• D. A. DAVIDSON COMPANIES

    Knowledge to
    Shape the Future

    2019 Annual Report
BEHIND THE THEME

Everything we do at D.A. Davidson starts with a clear purpose: helping others on their path to a brighter future. Whether we are advising a CEO on the sale of her business, readying a couple for their newborn’s eventual college bills or helping a school board finance construction, we are dedicated to preparing our clients for what comes next. And we go further, shaping opportunities into solutions that suit our clients’ hopes, desires, situations and business needs. We combine our intellectual capital with dynamic technology, powerful resources and a distinctly personal touch. These are the characteristics that make D.A. Davidson stand apart — and make us a uniquely strong partner for the future.

LETTER FROM OUR LEADERSHIP

Dear Shareholders, Clients and Associates:

As I reflect on my years with D.A. Davidson, I am particularly proud of this time, as our company stands on the brink of its 85th year in business. While we are a company that rarely looks backward — preferring to focus on our future — an anniversary of this magnitude is exceptional in the business world. In considering both where we have been and the opportunities that lie before us, I believe we at D.A. Davidson have barely scratched the surface of possibilities. Our firm is uniquely positioned to continue its history of long-term business success while guiding our clients to shape their own, personal financial successes.

We begin 2020 with a foundation of significant investments in each of our business units and in leadership, reinforcing the work we complete together. In 2019, we expanded into new markets, grew within existing markets and continued to accelerate investments in two of our most important assets — our professionals and our technology. The Wealth Management group benefited from a major platform investment, which enhanced the technological tools that our financial advisors use to assist our clients. Our Wealth Management team ended the year with solid recruiting success, allowing that group to post record revenues once again. Similarly, our Trust team completed an exceptional year by adding two Midwest offices, growing its private trust presence and delivering record revenues and profits.

Our Equity Capital Markets group also added to its talent pool, bringing on professionals in offices from coast to coast and particularly expanding the group’s footprint along the East Coast. While our Fixed Income group grew through significant new hires, the team additionally acquired Wells Nelson & Associates, a public finance and wealth management firm, to extend D.A. Davidson’s fixed income presence across Oklahoma and Texas.

In the spring, we welcomed Marc Dispense, who serves as our new President of Fixed Income Capital Markets. We thank Sam Doyle, the team’s longtime previous President, for his work on ensuring a smooth transition, and we look forward to Marc’s leadership as he continues Sam’s legacy of vision, strategy and passion for the business.

One of my favorite aspects of the past year has been a less tangible advancement: more widespread recognition of our firm and strengthening of its reputation. You may have seen or heard D.A. Davidson’s experts on your favorite broadcast network, in a print publication or on a podcast. Our professionals are now solidly among our industry’s most sought-after commentators and thought leaders, appearing in nationally recognized media outlets every week to discuss topics ranging from market fluctuations to personal finance and from investing ideas to global economics.

As we look to 2020, I want to thank Tom Nelson, our firm’s longtime Chief Financial Officer, as he plans for his upcoming retirement. Tom’s contributions to our firm have been exceptional. And we are pleased with the transition of his role to Scott Witeby, whose analytical skills and broad understanding of our industry make him an ideal CFO during this important period for our company.

The whole of our leadership team, and deep bench of talent across D.A. Davidson, will be the driving force behind our firm’s future successes. Our associates are responsible not only for ensuring that our firm pursues its strategy and focus but also for doing so with our clients as our top priority. D.A. Davidson operates in a deeply personal space, helping clients to navigate the intersection between their own lives and finances and, for some, their businesses. We have the opportunity and obligation to help our clients understand that relationship as we help them create their own bright futures.

I recognize that the coming years are likely to bring an increase in market volatility, political strife and global changes. My pledge to each of you is that we will navigate these challenges with the same attention to doing what is right that has allowed D.A. Davidson to reach its 85th year. As an employee-owned firm, we are able to continue approaching our work with the same long-term view that has brought us this far and that provides the best dividends for our clients.

In closing, I would like to express my deep appreciation and gratitude for our leadership team and employees. I am thankful every day for their capabilities, character and passion for their work, which represent the foundation of our firm’s future.

