SEC Company Response from STIFEL FINANCIAL CORP (SF, SFB, SF-PB, SF-PC, SF-PD) (CIK 0000720672) (SF) — May 22, 2015
STIFEL FINANCIAL CORP (SF, SFB, SF-PB, SF-PC, SF-PD) (CIK 0000720672)
Date: May 22, 2015 · CIK: 0000720672 · Accession: 0001193125-15-198911
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-09305
Referenced dates: July 12, 2013, May 8, 2015
Letter
Via EDGAR (Correspondence) United States Securities and Exchange Commission Division of Corporation Finance RE: Stifel Financial Corp. Form 10-K for the Fiscal Year Ended December 31, 2014 Filed March 2, 2015 File No. 001-09305
Dear Ms. Hayes:
This letter sets forth the responses of Stifel Financial Corp. (the “Company,” “we,” “us” or similar terms) to the comments by the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in the Staff’s letter dated May 8, 2015.
For your convenience, the text of the Staff’s comments is set forth in italics below, followed in each case by our response.
Form 10-K for the Fiscal Year Ended December 31, 2014
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 36
Results of Operations – Global Wealth Management, page 47
Asset Management and Service Fees, page 48
1. We note that the value of assets in fee-based accounts at December 31, 2014 increased to $34.9 billion from $29.0 billion at December 31, 2013, of which 52.9% is attributable to net inflows and 47.1% is attributable to market appreciation. You represented in your response letter dated July 12, 2013 that you would include a roll-forward of your assets under management that separately presents gross client inflows, gross client outflows and market appreciation/depreciation in future filings. Please direct us to where we can find such disclosure or confirm to us that you will provide this disclosure in future filings. Please provide the roll-forward at the asset class level.
Response:
The following table summarizes the changes in our assets in fee-based accounts for the twelve months ended December 31, 2014 (in thousands):
Balance at December 31, 2013
$ 29,025,210
Inflows
4,926,378
Outflows
(1,800,500 )
Market appreciation
2,786,298
Balance at December 31, 2014
$ 34,937,386
In response to the Staff’s comment, we will include a roll-forward of our assets in fee-based accounts that separately presents gross client inflows, gross client outflows, and market appreciation/depreciation starting with our Quarterly Report on Form 10-Q for the period ended June 30, 2015, and in other applicable future filings.
III. Loan Portfolio, page 58
2. Please disclose the principal and interest amount of loans 90 days past due and still accruing as well as the amount of potential problem loans. Refer to Item III C.1 and C.2 of Industry Guide 3.
Response:
Please be advised that there were no loans past due 90 days and still accruing interest at December 31, 2014 and 2013. Potential problem loans consist of loans that are performing in accordance with contractual terms, but for which we have concerns about the borrower’s ability to comply with repayment terms because of the borrower’s potential financial difficulties. We monitor these loans closely and review their performance on a regular basis. At December 31, 2014, we had $6.6 million of potential problem loans, which were not included in non-accrual or restructured loans.
Item 8. Financial Statements and Supplementary Data, page 86
Notes to Consolidated Financial Statements, page 97
Note 9 – Bank Loans, page 137
3. We note that your gross bank loans are a significant portion of your total assets. We also note that certain disclosures required by ASC 310 do not appear to be disclosed within this note. Please expand your disclosure in future filings to address the following:
•
Provide a discussion of the risk characteristics of each portfolio segment pursuant to ASC 310-10-50-11B(a)(2).
•
Disclose the balance of your allowance for loan losses and the recorded investment in financing receivables by impairment methodology. Refer to ASC 310-10-50-11B(g) through 50-11B(h).
•
We note from your disclosure on page 128 that you use delinquency rates, charge-off rates, and internal risk ratings to assess the credit quality of your loan portfolio. Please disclose the credit quality information for each class of financing receivable pursuant to ASC 310-10-50-29 and 50-30.
•
Disclose the recorded investment for your financing receivables 90 days past due and still accruing and an aging analysis of the recorded investment in financing receivables that are past due. Refer to ASC 310-10-50-7(b) and 50-7A.
•
Disclose your policy for determining which loans are individually assessed for impairment pursuant to ASC 310-10-50-15(d), as well as the qualitative disclosures for impaired loans pursuant to ASC 310-10-50-15(a) and 50-15(c).
