your first question comes from Steven Chubak from Wolfe Research. Your line is open, please go ahead.

On the NIM guidance, a lots of moving pieces driving the stronger NIM this quarter. I was really hoping to unpack a few of those. And first on the liability side, is there any additional room for continued roll-off of higher cost FHLB and CDs. And on the asset side of the equation, how should we think about the asset yield trajectory in the absence of additional rate hikes. I'm just trying to understand in that guidance range of 310 to 320, given how strong the NIM was this quarter. Is that reflect conservatism? Or what are some of the moving pieces?

It's Jim, I'll start, thanks on the deposit side, we did what we said we were going to do by rolling those off. That might be a little bit left, but that was, you know, the result of getting the extra charter and yes, sweeping more cash deposits. And on the asset side, you know, that our projection is pretty much a static environment going forward. So I'm not sure that the Fed's going to be doing much. I'm not exactly sure what the yield curve will do. But our guidance, tries to say 310 to 317 and that's where we believe the NIM will come in. So I'm not sure there's much to unpack and --

The guidance of 310 to 320, obviously we're already at the high end of that range, and I think we'll continue to monitor what our peers are doing from a deposit pricing perspective and continue to be competitive there. But again the upside really is going to be continuing to reinvest proceeds from securities into higher yielding loans, and I think you can see that play out in the quarter as well.

That's helpful and then just a question on the capital outlook and future deployment plan. So the capital ratio has ticked up nicely in the quarter, I know in the last call, Ron, you insighted the $500 million of capital generation and really limited capital needs to support bank growth and the dividend, which implies a greater deployment or more aggressive deployment of the buyback. I know there were factors that kept you out of the market. But just given the share count guidance, which is a little bit higher than we expected for 2Q. What's your appetite at this point given how much your stock has run off to maybe continue to be more aggressive with share purchase. I'm just trying to think about sizing that capacity in relation to your appetite?

Well first of all, I mean, I, you know share repurchases are always done here with an eye toward value and the share repurchases should create value for remaining shareholders. So obviously our stock price is up 40% for the year, we're going to continue to buyback shares, but I would say they're not as aggressively at the current price as we would at the beginning of the year price, I think that's just obvious. We just announced an acquisition and we continue to have opportunities in front of us and we balance all of these opportunities, along the lines of the best risk adjusted returns. So today with the stock price higher it's not as obvious, it certainly we believe is still a good return, I believe our stock is undervalued trading at 10 times earnings is give or take, but the, we're going to continue to look at all of our alternatives to build the company.

Another point to highlight here is the impact of the higher share price on that projected share account. So you have to remember the recent run in the our stock over the year-to-date performance has had a fairly sizable impact. If you think about our guidance assuming around the price, where we are today talk about $59. If were to go back say down to $50 a share, that's about 900,000 shares, so that's a pretty material impact given the run of the stock. And something to consider when you think about what's within that number.

Yes, and that maybe a pretty high class problem to have. Just one more for me on the IB outlook. Ron, your comments were actually quite encouraging, as we hear think about the outlook for ECM and DCM particularly following some of the challenges on the underwriting side this quarter. I'm just wondering in the context of the full year guidance range you had given, which understanding it's relatively wide, but last quarter you spoke of a low end with revenues down slightly year-on-year. I'm just wondering in the context of the full year how you're thinking about the potential for growth given some of the strength that you're seeing in the backlog?

I would say that the low end of the guidance would have suggested our first decline in revenues in 24 years. So that, and you're talking about total guidance, right?

Total guidance?

Yes, total guidance. So, yes, you know, I feel like I feel optimistic about the remainder of the year considering our pipeline, considering that we don't see a recession looming, the Fed seems to have certainly be in a pause mode, you know, decent GDP growth in the first quarter, inflation is muted, these financial conditions will allow us to continue to, I believe build our business to the end of the year.

All right. And one final clean up for me. The $1.9 billion individual program balances. I'm just wondering what proportion of that is still available to be deployed to fund future bank growth?

Yes. As of today we have about $500 million of additional capacity within that program.

I would also point out, you know, we made the comment on the call about additional deposit generating capabilities that we are building out of the bank as additional means. As we look out beyond 2019 to 2020 and beyond and we feel pretty confident in the deposit capabilities we're building there.

That's great. Thank you for taking my questions.

Thank you.

Your next question comes from Devin Ryan from JMP Securities. Your line is open, please go ahead.

All right, great. Good morning guys.

Good morning, Devin.

