Good afternoon. My name is Heidi, and I will be your conference operator today. At this time, I'd like to welcome everyone to the First Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. It is now my pleasure to turn the call over to Mr. James Zemlayak, CFO. You may begin your conference, sir.

Thank you, Heidi. Good afternoon. I'm Jim Zemlyak, CFO of Stifel. I would like to welcome everyone to our conference call today to discuss our first quarter 2017 financial results. Please note that this conference call is being recorded. If you would like a copy of today's presentation, you may download slides from our website at stifel.com. Before we begin today's call, I would like to remind listeners that this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not statements of facts or guarantees of performance. They may include statements regarding, amongst other things, our ability to successfully integrate acquired companies or branch offices and financial advisors; general, economic, political, regulatory and market conditions; the investment banking and brokerage industries; our objectives and results; and they may include our beliefs regarding the effects of various regulatory matters, legal proceedings, management expectations, our liquidity and funding sources, counterparty credit risks, or other similar matters. As such, they are subject to risks, uncertainties and other factors that may cause actual future results to differ materially from those discussed in the statements. To supplement our financial statements presented in accordance with GAAP, we may use certain non-GAAP measures of financial performance and liquidity. These non-GAAP measures should only be considered together with the company's GAAP results. To the extent we discuss non-GAAP measures, the reconciliation to GAAP is available on our website at stifel.com. And finally, for a discussion of risks and uncertainties in our business, please see the business factors affecting the company and the financial services industry in the company's Annual Report on Form 10-K and MD&A of results on the company's quarterly reports on Form 10-Q. I will now turn the call over to our Chairman and CEO, Ron Kruszewski.

Thanks, Jim. Good afternoon to everyone and thank you for taking the time to listen to our first quarter 2017 results. This afternoon, we issued a press release on our first quarter results. We also posted a slide deck on our website, and I'll be referring to slides as is our custom on this call. So with that, look, I'm pleased with our results. Stifel generated a second consecutive quarter of record net revenue, and non-GAAP pre-tax margins came in just under 15%, which is the highest level since the fourth quarter of 2014. Our continued growth on both the top and bottom line is a testament to Stifel's diversified business strategy as well as our efforts to improve our expense (03:22) efficiencies. In the first quarter, our net revenue was driven by record results in our Global Wealth Management segment that was due to further increases in fee-based revenue and improved net interest income at Stifel Bank. The growth in these recurring revenue streams over the past year-and-a-half has helped to offset the volatility in our more transaction-driven institutional businesses. In terms of expense discipline, we continue to make progress in our cost reduction initiatives as the first quarter represented the lowest non-comp ratio at the firm in 11 quarters. Looking at our first quarter results, you can see from the table on the slide that our total net revenue was a record $676 million, as I said, driven by Global Wealth Management. Our Bank continues to be a driver of a lot of this growth as net interest margin rebounded as expected from last quarter subdued levels to 256 basis points. And that does not include, what I think – what I know is the impact of the March rate increase. For the quarter, our GAAP EPS was…

Certainly. Your first question comes from the line of Steven Chubak with Nomura Instinet. Steven, your line is now open.

Hey. Good afternoon, Ron.

Steven, how are you?

Good. Thanks. So just want to kick off, I've had a couple of questions from folks that have just come in, just trying to clarify some of the guidance that you'd given around NII. So you did note that you should see a comparable benefit next quarter from the March rate hike. And I was hoping you can give some insight into whether that's in terms of NIM expansion or NII uplift? If you can just give more specifics around how we should think about that benefit, that'd be helpful.

I think I said that the – that – you would – a couple things happened and there's a lag effect here, okay? I mean, we – you do get some immediate fee when you have a rate increase, but assets take a while to reprice, okay? You also have a lag effect on deposit. So I think what I've said is that you'd see a similar impact in the second quarter as we saw in the first and if I would give you a number, I would say 10 basis points to 12 basis points.

Okay. Got it. And in terms of the benefit that you saw from, on some of the off balance sheet cash and the asset management fee line. Since you had really strong growth in fee-based assets, I'm just trying to parse how much of the benefit we saw this quarter was from higher rate on cash balances or off balance sheet cash versus the benefit from stronger fee-based conversions that you guys continue to see?

Yes, well, look, it was – part of that is – the answer is, it's about equally split, just so if you're trying to model it, if I could say, part of it, our asset fees have a full, our (31:03) deposit fee income plus our asset management fees. So about 50-50, to answer your question directly.

Perfect. And just one more from me. I was hoping you could speak to some of the secular headwinds you alluded to for the equities business. What factors are at least most concerning to you? And any thoughts you can provide on MiFID II, which continues to garner more attention?