•
Disclose your accounting policy for determining when a troubled debt restructuring (“TDR”) has been granted to a borrower, and provide your impairment policy for TDRs. Revise to present the required TDR disclosures found at ASC 310-10-50-33 and 50-34.
Response:
In response to the Staff’s comment, we will include additional disclosures, starting with our Quarterly Report on Form 10-Q for the period ended June 30, 2015, and in other applicable future filings to:
•
Provide a discussion of the risk characteristics of each portfolio segment pursuant to ASC 310-10-50-11B(a)(2).
•
Disclose the balance of our allowance for loan losses and the recorded investment in financing receivables by impairment methodology pursuant to ASC 310-10-50-11B(g) through 50-11B(h).
•
Disclose the credit quality information for each class of financing receivable pursuant to ASC 310-10-50-29 and 50-30.
•
Disclose the recorded investment for our financing receivables 90 days past due and still accruing and an aging analysis of the recorded investment in financing receivables that are past due pursuant to ASC 310-10-50-7(b) and 50-7A.
•
Disclose our policy for determining which loans are individually assessed for impairment pursuant to ASC 310-10-50-15(d), as well as the qualitative disclosures for impaired loans pursuant to ASC 310-10-50-15(a) and 50-15(c).
•
Disclose our accounting policy for determining when a TDR has been granted to a borrower, and provide our impairment policy for TDRs pursuant to ASC 310-10-50-33 and 50-34.
The revised disclosure is presented in Appendix A hereto.
Note 22 – Employee Incentive, Deferred Compensation, and Retirement Plans, page 141
4. Revise your disclosure in future filings to discuss the method used and assumptions made in determining the fair value of your equity compensation awards (e.g., stock units, restricted stock, etc.). Refer to ASC 718-10-50-2(f).
Response:
Please be advised that the fair value of our restricted stock award grants is based on the closing price our common stock on the date of grant and we have made no other significant assumptions in determining fair value.
The Company acknowledges the Staff’s comment and will include the applicable disclosure described in the previous paragraph in future filings to discuss the specific methods used and the assumptions made in determining the fair value of our equity compensation awards in accordance with ASC 718-10-50-2(f).
Note 26 – Earnings per Share (“EPS”), page 149
5. Clarify whether your restricted stock, restricted stock units and any other incentive stock award plans earn dividends or dividends equivalents. Please tell us whether the dividends or dividend equivalents credited to unvested awards are forfeitable and if not, whether the two-class method of computing earnings per share is necessary and would be materially different from your reported EPS. Please refer to ASC 260-10-45-61A.
Response:
Please be advised that nearly all of our stock-based awards are in the form of restricted stock units (RSUs). RSU grants to employees contain forfeitable rights to dividends or dividend equivalents, and are subject to forfeiture if the underlying awards do not vest. Accordingly, these awards are not considered to be participating securities that should be included in our computation of basic earnings per share under the two-class method as stated in ASC 260-10-45-61A.
Please be advised that RSUs issued to our non-employee directors, which represent a small portion of our stock-based awards, contain non-forfeitable rights to dividends or dividend equivalents and are considered to be participating securities.
As of December 31, 2014, 2013, and 2012, outstanding RSUs held by our non-employee directors were 204,885, 188,262, and 177,815, respectively, while the average shares outstanding used in the basic computation of earnings per share were 66,472,000, 63,568,000, and 53,563,000, at December 31, 2014, 2013, and 2012, respectively. Based on this, we have determined that applying the two-class method of computing earnings per share is not necessary, as it is not materially different from our reported earnings per share.
In future filings, we will include the following additional disclosure, to the extent applicable:
“The holders of unvested restricted awards have forfeitable rights to dividends or dividend equivalents and therefore, such unvested awards do not qualify as participating securities. Restricted awards issued to our non-employee directors contain non-forfeitable rights to dividend or dividend equivalents and therefore, qualify as participating securities. Applying the two-class method of computing earnings per share would not differ materially from our computation of basic earnings per share.”
Item 15. Exhibits and Financial Statement Schedules
6. We note the reference on page 155 to your 2007 Incentive Stock Plan, but we are unable to locate a copy of this Plan in your filing. Please direct us to the document, or file it in accordance with Item 601(b)(10)(iii)(B) of Regulation S-K.
