Oppenheimer Holdings Inc. - Fourth Quarter 2012 Earnings

           Oppenheimer Holdings Inc. - Fourth Quarter 2012 Earnings

PR Newswire

NEW YORK, Feb. 1, 2013

NYSE - OPY

NEW YORK, Feb. 1, 2013 /PRNewswire/ -

Expressed in thousands of                            
dollars,                        Three Months ended            Year ended
except per share amounts           December 31,              December 31,
                                 2012       2011       2012       2011
(unaudited)                                                        
                                                                  
Revenue                       $249,415   $229,438   $952,612   $958,992
Expenses                      $256,550   $227,387   $953,139   $941,144
Profit before income taxes*   $(7,135)     $2,051     $(527)    $17,848
Income tax provision                                          
(benefit)                      $(3,768)     $(1,908)         $324       $5,231
Net profit/(loss)                                             
attributable to Oppenheimer
Holdings Inc.                  $(3,700)       $3,433     $(3,613)      $10,316
                                                                  
Basic earnings per share       $(0.27)      $0.25    $(0.27)      $0.76
Diluted earnings per share     $(0.27)      $0.25    $(0.27)      $0.74
Book value per share at                                       
December 31                      $36.84       $37.16       $36.84       $37.16
Tangible book value per                                       
share at December 31             $24.38       $24.47       $24.38       $24.47
                                                                  
* includes non-controlling                                    
interest                                                                  

                               Business Review

Oppenheimer Holdings Inc. reported a net  loss of $3.7 million or $(0.27)  per 
share for the fourth quarter of 2012 compared to a net profit of $3.4  million 
or $0.25 per  share in  the fourth  quarter of  2011. Revenue  for the  fourth 
quarter of 2012 was  $249.4 million compared to  revenue of $229.4 million  in 
the fourth quarter of 2011, an increase of 8.7%.

The fourth  quarter  of  2012  was significantly  impacted  by  the  following 
matters. On January 31, 2013, a  FINRA arbitration panel rendered a  decision 
in the  previously  disclosed  U.S.  Airways case,  filed  in  February  2009, 
resulting in  an award  against the  Company's subsidiary,  Oppenheimer &  Co. 
Inc., in the amount of $30 million including interest and costs on a claim  of 
approximately $140 million (adjusted down  from $253 million). The effect  of 
the award will result in a fourth quarter after-tax charge of $17.9  million. 
The Company is extremely disappointed with the decision of the panel and  will 
pursue its previously filed arbitration against Deutsche Bank covering many of
the issues in this case in an effort  to recover the amount of the award  plus 
all associated costs of  the case. Oppenheimer  is also currently  considering 
whether to file a motion to vacate the order.

Oppenheimer Holdings Inc., the ultimate parent of Oppenheimer & Co. Inc.,  has 
contributed capital  into Oppenheimer  & Co.  Inc., the  broker-dealer, in  an 
amount equal  to the  net after  tax effect  of the  award. Accordingly,  the 
regulatory capital of Oppenheimer &  Co. Inc. will not  change as a result  of 
the award.

Separately, at the end of 2012, all contingencies expired related to five year
contingent consideration issued as  part of the  Company's acquisition of  the 
U.S. capital  markets division  from  Canadian Imperial  Bank of  Commerce  in 
January 2008. As a result, the Company recorded a non-cash adjustment reducing
occupancy expenses in  the amount  of $6.8  million, on  an after-tax  basis. 
Also, during  the  fourth quarter  of  2012, the  Company  recorded  after-tax 
credits of $1.9 million related to state investment and employment  incentives 
for investments previously made.  The net effect of  these three items was  an 
after-tax charge of $9.2 million for the period.

The fourth  quarter  of 2012  was  also  impacted by  Superstorm  Sandy  which 
occurred on October  29^th causing  the Company  to vacate  its two  principal 
offices in downtown  Manhattan and  displaced 800 of  the Company's  employees 
including  substantially   all  of   its  capital   markets,  operations   and 
headquarters staff for in excess of 30 days. As a result of the  dislocation, 
the Company  received rent  abatement  credits of  $1.7  million for  its  two 
downtown buildings and incurred rent and other costs of approximately $500,000
to accommodate displaced employees.