JAMES P. KERR
Chairman and Chief Executive Officer

2019: CONTINUED GROWTH

D.A. Davidson & Companies

$527.1 M
2019 Total Assets

$263.7 M
2019 Shareholders’ Equity

$482.4 M
2019 Net Revenue

$51.7 B
2019 Assets Under Administration
1,400
2019 D.A. Davidson Associates
2018: 1,370; 2017: 1,343
97
2019 Office Locations
2018: 92; 2017: 91

D.A. Davidson & Co.

Asset Management and Trust

BUSINESS UNITS

Wealth Management

Growing Presence, Growing Resources

D.A. Davidson Wealth Management offers individually tailored solutions, delivered with personalized service, to help clients nationwide build, protect and pass on wealth for generations.

  • Our Wealth Management group expanded into five new markets spanning the United States with the addition of a number of individual advisors, teams and offices.
  • We hired key professionals, significantly within our Advisor Solutions Team, to enhance our support network.
  • As part of our continued investment in smart technology, we converted to a sophisticated new platform to provide our advisors with expanded capabilities and access to best-in-class industry technology.
  • The Wealth Management group ended the year with record revenues and assets under administration.

Asset Management and Trust

Growing Wealth and Expanding Relationships for Generations

Our Asset Management and Trust group helps clients work toward financial goals today while shaping legacies for the future, through a combination of investment management, personal trust and retirement services.

  • D.A. Davidson Trust established two Midwest trust offices in 2019, expanding the firm’s footprint to offer its full fiduciary powers to clients across the region.
  • We increased our emphasis on the important area of special needs trusts in order to provide the critical, specialized guidance that families need as they plan for the long-term care of loved ones.
  • Our asset management firm, Davidson Investment Advisors, built upon its expertise with the addition of new professionals.
  • The Asset Management and Trust group completed the year with record pre-tax profits and the highest profit margin of our business units, helping to strengthen D.A. Davidson as a whole.

Equity Capital Markets

Thought Leaders Providing a National Perspective and In-Depth Analysis

Our Equity Capital Markets group unites a suite of equity capital markets services, including research, sales and trading, corporate services, underwriting, and investment banking.

  • Our institutional research analysts were highly visible in 2019 across a broad spectrum of national and international media. From the Financial Times to The Wall Street Journal, reporters sought our professionals’ analysis and perspectives on important sectors and the public companies driving change.
  • A dozen new hires during the year strengthened the intellectual capital of our financial institutions group while broadening our geographic footprint. Our new additions included specialists devoted to deal origination, sales and trading, and large cap bank research coverage.
  • We deepened our expertise in the technology sector, adding tech-focused colleagues to our institutional research, investment banking, and sales and market making teams.
  • 2019 was a breakout year for our diversified industrials and services industry group, which increased its revenue significantly and expanded its work with private equity firms.

Investment Banking

Global Opportunities Facilitated by Local Trusted Partners

D.A. Davidson’s Investment Banking team provides comprehensive investment banking services, from expert advice to execution excellence. Our professionals are passionate about providing senior-level attention, sector insights and customized solutions to enable our clients to achieve their strategic objectives.

  • Our Investment Banking group continued to build our expertise in 2019 by hiring more than 30 professionals, including seven senior bankers with extensive experience.
  • We solidified our team’s position as one of the nation’s most active M&A advisors and equity underwriters in the financial institutions sector. By strengthening our financial institutions and technology franchises, we delivered industry breadth while maintaining the sector depth that best serves our clients.
  • Our financial institutions team extended our geographic footprint by adding veteran investment bankers in the important Southeast region.
  • We received national recognition during the year for our work from the Americas M&A Atlas Awards, including U.S.A. Private Equity Deal of the Year for Small Markets, U.S.A. Deal of the Year for Middle Markets, and Bank & Services M&A Deal of the Year.

Fixed Income
Capital Markets

An Innovative Team Putting Client Service First

Our Fixed Income Capital Markets group provides investors with access to fixed income markets, delivering a range of value-added investment, underwriting, sales and trading services, strategies and insights. We are a national leader in raising capital for our clients.

