Form10vk









 

 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION




Washington, D.C. 20549




FORM 10-K





ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934





For the Fiscal Year Ended December 31, 2010





Commission File No. 001-09305




STIFEL
	FINANCIAL CORP.




(Exact Name of Registrant as specified in its Charter)








     
     
     




    DELAWARE

     
    43-1273600


    (State or Other Jurisdiction of

     
    (IRS Employer Identification No.)


    Incorporation or Organization)
     
     


     
     
     


    501 North Broadway
     
     


    St. Louis, Missouri
     
    63102


    (Address of Principal Executive Offices)

     
    (Zip Code)







(314) 342-2000

(Registrant’s Telephone Number, Including Area Code)




Securities registered pursuant to Section 12(b) of the Act:








     
     
     




     

     
    Name of Each Exchange


    Title of Each Class

     
    On Which Registered


     

     
     


    Common Stock, par value $0.15 per share

     
    The New York Stock Exchange


     
     
    Chicago Stock Exchange


    Preferred Stock Purchase Rights

     
    The New York Stock Exchange



     
     
    Chicago Stock Exchange







Securities registered pursuant to Section 12(g) of the Act: None




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes þ
	No o




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act. Yes o No þ




Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ No o




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
	
Indicate by check mark whether the registrant has submitted
	electronically and posted on its corporate Web site, if any, every
	Interactive Data File required to be submitted and posted pursuant to
	Rule 405 of Regulation S-T during the preceding 12 months (or for such
	shorter period that the registrant was required to submit and post such
	files). Yes o No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.










     
     
     
     
     
     
     




    Large accelerated filer þ

     
    Accelerated filer o

     
    Non-accelerated filer o

     
    Smaller reporting company o


     

     
     
     
    (Do not check if a smaller reporting company)
     
     








Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ






The aggregate market value of the registrant's common stock, $0.15 par value per
share, held by non-affiliates of the registrant as of the close of business on
June 30, 2010, was $1,452,102,019.(1)  



The number of shares outstanding of the
registrant's common stock, $0.15 par value per share, as of the close of
business on February 23, 2011, was 35,912,912,
which includes exchangeable shares of TWP Acquisition Company (Canada), Inc., a
wholly owned subsidiary of the registrant.
These shares are exchangeable at any time into an aggregate of 281,720 shares of
common stock of the registrant; entitle the holder to dividend and other rights
substantially economically equivalent to those of a share of common stock; and,
through a voting trust, entitle the holder to a vote on matters presented to
common shareholders.



(1)   In determining this amount, the registrant assumed that the executive
officers of the registrant and the registrant's directors are affiliates of the
registrant. Such assumptions shall not be deemed to be conclusive for any other
purposes.  




DOCUMENTS INCORPORATED BY REFERENCE






	Portions of the Proxy Statement for the annual meeting of shareholders, to
	be filed within 120 days of our fiscal year ended December 31, 2010, are
	incorporated by reference in Part III hereof.




 


 





 





 







STIFEL FINANCIAL CORP.




TABLE OF CONTENTS


	
		
		

		 
		
		

		 
		
		

		 
		
		 
	
	
		
		


		Part I
		
		

		 
		
		

		 
		
		 
	
	
		
		

		 
		
		


		Item 1.
		
		

		Business
		
		4
	
	
		
		

		 
		
		


		Item 1A.
		
		

		Risk Factors
		
		15
	
	
		
		

		 
		
		


		Item 1B.
		
		

		Unresolved Staff Comments
		
		23
	
	
		
		

		 
		
		


		Item 2.
		
		

		Properties
		
		24
	
	
		
		

		 
		
		


		Item 3.
		
		

		Legal Proceedings
		
		25
	
	
		
		

		 
		
		

		Item 4.
		
		

		(Removed and Reserved)
		
		25
	
	
		
		


		Part II
		
		

		 
		
		

		 
		
		 
	
	
		
		

		 
		
		

		Item 5.
		
		


		Market for Registrant's Common Equity, Related Stockholder Matters and
		Issuer Purchases of Equity Securities
		
		26
	
	
		
		

		 
		
		


		Item 6.
		
		

		Selected Financial Data
		
		29
	
	
		
		

		 
		
		


		Item 7.
		
		

		Management's Discussion and Analysis
		of Financial Condition and Results of Operations
		
		30
	
	
		
		

		 
		
		


		Item 7A.
		
		

		Quantitative and Qualitative
		Disclosures About Market Risk
		
		73
	
	
		
		

		 
		
		


		Item 8.
		