Well, we were talking – I was in a meeting earlier, Steven, and the secular headwinds and the equity brokerage business I think is celebrating its 40th anniversary (31:46) May Day and it's a continual. We've always buy and that sort of bailed us out. I'm not prepared really to talk about MiFID. I understand where it is. It's European, it impacts the global firm. A lot of questions about how it impacts 40 Act and a number of things. So I don't expect it to be a net positive, I can say that, but I don't know that I can really quantify it for you. I do believe that the trend, which has just been continuing toward paths of investing, at some point will – that pendulum will swing back. We'll see, I've said that consistently. I think I put it in the annual report, maybe we could be the last active investor in a passive world, which would be interesting. But I think that right now there are clearly secular headwinds to that business.

Fair enough, Ron. I appreciate the color. And thanks for taking my questions.

Yeah.

Your next question comes from the line of Devin Ryan with JMP Securities. Devin, your line is now open.

Devin Ryan. Thanks.

Changed your name? Did you change your name (33:05)?

Actually, it's a nice name. So a couple of quick ones here. So I guess, first, financial advisor headcounts stepped up. I suspect that's from City Financial, but I'm just curious, it seems like we've kind of been flat-lining a little bit in kind of maybe the core financial advisor work force, I know that's a little bit of an industry dynamic, but I'm just curious how focused you are right now on growing financial advisors in this backdrop? Is it a high priority? Or is there maybe some reason that I'm not seeing that you'd be less interested like competitive dynamics or just waiting for DOL to get resolved?

Look, it's a combination of a lot of those things, okay. And we're always, every day, trying to bring people that believe in our business model and believe in our culture and the way we do things. Those people, we're trying to bring in every single day. There have been a number of trends. The DOL has had two impacts. One is, it does create some questions about even, frankly, the legality of the structure of some of the recruiting deals. That's caused some pause. But on the other hand, it's also caused, well, I would say frankly an uptick in just retirement, in people that have looked at how they've done business and can you just conform with this and so a lot of people have just said, you know, I was going to retire anyway, I just think they've accelerated it. So we're seeing a combination of that. I would say that it's never a numbers game for us. We don't have a target to hire X number of people, we don't have a budget to say we're going to have this kind of money at recruiting. We believe that we're going to continue to recruit. I think when DOL does get results here, one way or the other, it will change the environment. At least for us, it'll be a more conducive recruiting environment, once that uncertainty gets off the table. We don't – there's a lot of questions about that, at least to me.

Okay. That's great color. Thank you. And then GWM commissions principal transactions, obviously, a nice step-up this quarter. I'm not sure if you look at it like this, but can you give us any sense of how much of that increase was driven by just higher billings on trailing commissions, just with the higher markets versus how much was seeming, maybe more or a better retail investor engagement, or customer engagement and then, if any was City Financial?

Well, look, first of all, asset-based fees don't fall in those line items, okay. So asset-based fees fall in assets and servicing side (36:11), so I would say that the commission in principal transaction, which is primarily our transactional business in equities and fixed income is a result of higher engagement. We've seen a pickup in that business in our Barclays, they've gotten more acclimated to Stifel. They certainly have improved numbers over a year ago, when they were kind of just with the firm for the first quarter. And City Securities was not a big impact on that. We just closed on that and that's in the early stages of acclimation. So it really, probably, is a little bit of a productivity and engagement is what I would say is the reason for that.

Okay. Okay. Great. And last quick one here, just on the FICC commentary that was for fixed income brokerage. I mean, what's the biggest driver of just the maybe more subdued activity? Is it tax uncertainty, or the yield curve? I'm just trying to think about it before thinking for what could make it change and maybe break back up to something that's a little bit more active, what might that be?

Well, I – first of all, in our business it's a growth area for us and we're focused on increasing our debt underwriting capability, all right. And that is something that we believe we can have strong growth in and that adds benefits across that business, just as equity underwriting and businesses has benefited from (37:51) equity brokerage. So we're in the early stages of fixed income on the taxable side and that will help. But I would really say that I – we really were looking at a very, very strong quarter in the first quarter of last year, as I said in my remarks that in these market conditions, which is a flattening of the yield curve a little bit, the depository which is a big part of our business in the rates business is a little – it's more subdued and – in this environment. So some color on tax policy that never – that uncertainty, that's helped (38:34) the tax-free business. So I think as we get some of these policy and tax reform, this infrastructure, is it going to be public, private, a form of that. What's it going to be? A lot of questions out there. I think we're well-positioned for that right now. But as I said, in this current environment, I would encourage you to look at our results, which I'm very pleased with, to look at our results of the last few quarters as you try to think about where we are going forward.

Okay. All right. Terrific. Thanks, Ron.

Yeah.

Your next question comes from the line of Christian Bolu with Credit Suisse. Christian, your line is now open. Christian Bolu - Credit Suisse Securities (USA) LLC: Good afternoon, Ron.