Net loss for the year ended December 31, 2012 was $3.6 million or $(0.27)  per 
share compared to  net profit of  $10.3 million  or $0.76 per  share in  2011. 
Revenue for the year ended December 31, 2012 was $952.6 million, a decrease of
less than 1% compared to $959.0 million in 2011.

Client assets under administration  totaled approximately $80.3 billion  while 
client assets  under management  in fee-based  programs totaled  approximately 
$20.9  billion  at  December  31,  2012  ($76.0  billion  and  $18.6  billion, 
respectively, at December 31, 2011).

In commenting on the Company's results, Albert Lowenthal, Chairman, said,  "We 
are extremely disappointed with the  outcome of the U.S. Airways  arbitration, 
which has been outstanding for a number  of years. It has been a  significant 
ongoing expense and a major distraction for our Company. The award will  have 
no impact on the regulatory capital  of Oppenheimer & Co. Inc., our  principal 
operating subsidiary, as its holding company  has injected an amount equal  to 
the after-tax effect of the award as additional capital.

As to the most  recent quarter, the significant  uncertainties presented by  a 
challenging  economic  environment,  sovereign  debt  concerns  in  Europe,  a 
national election  and  the U.S.  "fiscal  cliff" affected  financial  markets 
throughout the year and more importantly investor confidence. While the equity
markets turned in a  more than respectable  performance, trading volumes  were 
disappointing as was underwriting activity resulting in lower revenue for  the 
year.

Our business was impacted  by Superstorm Sandy. However,  we will never  know 
the full  impact  on business  due  to the  displacement  of so  many  of  our 
employees.  We  are  extremely  proud  of  their  performance  under   adverse 
conditions and  pleased  that there  were  no  issues around  our  ability  to 
continue to service our clients in unaffected regions throughout the period.

We were pleased  with the  performance of our  fee-based businesses  including 
Oppenheimer  Asset  Management   and  Oppenheimer   Multifamily  Housing   and 
Healthcare Finance, Inc.,  both of which  produced record revenue  as did  our 
fixed income business, both taxable and non-taxable. These strong sectors were
not sufficient, however,  to offset the  headwinds of low  trading volumes  in 
equities and low transaction volumes in investment banking.

We have seen an  upturn in the  Company's business in the  first few weeks  of 
2013 and are optimistic about our business going forward."

Highlights of the  Company's results  for the  three and  twelve months  ended 
December 31, 2012 follow:

Revenue and Expenses

Revenue - Fourth Quarter 2012

  *Commission revenue was $118.4 million in the fourth quarter of 2012, an
    increase of 6.3%  compared to $111.3 million in the fourth quarter of
    2011, reflecting stronger markets in the fourth quarter of 2012 compared
    to the same period in 2011.
  *Principal transactions revenue was $13.9 million in the fourth quarter of
    2012, a decrease of 7.9% compared to $15.1 million in the fourth quarter
    of 2011. An increase of $2.4 million in municipal trading income in the
    fourth quarter of 2012 was more than offset by the negative effect in the
    valuation adjustment for auction rate securities owned and committed to
    purchase from clients of $2.5 million as well as decreases in equity
    trading, government and agency trading, repurchase agreements and declines
    in the value of the Company's investments compared to the same period in
    2011.
  *Interest revenue was $15.2 million in the fourth quarter of 2012, an
    increase of 15.3% compared to $13.2 million in the fourth quarter of 2011
    stemming from a $1.8 million increase in interest from U.S. government and
    agencies and reverse repurchase agreements in the fourth quarter of 2012
    compared to the same period in 2011.
  *Investment banking revenue was $22.8 million in the fourth quarter of
    2012, a decrease of 18.0% compared to $27.8 million in the fourth quarter
    of 2011 primarily due to a decrease of $11.6 million in revenue from
    corporate finance advisory fees partially offset by an increase in revenue
    from equity issuances of $4.6 million in the fourth quarter of 2012
    compared to the same period in 2011.
  *Advisory fees were $65.9  million in the fourth quarter of 2012, an
    increase of 37.7% compared to $47.9 million in the fourth quarter of 2011.
    Asset management fees increased by $8.0 million in the fourth quarter of
    2012 compared to the same period in 2011 as a result of an increase in the
    value of assets under management. Asset management fees are calculated
    based on client assets under management at the end of the prior quarter
    which totaled $21.1 billion at September 30, 2012 ($17.7 billion at
    September 30, 2011). Incentive fee income from the Company's general
    partner participation in hedge funds increased by $10.0 million in the
    fourth quarter of 2012 compared to the same period in 2011. Incentive fee
    income is based on the period-end mark-to-market value of the funds.
  *Other revenue was $13.1 million in the fourth quarter of 2012, a decrease
    of 6.6% compared to $14.1 million in the fourth quarter of 2011 primarily
    as a result of a decrease in the fair value of $1.4 million related to
    Company-owned life insurance policies underlying the deferred compensation
    plans in the fourth quarter of 2012 compared to the same period in 2011.