		

		Financial Statements and
		Supplementary Data
		
		78
	
	
		
		

		 
		
		


		Item 9.
		
		

		Changes in and Disagreements with
		Accountants and Accounting and Financial Disclosure
		
		143
	
	
		
		

		 
		
		


		Item 9A.
		
		

		Controls and Procedures
		
		143
	
	
		
		

		 
		
		


		Item 9B.
		
		

		Other Information
		
		145
	
	
		
		


		Part III
		
		

		 
		
		

		 
		
		 
	
	
		
		

		 
		
		


		Item 10.
		
		

		Directors, Executive Officers and
		Corporate Governance
		
		145
	
	
		
		

		 
		
		


		Item 11.
		
		

		Executive Compensation
		
		145
	
	
		
		

		 
		
		


		Item 12.
		
		


		Security Ownership of Certain Beneficial Owners and Management and
		Related Stockholder Matters
		
		145
	
	
		
		

		 
		
		


		Item 13.
		
		

		Certain Relationships and Related
		Transactions, and Director Independence
		
		146
	
	
		
		

		 
		
		


		Item 14.
		
		

		Principal Accounting Fees and
		Services
		
		146
	
	
		
		


		Part IV
		
		

		 
		
		

		 
		
		 
	
	
		
		

		 
		
		

		Item 15.
		
		

		Exhibits, Financial Statement
		Schedules
		
		147
	
	
		
		

		 
		
		

		 
		
		

		 
		
		 
	
	
		
		

		 
		
		

		 
		
		

		Signatures
		
		151
	
	
		
		

		 
		
		

		 
		
		

		 
		
		 
	



3












PART I




Certain
statements in this report may be considered forward-looking. Statements that are
not historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. These forward-looking statements
cover, among other things, statements made about general economic, political,
regulatory, and market conditions, the investment banking and brokerage
industries, our objectives and results, and also may include our belief
regarding the effect of various legal proceedings, management expectations, our
liquidity and funding sources, counterparty credit risk, or other similar
matters. Forward-looking statements involve inherent risks and uncertainties,
and important factors could cause actual results to differ materially from those
anticipated, including those factors discussed below under "Risk Factors" in
Item 1A, as well as those discussed in "External Factors Impacting Our Business"




included
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of this report.




Because of these and other uncertainties, our actual future results may be
materially different from the results indicated by these forward-looking
statements. In addition, our past results of operations do not necessarily
indicate our future results.
We
undertake no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this document.



ITEM 1.
 BUSINESS



Stifel
Financial Corp. is a Delaware corporation and a financial holding company
headquartered in St. Louis. We were organized in 1983. Our principal subsidiary
is Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"), a full-service
retail and institutional brokerage and investment banking firm. Stifel Nicolaus
is the successor to a partnership founded in 1890. Our other subsidiaries
include Thomas Weisel Partners LLC ("TWP"), a registered broker-dealer firm;
Century Securities Associates, Inc. ("CSA"), an independent contractor
broker-dealer firm; Stifel Nicolaus Limited ("SN Ltd") and Thomas Weisel
Partners International Limited ("TWPIL"), our European subsidiaries; Stifel
Nicolaus Canada, Inc. ("SN Canada"), our registered Canadian broker-dealer
subsidiary; and Stifel Bank & Trust ("Stifel Bank"), a retail and commercial
bank. Unless the context requires otherwise, the terms "our company," "we," and
"our," as used herein, refer to Stifel Financial Corp. and its subsidiaries.





With our
century-old operating history, we have built a diversified business serving
private clients, institutional investors, and investment banking clients located
across the country. Our principal activities are:




Our core
philosophy is based upon a tradition of trust, understanding, and studied
advice. We attract and retain experienced professionals by fostering a culture
of entrepreneurial, long-term thinking. We provide our private, institutional,
and corporate clients quality, personalized service, with the theory that if we
place clients' needs first, both our clients and our company will prosper. Our
unwavering client and employee focus have earned us a reputation as one of the
leading brokerage and investment banking firms off Wall Street.   



We have
grown our business both organically and through opportunistic acquisitions. Over
the past several years, we have grown substantially, primarily by completing and
successfully integrating a number of acquisitions, including our acquisition of
the capital markets business of Legg Mason ("LM
Capital Markets")
from Citigroup in December 2005 and the following acquisitions:




4











Business
Segments



We operate
in the following segments: Global Wealth Management, Institutional Group, and
Other.
As a
result of organizational changes in the second quarter of 2009, which included a
change in the management reporting structure of our company, the segments
formerly reported as Equity Capital Markets and Fixed Income Capital Markets
have been combined into a single segment called Institutional Group. In
addition,
the UBS
branch acquisition and related customer account conversion to our platform has
enabled us to further leverage our customers' assets, which allows us the
ability to provide a full array of financial products to both our Private Client
Group and Stifel Bank customers. As a result, during the third quarter of 2009,
we changed how we manage these reporting units, and consequently, they were
combined to form the Global Wealth Management segment.
Previously
reported segment information has been revised to reflect this change. For a
discussion of the financial results of our segments, see Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Segment Analysis."  