  • We completed the acquisition of Wells Nelson & Associates, a public finance and wealth management firm with offices in Oklahoma and Texas. The new team strengthens our presence in this important region.
  • The Fixed Income Capital Markets group ended the year with record revenues, led by the work of our public finance team.
  • We continued to grow our taxable platform with the hiring of several key sales and trading professionals whose work advances our thought leadership.
  • Our CD business nearly doubled during the year.
  • We completed a successful transition in pivotal management positions as part of a multi-year growth strategy. Leading the team is Marc Dispense, D.A. Davidson’s new President of Fixed Income Capital Markets.

Visions of the Future

quote

In the complex world of delivering financial advice and services, leadership strength is essential. This intangible characteristic is unique to the few companies that stand the test of time and intrinsic to the professionals who guide such firms. At D.A. Davidson, we begin our firm’s 85th year having hired some of the best and brightest minds whose work will help us take the bold, transformative steps that pave our way for the future. We are proud to present the following sampling of insights from three such executives, each bringing fresh ideas, deep expertise and sharp, strategic thinking to our work on behalf of our clients. We believe D.A. Davidson’s future, and that of our clients, will shine brightly because of the skills, knowledge and passion of these leaders.
— Larry Martinez, President of D.A. Davidson Companies

Creating Clarity for Clients by Providing Thoughtful Advice for Changing Times

Gil Luria, Managing Director, Head of Institutional Research, believes D.A. Davidson’s employee ownership model, long- term strategic outlook and focus on associates’ career development position the firm for continued success

What are your main priorities for 2020?

D.A. Davidson has a unique opportunity to attract and develop a highly productive group of professionals and continue building a strong and enduring business. Recruiting these top-tier professionals as the financial services industry is being disrupted will continue to be our main focus.

Complementing our recruiting efforts will be the retention and development of those who are already part of the team. In particular, we are investing significantly in the career development of our younger colleagues through training and mentorship, with an eye to increasing diversity and engagement.

What excites you the most when you think about the future of D.A. Davidson?

We are building a business the right way. Our strategy balances service excellence, sustainable growth and integrity in a way that allows us to be proud of the business we are building. The best part for me is working with a group of colleagues I respect and learn from every day.

What opportunities do you see in the capital markets and how does that fit with the firm’s overall strategy?

Our clients will always need good advice from experienced, knowledgeable and thoughtful leaders. While our competitors in the capital markets business are distracted by challenging markets, increased regulation and changing priorities, we are focused on our customers and providing that valuable advice. The disruption elsewhere creates numerous opportunities for us to gain additional market share and add the most talented professionals.

What distinguishes D.A. Davidson from its industry peers? How do you plan to build on that?

D.A. Davidson’s differentiation comes from our character as an employee-owned firm. We are not managed to short-term goals by a global financial conglomerate or managed for the benefit of one family or a single proprietor.

We make decisions based on the long-term health of a business we all own. This sense of ownership allows us to stay focused on excellent service without compromising our integrity, a combination that has become increasingly rare among our peers.

D.A. Davidson has a rich history. How does that shape your planning?

Our reputation has been built over decades of providing valuable advice and doing the right thing for our customers.

It is our responsibility to extend that well-deserved reputation to how we conduct ourselves every day. top priority. D.A. Davidson operates in a deeply personal space, helping clients to navigate the intersection between their own lives and finances and, for some, their businesses. We have the opportunity and obligation to help our clients understand that relationship as we help them create their own bright futures.

The sense of stability afforded by our long history is important to our clients — they can be confident we will be around for the long term and will be a worthwhile partner. This stability has been instrumental in our ability to recruit top talent from firms that lack our track record and the commitment we have shown to each of our businesses.

Our longevity and ownership model provide the foundation for another important priority — maintaining and strengthening our ties to our local communities.

From Data Analytics to Efficiency Initiatives, Finance Leads the
Firm into the Future

Scott Witeby, Senior Vice President, Chief Financial Officer, has a vision for 2020 that includes a high-performing finance team, data transformation and building on D.A. Davidson’s client- and community-focused culture.

You’re relatively new to D.A. Davidson. What attracted you to the firm?