Hi, I guess first question here you on the advisor recruiting backdrop Ron appreciate some of your comments and your point it looks like the second quarter has started on a strong note from the outside from what we can see it looks like April you've already brought in kind of the same number of assets as you did in the first quarter from what we can track. I'm just curious, kind of, what the themes that you're seeing are there in terms of what's helping momentum or attracting people to Stifel. As you just think about kind of context for the full year 2019 based on the pipeline today and the amount of people you're talking to if you can give us any context of maybe how you think that could look relative to last year?

You know, today in this environment and considering all that's going on I would say that I would think that 2019 will exceed our recruiting in 2018, were the number of people that are considering Stifel is the number and the quality and the number of teams and rather large teams. Is the largest that I've seen since I've been here. It's just a lot of interest in what we're doing. I think it's a combination of other, what other market participants are doing, but also some of the investments that we have been making to make our clients our advisors more efficient, the ability to gather client assets when you combine that all together, our recruiting is very stout right now and we get them to come here and that's all we did, but we've been converting a lot of them to join the firm, by April of the, is a good example of that.

Got it, terrific. Okay and then just obviously to the extent you continue to have success there. There is a cost to recruit, you know, both in terms of the infrastructure of the firm and then you're just thinking about the amortization on the compensation side. But you guys have also been managing expense as well. So I'm just curious how you think about just the trajectory of expenses tied to recruiting and whether I guess you have the infrastructure in place where there's not a lot of additional spend to kind of bring in the type of classes that you think you will in the next year or two. Or is there kind of another kind of big infrastructure call it, the investment that we need to think about just as you open a bunch of new offices and expand the footprint?

Well we've been, we have been making a fair amount of infrastructure and technology spends over the last two years. And so that's been in the numbers. The other big number that usually comes out of all of this is the amortization of the recruiting deal so to speak, and what I would say about that is we were coming off of a period of tremendous recruiting back in the '09, '10 period. And like depreciation that's rolling off significantly and have been replaced by new hires, but when I look at it, I don't see that number particularly going up, because what hits our income statement and that's because of again, a lot of the recruits that we had eight or nine and 10 years ago, when we went from 700 advisors to 1,400 in a short period those transition deals are rolling off, as well as that amortization expense.

Got it. Okay. Thank you. Just the last one here on. Yes, I guess capital and M&A, you know, obviously great to see the stock price move here and hopefully that continues. But just in terms of thinking about acquisitions is a outlook for capital deployment. You announced the Mooreland deal recently I'm just curious kind of what you're seeing in the backdrop for M&A, today how the flow of opportunities have been in both the institutional and wealth management side of the business and just appetite there today.

As always I, first of all as you know and all of our shareholders know, we have been both an active participant in M&A, but more importantly an effective participant in M&A in that, we have an ability to properly identify price and integrate deals. And as such we feel a lot of things, if something is, you know, potentially available, we get a call, we parsed through it and we know we execute on deals that we believe first to add to our relevance, I've always said that we believe are accretive and we always compare that against alternative use of the capital, which could be either growing the balance sheet in the bank or buying back stock. So that hasn't changed in 20 years and it's not going to change today, as it relates to the current environment, I would say that there are some, you know, there are some properties that, that are out they're always are, but it feels like a little bit more. I feel be a little concerned when I see that, it feels at the top of the market type stuff. But, you know, we're active and we'll do what we've always done.

Okay, terrific. All right, thanks Ron. Appreciate it.

Your next question come from Chris Harris with Wells Fargo. Your line is open, please go ahead.

Thanks guys. So customer cash balances are trending lower, it's not unique to you, obviously it's a trend happening everywhere. It's going to put a little bit of pressure on your interest earning assets. You're kind of guiding to a flattish NIM here, but there's still some balance sheet growth you could potentially execute at the bank. So if rates stay flattish with where we are today, do you guys think you can still grow NII from the 1Q level as we proceed through the duration of 2019?

Yes, it's early and we still feel comfortable with our NII guidance with income coming in higher than we originally saw. It does give us some flexibility of the balance sheet. We continue to look at opportunities to manage asset levels, but we do feel confident with the NII guidance.

That's on higher interest earning asset, so it's not just the percentage of it's time, the interest earnings asset, which means that NII is going to be higher.

Yes, Okay. With respect to the outlook for NIM. Are you guys assuming within that guidance range that your deposit costs creep up a little bit from here?

Obviously, we're looking at that and we'll be responsive to the market, but we're not anticipating any further creep there in terms of what we're seeing.

Okay, great. And just one question on the institutional business. Nice recovery and the fixed income brokerage side. Just a bigger picture, there's been a lot of volatility in that line item over the years. Clearly a lot of things are impacting that. What do you think like a normalized run rate type of revenue number is for that business based on an annual basis. I guess that's part one of the question. And then part two is, is MiFID impacting that business the same way it's impacting the equity side?