Hey, Christian. Christian Bolu - Credit Suisse Securities (USA) LLC: Hey. Apologies for the nitty question here, but following-up on Steven's earlier question, is it possible just to break out of the $163 million in asset management fees, how much of that came from kind of cash balances fees on that? And what kind of yields are you getting on that?

I think that, probably, depending on how we can do this under (39:48) and all of that, we'll try to get these numbers out. I'm not prepared today to sit there, and I would want to think about there's average impacts on this and there are things that have happened, we did two rates increases. So I didn't deduct your question a little bit here and that I'd like to, now that I've gotten it twice, we'll try to provide a little more color on what is flowing through that, because it is primarily our – many of the discounters, that's where they are – or people that don't have banks, the increase in rates is flowing through that line item. For us, it's also true, but less so, as we continue to grow the Bank, because it'll sweep those deposits into the Bank. But all that said, Christian, I think that I would prefer not to just wing some numbers at you. And I want to look at the average balance here, okay? Christian Bolu - Credit Suisse Securities (USA) LLC: (40:42).

The average... Christian Bolu - Credit Suisse Securities (USA) LLC: Yeah. (40:43) just for modeling purposes for us.

Yeah, okay. Christian Bolu - Credit Suisse Securities (USA) LLC: And then just on this $7 million you mentioned that was a benefit from the December hike, I believe you said there was still some left to come in the second quarter, so how much is left from the December hike?

So, I think it's all – I didn't give you a number. Our asset side reprices overtime, okay? It doesn't immediately reprice on the asset side. So I think I gave 10 basis points to 12 basis points. I think I would focus on that right now, as what the impact on the second quarter and then we'll get a little bit more color. More often, I tend to be cautious about this, because the dynamics around the NII, the dynamics around the – what deposit rate path through (41:43) is. There's a number of things here, but I think I'm going to comment a little bit more clarity, as we normalize a little bit higher in rates. I would caution all of our shareholders, I might personally believe that the equilibrium interest rate, which is where everyone is trying to get to, a lot of people think it's 3% to 4%, I personally think it's 1.5% (42:07), but I don't know how much further we have to go on this. And I think we'll see some normalization of pass-through rates to clients and kind of (42:19) balance sheet. Christian Bolu - Credit Suisse Securities (USA) LLC: Okay. Got it. And then, maybe just on the comp ratio, given most of the growth is now coming from your higher margin Wealth Management businesses, should we expect the full year comp ratio to trend towards the lower end of that 60.5% to 62.5% guidance range?

A lot of the growth – as I've said in the past, a lot of the growth, the higher, if you will, margin business is actually in the Bank at net interest income. To answer your question, we changed our guidance from 62% to 64% to 60.5% to 62.5%, and we're at the high end of that range right now. So, I think it's fair to think that we might – there's more room to the downside than there is to the upside, but so much of this, Christian, is market dependent. And we want to make sure that in times like this that we retain the optionality for business improvement. And that means that we just not (43:32) – we don't want to be cutting comp and cut our business capabilities when I believe that there's still high optionality to business improvement if we get tax reform, if we get infrastructure reform, and if we get some of these pro-growth things done in Washington, we're well positioned. Frankly today, the promise is greater than the reality, and we want to maintain that. So, our comp ratio, I would think, could come down but I'm not going to give you guidance for that. Christian Bolu - Credit Suisse Securities (USA) LLC: Okay. But just to be clear the guidance range of 60.5% to 62.5% still stands?

Yes, absolutely. Christian Bolu - Credit Suisse Securities (USA) LLC: Okay. And then, just a longer-term one. I know we've had this one back and forth here. But ROE target, just given the integration of your major acquisitions, we've now had three rate hikes, you've grown the balance sheet. Just curious how you're thinking of where long-term ROEs ultimately shake out for Stifel.

Well, it's a great question, Christian. I think, there's two numbers. Our tangible ROE is 14%, which is very competitive. Our ROE is a little under 10%, not where I certainly would want it to be, and there are structural changes that will do that. I will tell you this in a very broad comment, Christian, and that is that we are – as a company, we are relatively more levered to the equity markets. Okay? And the capital raising (45:16) on the institutional side, and some of our recent deals are focused on that, Thomas Weisel Partners, KBW, these were equity-based shops. And as I look at it, the amount of capability that we have in the existing footprint to do a lot more revenue in better market condition will be a big driver to this ROE problem, which I acknowledge. So, we'll continue to focus on ROE, but we needed some – I'm hoping for some – a little bit of tailwind from economic growth. Christian Bolu - Credit Suisse Securities (USA) LLC: Just maybe – just a follow-up on your point about equities. So, as we sit here with, I guess, near record high in most indices above trend on a PE basis, I guess, what sort of equity backdrop would you want to get those equity businesses firing on all cylinders?