Narrative
description of business



As of
December 31, 2010, we employed 4,906 associates, including 1,775 financial
advisors. As of December 31, 2010, through our broker-dealer subsidiaries, we
provide securities-related financial services to approximately 1.0 million
client accounts of customers throughout the United States, Canada, and Europe.
Our customers include individuals, corporations, municipalities, and
institutions. Although we have customers throughout the United States, our major
geographic area of concentration is in the Midwest and Mid-Atlantic regions,
with a growing presence in the Northeast, Southeast, and Western United States.
No single client accounts for a material percentage of any segment of our
business. Our inventory, which we believe is of modest size and intended to turn
over quickly, exists to facilitate order flow and support the investment
strategies of our clients.
Although
we do not engage in significant proprietary trading for our own account, the
inventory of securities held to facilitate customer trades and our market-making
activities are sensitive to market movements.

Furthermore, our balance sheet is highly liquid, without material holdings of
securities that are difficult to value or remarket. We believe that our broad
platform, fee-based revenues, and strong distribution network position us well
to take advantage of current trends within the financial services sector.



5










GLOBAL
WEALTH MANAGEMENT



We provide
securities transaction, brokerage, and investment services to our clients
through the consolidated Stifel Nicolaus branch system and through CSA, our
wholly owned independent contractor subsidiary, and TWP. We have made
significant investments in personnel and technology to grow the Private Client
Group over the past ten years. At December 31, 2010, the Private Client Group,
with a concentration in the Midwest and Mid-Atlantic regions and a growing
presence in the Northeast, Southeast, and Western United States, had a network
of 1,775 financial advisors located in 285 branch offices in 44 states and the
District of Columbia. In addition, we have 160 independent contractors.






Consolidated Stifel Nicolaus Branch System



Our
financial advisors provide a broad range of investments and services, including
financial planning services to our clients. We offer equity securities; taxable
and tax-exempt fixed income securities, including municipal, corporate, and
government agency securities; preferred stock; and unit investment trusts. We
also offer a broad range of externally managed fee-based products. In addition,
we offer insurance and annuity products and investment company shares through
agreements with numerous third-party distributors. We encourage our financial
advisors to pursue the products and services that best fit their clients' needs
and that they feel most comfortable recommending. Our private clients may choose
from a traditional, commission-based structure or fee-based money management
programs. In most cases, commissions are charged for sales of investment
products to clients based on an established commission schedule. In certain
cases, varying discounts may be given based on relevant client or trade factors
determined by the financial advisor.  



CSA
Private Client



At
December 31, 2010, CSA had affiliations with 160 independent contractors in 127
branch offices in 27 states. CSA's independent contractors provide the same
types of financial products and services to its private clients as does Stifel
Nicolaus. Under their contractual arrangements, these independent contractors
may also provide accounting services, real estate brokerage, insurance, or other
business activities for their own account. However, all securities transactions
must be transacted through CSA. Independent contractors are responsible for all
of their direct costs and are paid a larger percentage of commissions to
compensate them for their added expenses. CSA is an introducing broker-dealer
and, as such, clears its transactions through Stifel Nicolaus.



Customer
Financing



Client
securities transactions are effected on either a cash or margin basis. The
customer deposits less than the full cost of the security when securities are
purchased on a margin basis. We make a loan for the balance of the purchase
price. Such loans are collateralized by the securities purchased. The amounts of
the loans are subject to the margin requirements of Regulation T of the Board of
Governors of the Federal Reserve System, Financial Industry Regulatory Authority
("FINRA")

margin requirements, and our internal policies, which usually are more
restrictive than Regulation T or FINRA requirements. In permitting customers to
purchase securities on margin, we are subject to the risk of a market decline,
which could reduce the value of our collateral below the amount of the
customers' indebtedness.