Response:
The Stifel Financial Corp. 2007 Incentive Stock Plan was filed as Annex I to the Company’s definitive Proxy Statement on Schedule 14A for the 2007 Annual Meeting of Shareholders filed with the Commission on May 22, 2007. The Company inadvertently omitted reference to this document in the exhibit index included in its Annual Report on Form 10-K for the year ended December 31, 2014 and will, to the extent appropriate, include such reference in the exhibit index in its Annual Report on Form 10-K for the year ended December 31, 2015.
****
On behalf of the Company, I acknowledge that:
•
the Company is responsible for the adequacy and accuracy of the disclosures in this filing;
•
Staff comments or changes to disclosures in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
•
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under federal securities laws of the United States.
If you have any questions or comments regarding the above information, please do not hesitate to contact me at (314) 342-2228.
Sincerely,
/s/ James M. Zemlyak
Show Raw Text
CORRESP 1 filename1.htm Correspondence Via EDGAR (Correspondence) May 22, 2015 Ms. Suzanne Hayes Assistant Director United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 RE: Stifel Financial Corp. Form 10-K for the Fiscal Year Ended December 31, 2014 Filed March 2, 2015 File No. 001-09305 Dear Ms. Hayes: This letter sets forth the responses of Stifel Financial Corp. (the “Company,” “we,” “us” or similar terms) to the comments by the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in the Staff’s letter dated May 8, 2015. For your convenience, the text of the Staff’s comments is set forth in italics below, followed in each case by our response. Form 10-K for the Fiscal Year Ended December 31, 2014 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 36 Results of Operations – Global Wealth Management, page 47 Asset Management and Service Fees, page 48 1. We note that the value of assets in fee-based accounts at December 31, 2014 increased to $34.9 billion from $29.0 billion at December 31, 2013, of which 52.9% is attributable to net inflows and 47.1% is attributable to market appreciation. You represented in your response letter dated July 12, 2013 that you would include a roll-forward of your assets under management that separately presents gross client inflows, gross client outflows and market appreciation/depreciation in future filings. Please direct us to where we can find such disclosure or confirm to us that you will provide this disclosure in future filings. Please provide the roll-forward at the asset class level. Response: The following table summarizes the changes in our assets in fee-based accounts for the twelve months ended December 31, 2014 (in thousands): Balance at December 31, 2013 $ 29,025,210 Inflows 4,926,378 Outflows (1,800,500 ) Market appreciation 2,786,298 Balance at December 31, 2014 $ 34,937,386 In response to the Staff’s comment, we will include a roll-forward of our assets in fee-based accounts that separately presents gross client inflows, gross client outflows, and market appreciation/depreciation starting with our Quarterly Report on Form 10-Q for the period ended June 30, 2015, and in other applicable future filings. III. Loan Portfolio, page 58 2. Please disclose the principal and interest amount of loans 90 days past due and still accruing as well as the amount of potential problem loans. Refer to Item III C.1 and C.2 of Industry Guide 3. Response: Please be advised that there were no loans past due 90 days and still accruing interest at December 31, 2014 and 2013. Potential problem loans consist of loans that are performing in accordance with contractual terms, but for which we have concerns about the borrower’s ability to comply with repayment terms because of the borrower’s potential financial difficulties. We monitor these loans closely and review their performance on a regular basis. At December 31, 2014, we had $6.6 million of potential problem loans, which were not included in non-accrual or restructured loans. Item 8. Financial Statements and Supplementary Data, page 86 Notes to Consolidated Financial Statements, page 97 Note 9 – Bank Loans, page 137 3. We note that your gross bank loans are a significant portion of your total assets. We also note that certain disclosures required by ASC 310 do not appear to be disclosed within this note. Please expand your disclosure in future filings to address the following: • Provide a discussion of the risk characteristics of each portfolio segment pursuant to ASC 310-10-50-11B(a)(2). • Disclose the balance of your allowance for loan losses and the recorded investment in financing receivables by impairment methodology. Refer to ASC 310-10-50-11B(g) through 50-11B(h). • We note from your disclosure on page 128 that you use delinquency rates, charge-off rates, and internal risk ratings to assess the credit quality of your loan portfolio. Please disclose the credit quality information for each class of financing receivable pursuant to ASC 310-10-50-29 and 50-30. • Disclose the recorded investment for your financing receivables 90 days past due and still accruing and an aging analysis of the recorded investment in financing receivables