Revenue - Year-to-date 2012

  *Commission revenue was $469.9 million in the year ended December 31, 2012,
    a decrease of 4.5% compared to $492.2 million in 2011 due to a lower
    volume of business in year ended December 31, 2012 compared to 2011.
  *Principal transactions revenue was $54.3 million in the year ended
    December 31, 2012, an increase of 14.0% compared to $47.7 million in 2011.
    Revenue from equities, corporate bonds, agencies and municipals trading as
    well as an increase in the value of the Company's investments added $17.4
    million in the year ended December 31, 2012 compared to 2011. These gains
    were offset by decreases of $9.6 million in U.S. government and agencies
    trading and repurchase agreements as well as the negative effect of the
    valuation adjustment for auction rate securities owned and committed to
    purchase from clients of $3.1 million.
  *Interest revenue was $57.7 million in the year ended December 31, 2012, an
    increase of 1.6% compared to $56.8 million in 2011. The increase is
    primarily attributable to an increase of $4.8 million increase in interest
    from higher holdings of U.S. government and agencies and reverse
    repurchase agreements in the year ended December 31, 2012 compared to
    2011. This increase was partially offset by a decrease of $3.2 million in
    margin and other interest income.
  *Investment banking revenue was $89.5 million in the year ended December
    31, 2012, a decrease of 24.9% compared to $119.2 million in 2011 primarily
    due a decrease of $28.1 million in revenue from corporate finance advisory
    fees as well as a decrease in revenue from equity issuances of $2.9
    million in 2012 compared to the same period in 2011.
  *Advisory fees were $222.7  million in the year ended December 31, 2012, an
    increase of 13.0% compared to $197.1 million in 2011. Asset management
    fees increased by $17.3 million for the year ended December 31, 2012
    compared to 2011 as a result of an increase in the value of assets under
    management during the year. Incentive fee income increased by $8.3 million
    in the year ended December 31, 2012 compared to 2011.
  *Other revenue was $58.6 million in the year ended December 31, 2012, an
    increase of 27.2% compared to $46.0 million in 2011 primarily due to an
    increase of $5.5 million in the fair value of our Company-owned life
    insurance policies that support our deferred compensation plans. In
    addition, fees generated by Oppenheimer Multifamily Housing & Healthcare
    Finance, Inc. increased $7.1 million in the year ended December 31, 2012
    compared to 2011.