Stifel
Bank



In April
2007, we completed the acquisition of First Service, a St. Louis-based
full-service bank, which now operates as Stifel Bank & Trust and is reported in
the Global Wealth Management segment. Since the closing of the bank acquisition,
we have grown retail and commercial bank assets from $145.6 million on
acquisition date to $1.8
billion
at December 31, 2010. Through Stifel Bank, we offer retail and commercial
banking services to private and corporate clients, including personal loan
programs, such as fixed and variable mortgage loans, home equity lines of
credit, personal loans, loans secured by CDs or savings, automobile loans, and
securities-based loans, as well as commercial lending programs, such as small
business loans, commercial real estate loans, lines of credit, credit cards,
term loans, and inventory and receivables financing, in addition to other
banking products. We believe this acquisition will not only help us serve our
private clients more effectively by offering them a broader range of services,
but will also enable us to better utilize our private client cash balances.



6











INSTITUTIONAL GROUP



The
Institutional Group segment includes research, equity and fixed income
institutional sales and trading, investment banking, public finance, and
syndicate, and consisted of 980 employees at December 31, 2010.



Research



Our
research department consisted of
218
analysts and support associates who publish research across multiple industry
groups and provide our clients with timely, insightful, and actionable research,
aimed at improving investment performance.




Institutional Sales and Trading



Our equity
sales and trading team distributes our proprietary equity research products and
communicates our investment recommendations to our client base of institutional
investors, executes equity trades, sells the securities of companies for which
we act as an underwriter, and makes a market in over
3,000
domestic securities at December 31, 2010. In our various sales and trading
activities, we take a focused approach on servicing our clients as opposed to
proprietary trading for our own account. Located in
18
cities in the United States as well as Geneva, London, and Madrid in Europe and
Toronto and Calgary, our equity sales and trading team, consisting of
197
professionals and support associates, services approximately
3,500
clients globally.



The fixed
income institutional sales and trading group consists of
227
professionals and support associates, located in
32
cities in the United States and is comprised of taxable and tax-exempt sales
departments. Our institutional sales and trading group executes trades in both
tax-exempt and taxable products, with diversification across municipal,
corporate, government agency, and mortgage-backed securities. Our fixed income
inventory is maintained primarily to facilitate order flow and support the
investment strategies of our institutional fixed income clients, as opposed to
seeking trading profits through proprietary trading.



Investment
Banking



Our
investment banking activities include the provision of financial advisory
services principally with respect to mergers and acquisitions and the execution
of public offerings and private placements of debt and equity securities. The
investment banking group, consisting of
266
professionals and support associates, focuses on middle-market companies as well
as on larger companies in targeted industries where we have particular
expertise, which include real estate, financial services, healthcare,
aerospace/defense and government services, telecommunications, transportation,
energy, business services, consumer services, industrial, technology, and
education.  



Our public
finance group acts as an underwriter and dealer in bonds issued by states,
cities, and other political subdivisions and acts as manager or participant in
offerings managed by other firms. The public finance group consists of
59
professionals and support associates.



Syndicate



Our
syndicate department, which consists of 13 origination and execution
professionals and support associates, coordinates marketing, distribution,
pricing, and stabilization of our managed equity and debt offerings.  In
addition, the department coordinates our underwriting participations and selling
group opportunities managed by other investment banking firms.



OTHER
SEGMENT



The Other
segment includes interest income from stock borrow activities, unallocated
interest expense, interest income and gains and losses from investments held,
compensation expense associated with the deferred compensation plan
modification, and all unallocated overhead cost associated with the execution of
orders; processing of securities transactions; custody of client securities;
receipt, identification, and delivery of funds and securities; compliance with
regulatory and legal requirements; internal financial accounting and controls;
and general administration and acquisition charges primarily related to the TWPG
acquisition.
At
December 31, 2010, we employed 643 persons in this segment.



7











BUSINESS CONTINUITY



We have
developed a business continuity plan that is designed to permit continued
operation of business critical functions in the event of disruptions to our St.
Louis, Missouri headquarters facility. Several critical business applications
are supported by our outside vendors who maintain backup capabilities. We
periodically participate in testing these backup facilities. Likewise, the
business functions that we run internally can be supported without the St. Louis
headquarters, through a combination of redundant computer facilities in other
east and west coast data centers, and from certain branch locations that can
connect to our third-party securities processing vendor through its primary or
redundant facilities. Systems have been designed so that we can route
mission-critical processing activity to alternate locations, which can be
staffed with relocated personnel as appropriate.