that are past due. Refer to ASC 310-10-50-7(b) and 50-7A. • Disclose your policy for determining which loans are individually assessed for impairment pursuant to ASC 310-10-50-15(d), as well as the qualitative disclosures for impaired loans pursuant to ASC 310-10-50-15(a) and 50-15(c). • Disclose your accounting policy for determining when a troubled debt restructuring (“TDR”) has been granted to a borrower, and provide your impairment policy for TDRs. Revise to present the required TDR disclosures found at ASC 310-10-50-33 and 50-34. Response: In response to the Staff’s comment, we will include additional disclosures, starting with our Quarterly Report on Form 10-Q for the period ended June 30, 2015, and in other applicable future filings to: • Provide a discussion of the risk characteristics of each portfolio segment pursuant to ASC 310-10-50-11B(a)(2). • Disclose the balance of our allowance for loan losses and the recorded investment in financing receivables by impairment methodology pursuant to ASC 310-10-50-11B(g) through 50-11B(h). • Disclose the credit quality information for each class of financing receivable pursuant to ASC 310-10-50-29 and 50-30. • Disclose the recorded investment for our financing receivables 90 days past due and still accruing and an aging analysis of the recorded investment in financing receivables that are past due pursuant to ASC 310-10-50-7(b) and 50-7A. • Disclose our policy for determining which loans are individually assessed for impairment pursuant to ASC 310-10-50-15(d), as well as the qualitative disclosures for impaired loans pursuant to ASC 310-10-50-15(a) and 50-15(c). • Disclose our accounting policy for determining when a TDR has been granted to a borrower, and provide our impairment policy for TDRs pursuant to ASC 310-10-50-33 and 50-34. The revised disclosure is presented in Appendix A hereto. Note 22 – Employee Incentive, Deferred Compensation, and Retirement Plans, page 141 4. Revise your disclosure in future filings to discuss the method used and assumptions made in determining the fair value of your equity compensation awards (e.g., stock units, restricted stock, etc.). Refer to ASC 718-10-50-2(f). Response: Please be advised that the fair value of our restricted stock award grants is based on the closing price our common stock on the date of grant and we have made no other significant assumptions in determining fair value. The Company acknowledges the Staff’s comment and will include the applicable disclosure described in the previous paragraph in future filings to discuss the specific methods used and the assumptions made in determining the fair value of our equity compensation awards in accordance with ASC 718-10-50-2(f). Note 26 – Earnings per Share (“EPS”), page 149 5. Clarify whether your restricted stock, restricted stock units and any other incentive stock award plans earn dividends or dividends equivalents. Please tell us whether the dividends or dividend equivalents credited to unvested awards are forfeitable and if not, whether the two-class method of computing earnings per share is necessary and would be materially different from your reported EPS. Please refer to ASC 260-10-45-61A. Response: Please be advised that nearly all of our stock-based awards are in the form of restricted stock units (RSUs). RSU grants to employees contain forfeitable rights to dividends or dividend equivalents, and are subject to forfeiture if the underlying awards do not vest. Accordingly, these awards are not considered to be participating securities that should be included in our computation of basic earnings per share under the two-class method as stated in ASC 260-10-45-61A. Please be advised that RSUs issued to our non-employee directors, which represent a small portion of our stock-based awards, contain non-forfeitable rights to dividends or dividend equivalents and are considered to be participating securities. As of December 31, 2014, 2013, and 2012, outstanding RSUs held by our non-employee directors were 204,885, 188,262, and 177,815, respectively, while the average shares outstanding used in the basic computation of earnings per share were 66,472,000, 63,568,000, and 53,563,000, at December 31, 2014, 2013, and 2012, respectively. Based on this, we have determined that applying the two-class method of computing earnings per share is not necessary, as it is not materially different from our reported earnings per share. In future filings, we will include the following additional disclosure, to the extent applicable: “The holders of unvested restricted awards have forfeitable rights to dividends or dividend equivalents and therefore, such unvested awards do not qualify as participating securities. Restricted awards issued to our non-employee directors contain non-forfeitable rights to dividend or dividend equivalents and therefore, qualify as participating securities. Applying the two-class method of computing earnings per share would not differ materially from our computation of basic earnings per share.” Item 15. Exhibits and Financial Statement Schedules 6. We note the reference on page 155 to your 2007 Incentive Stock Plan, but we are unable to locate a copy of this Plan in your filing. Please direct us to the document, or