I would like to see the uncertainty of potential tax reform taken off the table. I mean, meaning that what is it going to be? How are we going to do? Where are long-term rates going to settle? Are there going to be any border adjustment type things? There are a lot of questions now about pass-through rates versus personal rates. All of these things, the uncertainty especially around tax policy in general is not conducive to robust markets. That's been my experience in the past. Equity levels, you're right, on a PE basis, but (47:05) corporate tax rates to whatever they're talking about, those PE ratios are going to look (47:10) a little different. So that's (47:15), we're levered to the equity markets, we like our position. I believe that GDP growth is not going to average less than 1%, which is what it was in the first quarter, and we're going to try to maintain some of the optionality that we have to improving markets. Christian Bolu - Credit Suisse Securities (USA) LLC: Okay. Really appreciate all the answers, Ron. Thank you.

Your next question comes from the line of Conor Fitzgerald of Goldman Sachs. Conor, your line is now open. Conor Fitzgerald - Goldman Sachs & Co.: Good afternoon. Just want to appreciate the color on the deposit rates, but just wanted to kind of get a little more – dive a little deeper on those comments. Where you talked about trying to be competitive on the deposit rate but not necessarily a leader, when you think about your deposit rates, who do you consider your peer group that you'll try to match?

Well, we're going to keep – we're going to watch the full-service investment firms. Much of our client cash is very mobile. It moves in and out of securities, bonds mature and sit for a while, it's not as if we have $19 billion in cash just sitting there, or $20 billion that gets moves around. And so, our clients aren't with us because they're looking for the highest Internet money market rate, we've never been there, but we'll look at, frankly, the Morgan Stanley's and the Raymond James' and the various firms that are similarly situated to us with clients similar to ours, and we'll be competitive. Conor Fitzgerald - Goldman Sachs & Co.: Thank you. And then, maybe just asking on Christian's question on the comp ratio another way. I think you had almost $60 million of revenue growth year-over-year, the majority of which was net interest income, and compensation expenses were up almost $30 million year-over-year, so you had a marginal comp ratio approaching 50%. Just wondering if that's a fair way to think about the operating leverage from the revenue growth?

Fair question. I think that, as I've said in the past, I think there is leverage potentially in those numbers, but also in some of those numbers is us preserving optionality in our businesses. Conor Fitzgerald - Goldman Sachs & Co.: All right. Thanks for taking the questions.

Your next question comes from the line of Chris Harris with Wells Fargo. Chris, your line is now open.

Thanks. Another question on the expenses. Non-comp, you guys did better than you thought this quarter. Can you talk a little bit about what drove the small surprise there? And then, related to that, you mentioned that you're making progress on some of your cost initiatives. Wondering where you are in the evolution of your kind of expense management focus at this point?

All right. Your second question first. I mean, it's continuous. I don't want to be in a position where we get to decide every few years that we're going to do expense look at (50:31). We have taken a look at a number of our deals and our infrastructure build and where it resides and how it resides across all disciplines of expense: communication to occupancy to client engagement-type things that we're looking to make sure that our expenses are in line with our business expectation. So I think we have a focus. It's been going on for a while. And we're going to continue to focus on that. It was – you see some of the fruits of that this quarter, but I still had our guidance at $1.51 to $1.58. So, if we miss it on the high side, you have to remember at one point I think we had fees on the low side (51:34) but we won't – it's $1.51 to $1.58 is where we think we are, but I don't want to – we're not trying to guide that lower is what I'm trying to say.

Got you, okay. And then, I guess, the other question I had was a sort of a bigger picture question on DOL, Ron. There was a view in some circles that this rule was going to lead to some consolidation among wealth managers in order to achieve a little bit better scale. Hoping you can give us your updated thoughts on that, whether you actually think that view is still valid? And whether you guys are sort of assessing any opportunities or if there are really any opportunities that are presenting themselves to you at this point?

Yeah. I believe that when some of this comes out and when you actually understand, the rule is so complex that I do not – I for one am not in the camp that the potential for the rule will drive consolidation. I do believe that if the rule is implemented as written, it will become effective June 9 with the full implementation date of 01/01 of 2018. But that rule – to comply with that rule will require some scale, and will require investment, will require incremental dollars and will frankly lead to some increased litigation expense, all of which you could argue would tend towards some consolidation. Right. I think that that's true. I don't think that with the specter (53:27) of the rule, if delayed, if not repealed, I think we're going to have to see how that plays out before we start speculating on the consolidating impact of it.

Okay. Helpful. Thank you.

If there are no further questions at this time, I will turn the call back over to Mr. Kruszewski.

Thank you very much, everyone. Thank you. Always appreciate being able to update you. Certainly appreciate the questions. We'll try to follow up with the couple that we did not answer on this call, and I look forward to improved economic conditions and talking to you next quarter. So, thank you and good evening.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.