One of my former colleagues suggested I come in and meet with (Chairman and CEO) Jim Kerr, (President) Larry Martinez, (President, Davidson Investment Advisors) Andrew Davidson, and the management team. I really enjoyed the meeting and came away feeling like D.A. Davidson was the right cultural fit for me, that I could make a positive and meaningful impact, and that I could be a valuable contributor.

As you look ahead to 2020, what are your main priorities for 2020?

I intend to continue to build out and expand on the capabilities of the Finance department, with an emphasis on:

  • Data analytics and enhanced financial reporting
  • Improving the efficacy of financial controls and governance

  • Finance automation and efficiency initiatives
  • Creating an environment that facilitates sharing of ideas and best practices

What excites you the most when you think about the future of D.A. Davidson?

I am excited about D.A. Davidson’s growth trajectory. We’re a regional financial services firm with roots in Montana and we compete with Wall Street. What an amazing backstory! And I truly believe that our company culture is second to none. Today, D.A. Davidson is a $500 million company on track to become a $750 million company . . . a $1 billion company! It’s really remarkable, and I am passionate about working for a company that is good at what we do, does the right thing and gives back to the community.

What is your leadership philosophy?

Inspire, motivate and bring out the best in my team. Emphasize honesty, trust and integrity. Be authentic, and lead by example. Give 100 percent. Establish credibility and set stretch goals that are challenging but achievable. Have fun and enjoy what we do.

What distinguishes D.A. Davidson from its industry peers? How do you plan to build on that?

People who work at D.A. Davidson have a good understanding of the firm’s strategic priorities, which is a huge differentiator in the industry. We also have a great company culture. I want to help build on that by leading a high-performing Finance team.

What are the top trends in financial services and how will they affect clients?

Digital transformation and artificial intelligence (AI) continue to play an increasing role in the financial services industry, and financial advisors will need to think about how to digitize their business. Clients will look to AI to help calculate investment opportunities, interest rates and loan providers, to enhance security and prevent fraud, and to assist in risk management and lending decisions. As a company, we may look to leverage AI for big data analytics and robotic process automation (i.e., bots) to help our associates complete repetitive and labor-intensive tasks.

As Fixed Income Industry Transforms, D.A. Davidson Capitalizes on
Fresh Opportunities

Marc Dispense, President, Fixed Income Capital Markets, sees 2020 as a year of organic growth, fueled by expansion into new geographic regions, the introduction of new services, and active recruitment of the best talent in the industry.

You’re relatively new to D.A. Davidson. What attracted you to the firm?

The incredible people at D.A. Davidson, coupled with the future growth opportunities, make this a desirable firm for anyone to join. In addition, D.A. Davidson offers a unique culture, made up of a rare combination of competence, professionalism, performance, community involvement and employee ownership.

As you look ahead to 2020, what are your main priorities?

This will be a year of opportunity as we continue to focus on responsible growth. We see opportunity in expanding organically into new geographic regions, as well as growing the taxable sales and trading platform as a percentage of our secondary business.

On the recruiting front, we are connecting with more and more individuals who represent new clients and niches for us and who share D.A. Davidson’s core values.

What excites you the most when you think about the future of D.A. Davidson?

The fixed income platforms across the globe are in transformative times and we are well positioned to capitalize on changes by being nimble and client-focused. Technology, spread compression and increasing regulatory costs are negatively impacting some firms, while also creating opportunities for firms like D.A. Davidson. We have scale to compete with anyone but are small enough to be nimble and remain true to the producers who built our firm and the clients we serve.

What opportunities do you see in fixed income and how does that fit with the firm’s overall strategy?

There are many opportunities in fixed income right now. We see fragmented or smaller fixed income-only firms with good clients and employees struggling to absorb increasing industry costs. These firms, or strong producers within these firms, can add value to our platform by diversifying our cyclical revenue streams or introducing D.A. Davidson into new locations.

Technology continues to be a valuable tool for all firms, providing efficiencies, boosting revenue and improving compliance. Continuous technology improvements, as part of our strategic plan, help make the firm better for clients and associates.

What distinguishes D.A. Davidson from its industry peers? How do you plan to build on that?