file it in accordance with Item 601(b)(10)(iii)(B) of Regulation S-K. Response: The Stifel Financial Corp. 2007 Incentive Stock Plan was filed as Annex I to the Company’s definitive Proxy Statement on Schedule 14A for the 2007 Annual Meeting of Shareholders filed with the Commission on May 22, 2007. The Company inadvertently omitted reference to this document in the exhibit index included in its Annual Report on Form 10-K for the year ended December 31, 2014 and will, to the extent appropriate, include such reference in the exhibit index in its Annual Report on Form 10-K for the year ended December 31, 2015. **** On behalf of the Company, I acknowledge that: • the Company is responsible for the adequacy and accuracy of the disclosures in this filing; • Staff comments or changes to disclosures in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and • the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under federal securities laws of the United States. If you have any questions or comments regarding the above information, please do not hesitate to contact me at (314) 342-2228. Sincerely, /s/ James M. Zemlyak James M. Zemlyak President and Chief Financial Officer (Principal Financial Officer) cc: Ronald J. Kruszewski, Chairman and Chief Executive Officer David M. Minnick, Senior Vice President and General Counsel Mark P. Fisher, Senior Vice President and General Counsel Appendix A NOTE [ ● ] – Bank Loans The following table presents the balance and associated percentage of each major loan category in our loan portfolio at June 30, 2015 and December 31, 2014 (in thousands, except percentages): June 30, 2015 December 31, 2014 Balance Percent Balance Percent Commercial and industrial $ % $ 896,853 42.4 % Consumer 1 758,288 35.8 Residential real estate 432,646 20.4 Commercial real estate 15,902 0.8 Home equity lines of credit 12,945 0.6 Construction and land — — % 2,116,634 100.0 % Unamortized loan discount (30,533 ) Unamortized loan fees, net of loan fees (1,631 ) Loans in process 1,681 Allowance for loan losses (20,731 ) $ $ 2,065,420 1 Includes securities-based loans of $[ ● ] million and $732.8 million at June 30, 2015 and December 31, 2014, respectively. At June 30, 2015 and December 31, 2014, Stifel Bank had loans outstanding to its executive officers, directors, and their affiliates in the amount of $[ ● ] million and $0.6 million, respectively, and loans outstanding to other Stifel Financial Corp. executive officers, directors, and their affiliates in the amount of $[ ● ] million and $5.3 million, respectively. At June 30, 2015 and December 31, 2014, we had mortgage loans held for sale of $[ ● ] million and $121.9 million, respectively. For the three months ended June 30, 2015 and 2014, we recognized gains of $[ ● ] million and $1.7 million, respectively, from the sale of originated loans, net of fees and costs. For the six months ended June 30, 2015 and 2014, we recognized gains of $[ ● ] million and $2.9 million, respectively, from the sale of originated loans, net of fees and costs. The following table details activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2015 (in thousands). Three months ended June 30, 2015 Beginning Balance Provision Charge-offs Recoveries Ending Balance Commercial and industrial $ $ $ $ $ Consumer Residential real estate Commercial real estate Home equity lines of credit Construction and land $ $ $ $ $ Six months ended June 30, 2015 Beginning Balance Provision Charge-offs Recoveries Ending Balance Commercial and industrial $ $ $ $ $ Consumer Residential real estate Commercial real estate Home equity lines of credit Construction and land $ $ $ $ $ The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at June 30, 2015 (in thousands): Allowance for Loan Losses Recorded Investment in Loans Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Commercial and industrial $ $ $ $ $ $ Consumer Residential real estate Commercial real estate Home equity lines of credit Construction and land Unallocated $ $ $ $ $ $ The following table details activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2014 (in thousands). Three months ended June 30, 2014 Beginning Balance Provision Charge-offs Recoveries Ending Balance Commercial and industrial $ $ $ $ $ Consumer Residential real estate Commercial real estate Home equity lines of credit Construction and land $ $ $ $ $ Six months ended June 30, 2014 Beginning Balance Provision Charge-offs Recoveries Ending Balance Commercial and industrial $ $ $ $ $ Consumer Residential real estate Commercial real estate Home equity lines of credit Construction and land $ $ $ $ $ The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at June 30, 2014 (in thousands): Allowance for Loan Losses Recorded Investment in Loans Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Commercial and industrial $ $ $ $ $ $ Consumer Residential real estate Commercial real estate Home equity lines of credit Construction and land Unallocated $ $ $ $ $ $ The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at December 31, 2014 (in thousands): Allowance for Loan Losses Recorded Investment in Loans Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Individually Evaluated for Impairment Collectively Evaluated for Impai