Expenses - Fourth Quarter 2012

  *Compensation and related expenses were $164.9 million in the fourth
    quarter of 2012, an increase of 12.2% compared to $147.0 million in the
    fourth quarter of 2011 primarily due to increased production-related
    compensation on commissionable business and incentive compensation.
  *Clearing and exchange fees were $5.7 million in the fourth quarter of
    2012, a decreased of 2.7% compared to $5.9 million in the same period of
    2011.
  *Communications and technology expenses were $16.0 million in the fourth
    quarter of 2012, an increase of 3.1% compared to $15.5 million in the
    fourth quarter of 2011 due primarily to an increase in information
    technology-related expenses in the fourth quarter of 2012 compared to the
    same quarter of 2011.
  *Occupancy and equipment costs were $3.5 million in the fourth quarter of
    2012, a decrease of 82.7% compared to $20.5 million in the fourth quarter
    of 2011. As discussed above, during the period, all contingencies expired
    at the end of 2012 related to five year contingent consideration issued as
    part of the Company's acquisition of the U.S. capital markets division
    from Canadian Imperial Bank of Commerce in January 2008. As a result, the
    Company recorded a non-cash adjustment reducing occupancy expenses in the
    amount of $11.3 million. The decrease was also due to overlapping rent
    expense and write-offs of $2.4 million related to the move of our
    corporate headquarters in the fourth quarter of 2011 which were not
    applicable in the fourth quarter of 2012. Further, the fourth quarter of
    2011 included $2.1 million in amortization relating to the below-market
    lease which was not applicable in the fourth quarter of 2012. In
    addition, as described above, Superstorm Sandy had an impact on the
    Company's operations in New York City. The Company received rent abatement
    credits of $1.7 million for its two downtown buildings and incurred rent
    and other costs of approximately $500,000 to accommodate displaced
    employees.
  *Interest expense was $9.2 million in the fourth quarter of 2012, a
    decrease of 1.4% compared to $9.4 million in the fourth quarter of 2011.
  *Other expenses were $57.2 million in the fourth quarter of 2012, an
    increase of 95.7% compared to $29.2 million in the fourth quarter of 2011
    due to the outcome of the U.S. Airways arbitration as discussed above.
  *During the three month period ended December 31, 2012 the Company recorded
    tax credits of $1.9 million (net of Federal taxes) related to state
    investment and employment incentives for investments previously made.

Expenses - Year-to-date 2012

  *Compensation and related expenses were $626.4 million in the year ended
    December 31, 2012, essentially flat compared to $626.8 million in 2011.
  *Clearing and exchange fees were $23.8 million in the year ended December
    31, 2012, a decrease of 5.0% compared to $25.0 million in 2011 primarily
    stemming from a $1.3 million decrease in floor brokerage fees in the year
    ended December 31, 2012 compared to 2011. This decrease relates to the
    decrease in commission business described above.
  *Communications and technology expenses were $63.4 million for the year
    ended December 31, 2012, an increase of 1.1% compared to $62.7 million in
    2011 due primarily to an increase in information technology-related
    expenses in the year ended December 31, 2012 compared to 2011.
  *Occupancy and equipment costs were $62.8 million for the year ended
    December 31, 2012, a decrease of 17.9% compared to $76.5 million in 2011.
     At the end of 2012, all contingencies expired related to five year
    contingent consideration issued as part of the Company's acquisition of
    the U.S. capital markets division from Canadian Imperial Bank of Commerce
    in January 2008. As a result, the Company recorded a non-cash adjustment
    reducing occupancy expenses in the amount of $11.3 million.
  *Interest expense was $35.1 million in the year ended December 31, 2012, a
    decrease of 7.7% compared to $38.0 million in 2011 primarily due to
    decreased interest expenses incurred on repurchase agreements held by the
    government trading desk for the year ended December 31, 2012 compared to
    that of 2011.
  *Other expenses were $141.7 million for the year ended December 31, 2012,
    an increase of 26.3% compared to $112.2 million in 2011 due to the outcome
    of the U.S. Airways arbitration as discussed above.
  *During the three months ended June 30, 2012, the Company recorded
    adjustments of $1.3 million, net of taxes, related to the prior periods to
    establish additional reserves for taxes and adjust related interest.
    During the three month period ended December 31, 2012 the Company recorded
    tax credits of $1.9 million (net of Federal taxes) related to state
    investment and employment incentives for investments previously made.

                             Stockholders' Equity

  *At December 31, 2012, total equity was $505.6 million  compared to $513.4
    million  at December 31, 2011.
  *At December 31, 2012, book value per share was $36.84 (compared to $37.16
    at December 31, 2011) and tangible book value per share was $24.38
    (compared to $24.47 at December 31, 2011).