A lot of firms will say clients matter the most but that doesn’t always hold up in practice. We truly serve the needs of our clients and communities with a high-quality platform, top-notch people and a genuine commitment to our clients. This strong, ethical base, combined with the advantages of being a private, employee-owned firm, allows us to take a long-term, strategic approach. We continue to invest in organic growth by expanding our services, growing our geographic footprint and recruiting the best people in the industry.

D.A. Davidson has a rich history. How does that shape your planning?

Much of our success today is built upon D.A. Davidson’s history of bringing together strong people and firms over the past decades. This rich history and culture form a strong foundation and continue to guide our strategic planning and evolution as a firm.

Giving Report

We have long believed in the transformative power of working to build a more just and sustainable world. Improving our world starts with ideas. At D.A. Davidson, our associates’ ideas form the foundation of a corporate giving strategy that touches communities across the United States. We believe we can be most effective when we don’t simply throw money at society’s problems. Instead, we dive in more deeply and help create lasting solutions. Our mission is to help others build the future they choose.


We encourage our associates to take leadership roles in civic and charitable organizations. We work on teams to determine the most effective use of our philanthropic dollars. And through our multi-pronged approach to giving, D.A. Davidson is able to do more and leave a larger impact — putting our people and resources to work in tangible ways that connect our corporate values with the needs of our friends, neighbors and communities. Here are a few highlights of how our firm gave back in 2019.

Corporate Giving

Supporting Communities with Values-Driven Philanthropy

Each year we dedicate a significant portion of our company’s pre-tax profits to assist nonprofit organizations and causes that create positive change. Our recently-established regional giving committees work together to determine the appropriate distribution of aid throughout our footprint, amplifying our local impact for those who need assistance most. We also encourage our associates to effect change through their own volunteer work.

Gift Matching Program

Strengthening Our Associates’ Generosity

D.A. Davidson’s gift matching program allows our associates to tap into our firm’s resources. We match associates’ donations of volunteer hours or cash contributions to eligible nonprofit organizations — doubling the impact of their generosity every year. By focusing on the causes that reflect the personal interests and priorities of our colleagues, our firm’s matching contributions create lasting impact and touch a diverse range of charitable organizations and causes. In 2019, our gift matching program provided funds to 376 organizations whose work stretches across the United States, with many of our associates choosing to strengthen their donations to multiple nonprofits.

 

D.A. Davidson Day

Investing Our Time, Improving Our World

We believe that through volunteering, we can change lives one hour at a time. For a week in September, our associates step away from their desks, roll up their sleeves and give of their time and talent to designated nonprofits in their communities. We celebrated our firm’s third annual D.A. Davidson Day by partnering with 90 organizations to provide assistance for those who need it most. Our associates’ handiwork included building houses for low-income families, cooking meals at a soup kitchen, harvesting vegetables from a community garden, gathering and sorting school supplies for underprivileged youth, and organizing clothing for those experiencing homelessness. We met and exceeded our goal of 1,000 participants, who volunteered a total of 3,204 hours. We are proud of our associates’ work ethic and the strength of their efforts to better the world around them.

90
Organizations Partnered With
1000
Volunteers
3204
Hours Worked

Giving by Our Teams

Serving as a Force for Good Throughout the Year

Because the need for assistance doesn’t end when specific campaigns do, our colleagues can be found organizing volunteer events, gathering needed supplies, providing donations and assisting in other ways throughout the year. When the Midwest suffered severe flooding, our Iowa and Nebraska colleagues stepped up to provide major financial gifts. In Los Angeles and Seattle, our associates climbed the stairs of skyscrapers to raise funds for a YMCA and to battle cancer. A group of our Denver professionals cycled miles through the mountains in a fundraiser supporting the Children’s Hospital Colorado Foundation. The list of efforts throughout the year goes on and on — a testament to the spirit of giving that is ingrained in our firm’s culture.