Well the last question first. I mean, you know, MiFID it's indiscriminate to equities or fixed income theoretically, there's not the research component is different on fixed income. So the impact for us at least of MiFID on fixed income is not as apparent as it is on the equity side, and you know, honestly, if I had a sustainable run rate and fixed income I might even share it with you, but I don't. So I'm not going to make, I mean, you know, that business there's so many things that have been going on in that business from, you know, from sentiment to credit spreads to yield curve to place, they just, it's just a difficult thing to see. I believe that we have in place a fixed income business that, that can do well, but it's going to have some volatility quarter-to-quarter, but it's always profitable and we're certainly pleased with last quarter's result.

Very good. Thanks guys.

[Operator Instructions] Your next question from Alex Blostein from Goldman Sachs. Your line is open, please go ahead.

Hey, good morning, everybody.

Hey, Alex.

Question for you guys, another one on the wealth management side. So you know Ron obviously you talked about strong net new asset growth in the quarter. What was the net new asset number for you guys in Q1. And bigger picture question I guess when you think about some of the industry trends that we've been observing for a while with a move toward RIAs and the move toward independent channel. You guys are obviously participating much more in the employee channel side of things. What ultimately brings people to Stifel's wealth business given these sort of bigger picture industry trends where you don't seem to check a lot of the same boxes?

Well, where we, so what was the last part of your question? Where we don't seem to check?

Well, you don't seem to check that the RIA box or the independent broker dealer channel box. Given the fact that it's largely an employee kind of the FA channel?

Yes, well I guess. First of all, we are a dual registrant, Okay, so we have advisors who act very similar to RIA, in fact we have RIA funds in the firms, so we don't market that directly as some of our competitors just you're right about that in terms of capabilities. It's my view that as you, as the landscape evolves that being able to offer both RIA services and brokerage services is right for the client and you should be able to provide client choice, use episodic advice, building a bound ladders much better done on an episodic commission basis than it is being charged an annual fee. And so, you know, well that's been our view and that's why we stick with employee model, but our employee model has RIA capabilities, so without question. Look in terms of recruiting, I think, I'll do this once I want to give a sense for this the, and we're thinking about, I think the industry should think about frankly providing a little bit more of a numbers around the flow of recruiting I, but the first quarter, I'll just, I'll say that we brought in approximately $32 million in net new production, people that we brought from other firms $31 million to $32 million. We lost for people we didn't want to lose $2 million. And then we had people who retire primarily who had $7 million of production that we reassigned across the firm. So when you ask, you know, what we do in this quarter, I would say net new production expected for the quarter was $30 million. And you know we're trying to refine some of this, is how we try to look at it versus the net new advisor number that everyone, you know, that puts too much credence on. The numbers I just gave you are the numbers that matter, and we're looking at how we can at least among our mid-sized peers be a leader in providing that kind of information.

Great, that's perfect, and thanks for thoughts around the disclosure here. Second question speaking of new disclosure, great job, guys, on the average earning balance sheet and that's definitely helpful to put that all in the release. So when we think about the NIM guidance for the bank, can you just update us on the same for the consolidated business. Again assuming there's probably not a whole lot of deviation between the two things directionally, but just wanted to make sure. So relative to I think it was like 2.70 something NIM in the quarter?

When we gave NIM guidance back in the third quarter, fourth quarter everything has been specific to the bank. It's the vast majority of what we have, so we haven't really put out any guidance for that on a consolidated basis.

Fair enough. Last one for me. So on Mooreland Partners, it sounds like they have a handful of managing directors, but less clear what the production level is there, maybe help us understand kind of what the revenue contribution is to the business from that acquisition?

We just haven't disclosed that, I mean, we just closed and it's a nice transaction that fits nicely not only in our businesses, but in our locations, you know, across both the U.S. and in London. So we're always certainly like the transaction and believe that's going to not only add the revenues they bring in, but help us achieve other revenues. But we didn't disclose that, so I can't do that on this call.

We just announced it and we'll close later this year.

It will close later.

Thank you. Got it. Great. Thank you guys.

Thank you.

There are no further questions at this time. I turn the call back over to the presenters.

Well I would want to thank everyone for listening to our call. I will say that I'm optimistic given the current market conditions and everything that's going on that we can continue to grow your company and add to shareholder value while serving our clients. Look forward to talking to everyone in early August. Have a, maybe late July. But have a great day. Thank you.

This concludes today's conference call. You may now disconnect. Have a great day.