                                                                                     
                              OPPENHEIMER HOLDINGS INC.
                     SUMMARY STATEMENT OF OPERATIONS (UNAUDITED)
                                                                         
$ in thousands,                                                         
except share
and
per share
amounts                                                                        
                      Three Months Ended                     Year Ended
                12/31/12    12/31/11     % Δ     12/31/12    12/31/11     % Δ
REVENUE                                                                   
Commissions       $118,378    $111,316     6.3%    $469,865    $492,228    -4.5%
Principal                                                               
transactions,
net                 13,924       15,123     -7.9%       54,311       47,660     14.0%
Interest            15,200      13,180    15.3%      57,662      56,779     1.6%
Investment                                                              
banking             22,830       27,845    -18.0%       89,477      119,202    -24.9%
Advisory fees       65,936      47,897    37.7%     222,732     197,097    13.0%
Other               13,147      14,077    -6.6%      58,565      46,026    27.2%
                  249,415     229,438     8.7%     952,612     958,992    -0.7%
EXPENSES                                                                  
Compensation                                                            
and related
expenses           164,895      146,965     12.2%      626,411      626,767     -0.1%
Clearing and                                                            
exchange fees        5,704        5,864     -2.7%       23,750       24,991     -5.0%
Communications                                                          
& technology        16,013       15,527      3.1%       63,359       62,673      1.1%
Occupancy &                                                             
equipment costs      3,539       20,462    -82.7%       62,818       76,509    -17.9%
Interest             9,222       9,353    -1.4%      35,086      38,026    -7.7%
Other               57,177      29,216    95.7%     141,715     112,178    26.3%
                  256,550     227,387    12.8%     953,139     941,144     1.3%
                                                                         
Profit/(loss)                                                           
before income
taxes              (7,135)        2,051   -447.9%        (527)       17,848   -103.0%
                                                                         
Income tax                                                              
provision
(benefit)          (3,768)      (1,908)       n/a          324        5,231    -93.8%
                                                                         
Net                                                                     
profit/(loss)
for the period     (3,367)        3,959   -185.0%        (851)       12,617   -106.7%
Net profit                                                              
attributable to
non-controlling
interest, net
of tax                 333          526    -36.7%        2,762        2,301     20.0%
Net                                                                     
profit/(loss)
attributable to
Oppenheimer
Holdings Inc.     $(3,700)       $3,433   -207.8%     $(3,613)      $10,316   -135.0%
                                                                         
Profit/(loss)                                                           
per share
attributable to
Oppenheimer
Holdings Inc.                                                                  
Basic              $(0.27)       $0.25             $(0.27)       $0.76        
Diluted            $(0.27)       $0.25             $(0.27)       $0.74        
                                                                         
Weighted avg.                                                           
shares
outstanding     13,611,271   13,671,917            13,602,205   13,638,087         
Actual shares                                                           
outstanding     13,607,998   13,671,945            13,607,998   13,671,945         

                             Company Information

Oppenheimer, through its  principal subsidiaries,  Oppenheimer &  Co. Inc.  (a 
U.S. broker-dealer) and Oppenheimer Asset Management Inc., offers a wide range
of investment banking, securities, investment management and wealth management
services from 94 offices  in 26 states and  through local broker-dealers in  4 
foreign jurisdictions.  Oppenheimer employs  over 3,400  people. The  Company 
offers trust and estate services through Oppenheimer Trust Company. OPY Credit
Corp. offers  syndication  as  well  as trading  of  issued  corporate  loans. 
Oppenheimer Multifamily  Housing  & Healthcare  Finance,  Inc. is  engaged  in 
mortgage brokerage and  servicing. In addition,  through Freedom  Investments, 
Inc. and  the  BUYandHOLD  division  of  Freedom,  Oppenheimer  offers  online 
discount brokerage and dollar-based investing services.

                          Forward-Looking Statements

This press release includes  certain "forward-looking statements" relating  to 
anticipated future performance. For  a discussion of  the factors that  could 
cause future performance to be  different than anticipated, reference is  made 
to Factors Affecting "Forward-Looking Statements"  and Part 1A - Risk  Factors 
in Oppenheimer's Annual Report  on Form 10-K for  the year ended December  31, 
2011.

SOURCE Oppenheimer Holdings Inc.

Contact:

A.G. Lowenthal 212 668-8000 or E.K. Roberts 416 322-1515