The Start of Our Giving

Headquarters Team Leads in Community Responsibility

When it comes to giving, it may be true that home is where the heart is. Over the years, our corporate headquarters in Great Falls, Montana has served as a major driver of corporate giving initiatives, keeping up a regular drumbeat of deeds that benefit others. Efforts include those that are observed annually (such as serving as the single largest donor to the local United Way) and numerous initiatives supporting specific causes. In 2019, the work of our headquarters colleagues included providing volunteer teams and a sponsorship for Special Olympics Montana’s summer games, raising money, giving holiday gifts to Meals on Wheels recipients, selling raffle tickets to support the local public schools foundation, and gathering funds and groceries to fill a veterans’ food pantry. When it comes to giving, our Great Falls professionals serve as leaders throughout the year.

Student Investment Program

Inspiring a Deeper Understanding of Capital Markets

Our Student Investment Program offers students a truly hands-on education in portfolio management. We provide real money for teams of upper-level college finance students to invest and manage in a portfolio for a full year, with the guidance of a local D.A. Davidson financial advisor. Student teams gain experience in finance, portfolio management, stock research, leadership, teamwork and communications— a preparation framework for careers in financial professions. Besides its educational value, our Student Investment Program provides a tangible reward: Its 21 participating schools get to keep half of any portfolio returns above 5 percent. Over the years, we have donated over $628,000 to participating institutions. James Ragan, Director of Wealth Management Research and the co-director of the program, says it represents a unique opportunity for aspiring financial professionals. The program also offers lessons that are essential to increasing financial literacy for the next generation.

$ 628000
Donated to Participating Institutions Over the Years


MoneyWise

Providing Access to Important Financial Skills

Among our responsibilities at D.A. Davidson is sharing our knowledge about personal finance with the young people who could benefit the most. With that goal in mind, Andrew Crowell, Vice Chairman of Wealth Management, gathered a team that is now the driving force behind MoneyWise, our signature initiative to improve financial literacy among teenagers — those who will soon be responsible for their own financial futures. We began MoneyWise in 2018 when we created a curriculum, established our partnership with the Metropolitan YMCA of Los Angeles and held classes at three Y locations in Southern California. After the program was deemed a success, we expanded it to 13 locations, serving 200 teenagers in 2019. One of Andrew’s favorite moments from the program: seeing a comprehensive budget created by a student who credited the program for her newfound skills. As we consider such successes, we plan to expand MoneyWise to more Ys in 2020.

AWARDS AND HONORS

Celebrating Colleagues Who Make the World Better

Throughout our history, D.A. Davidson has maintained an unwavering commitment to not only make our world better, but to also support our colleagues who give generously of their time, talents and passion.


To inspire the best in all of us, our firm’s most prestigious employee award celebrates one associate annually who performs substantial volunteer work in his or her community. Mark Davis, Senior Vice President, Director of Private Trust Development, received the Bragg Lewis Knutson Community Service Award in 2019. The award recognizes his exceptional work with several causes and initiatives.


We also recognize two associates each year who embody our firm’s core values. The Ian B. Davidson Cultural Excellence Award was given to Jeff Nesset, Senior Vice President, Financial Advisor in Lewiston, Idaho, and Laura Young, Client Associate in Great Falls, Montana. We celebrate these individuals for holding themselves to high standards of ethics and professionalism at work while working tirelessly on behalf of others in their spare time.


We thank each of these colleagues for their contributions and we applaud them for serving as an inspiration to all of us.

2019 Bragg Lewis Knutson Community Service Award

MARK DAVIS
Senior Vice President, Director of Private Trust Development in Seattle

2019 Ian B. Davidson Cultural Excellence Award

JEFF NESSET
Senior Vice President, Financial Advisor in Lewiston, Idaho
LAURA YOUNG
Client Associate in Great Falls, Montana
OUR FOOTPRINT

A World of Opportunity
for Our Clients

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The objective of every D.A. Davidson professional is to bring a world of opportunity to our clients, and we do so from an expanding network of offices stretching across the United States. Together with our European strategic partner, MCF Corporate Finance, D.A. Davidson’s Investment Banking group originates and executes M&A transactions under the common brand of D.A. Davidson MCF International. This allows us to have on-the-ground expertise and strong relationships across Northern Europe. Our footprint ensures we deliver the best solutions to our clients everywhere.

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