GROWTH
STRATEGY



We believe
our plans for growth will allow us to increase our revenues and to expand our
role with clients as a valued partner. In executing our growth strategy, we take
advantage of the consolidation among mid-tier firms, which we believe provides
us opportunities in our private client and capital markets businesses. We do not
create specific growth or business plans for any particular type of acquisition,
focus on specific firms, or geographic expansion, nor do we establish
quantitative goals such as intended numbers of new hires or new office openings;
however, our corporate philosophy has always been to be in a position to take
advantage of opportunities as they arise. We intend to pursue the following
strategies with discipline:




8











COMPETITION



We compete
with other securities firms, some of which offer their customers a broader range
of brokerage services, have substantially greater resources, and may have
greater operating efficiencies. In addition, we face increasing competition from
other financial institutions, such as commercial banks, online service
providers, and other companies offering financial services. The Financial
Modernization Act, signed into law in late 1999, lifted restrictions on banks
and insurance companies, permitting them to provide financial services once
dominated by securities firms. In addition, recent consolidation in the
financial services industry may lead to increased competition from larger, more
diversified organizations.  



We rely on
the expertise acquired in our market area over our 120-year history, our
personnel, and our equity capital to operate in the competitive environment.




REGULATION



The
securities industry in the United States is subject to extensive regulation
under federal and state laws. The Securities and Exchange Commission ("SEC") is
the federal agency charged with the administration of the federal securities
laws. Much of the regulation of broker-dealers, however, has been delegated to
self-regulatory organizations ("SRO"), principally FINRA, the Municipal
Securities Rulemaking Board, and securities exchanges. SROs adopt rules (which
are subject to approval by the SEC) that govern the industry and conduct
periodic examinations of member broker-dealers. Securities firms are also
subject to regulation by state securities commissions in the states in which
they are registered. A number of changes have been proposed to the rules and
regulations that govern our securities business, and other rules and regulations
have been adopted, which may result in changes in the way we conduct our
business.



As a
result of federal and state registration and SRO memberships, broker-dealers are
subject to overlapping schemes of regulation that cover all aspects of their
securities businesses. Such regulations cover matters including capital
requirements; uses and safekeeping of clients' funds; conduct of directors,
officers, and employees; recordkeeping and reporting requirements; supervisory
and organizational procedures intended to ensure compliance with securities laws
and to prevent improper trading on material nonpublic information;
employee-related matters, including qualification and licensing of supervisory
and sales personnel; limitations on extensions of credit in securities
transactions; clearance and settlement procedures; requirements for the
registration, underwriting, sale, and distribution of securities; and rules of
the SROs designed to promote high standards of commercial honor and just and
equitable principles of trade. A particular focus of the applicable regulations
concerns the relationship between broker-dealers and their customers. As a
result, many aspects of the broker-dealer customer relationship are subject to
regulation, including, in some instances, "suitability" determinations as to
certain customer transactions, limitations on the amounts that may be charged to
customers, timing of proprietary trading in relation to customers' trades, and
disclosures to customers.



Additional
legislation, changes in rules promulgated by the SEC and by SROs, and changes in
the interpretation or enforcement of existing laws and rules often directly
affect the method of operation and profitability of broker-dealers. The SEC and
the SROs conduct regular examinations of our broker-dealer subsidiaries and also
initiate targeted and other specific inquiries from time to time, which
generally include the investigation of issues involving substantial portions of
the securities industry. The SEC and the SROs may conduct administrative
proceedings, which can result in censures, fines, suspension, or expulsion of a
broker-dealer, its officers, or employees. The principal purpose of regulation
and discipline of broker-dealers is the protection of customers and the
securities markets rather than the protection of creditors and stockholders of
broker-dealers.





Our U.S.
broker-dealer subsidiaries are required by federal law to belong to Securities
Investors Protection Corporation ("SIPC"). When the SIPC fund falls below a
certain amount, members are required to pay annual assessments to replenish the
reserves. If SIPC fund levels become inadequate, certain of our domestic
broker-dealer subsidiaries may be required to pay a special assessment.



9










As
broker-dealers, Stifel Nicolaus, TWP, and CSA are subject to the Uniform Net
Capital Rule (Rule 15c3-1) promulgated by the SEC. The Uniform Net Capital Rule
is designed to measure the general financial integrity and liquidity of a
broker-dealer and the minimum net capital deemed necessary to meet the
broker-dealer's continuing commitments to its customers and other
broker-dealers. Broker-dealers may be prohibited from expanding their business
and declaring cash dividends. A broker-dealer that fails to comply with the
Uniform Net Capital Rule may be subject to disciplinary actions by the SEC and
SROs, such as FINRA, including censures, fines, suspension, or expulsion. Stifel
Nicolaus and TWP have chosen to calculate their net capital under the
alternative method, which prescribes that their net capital shall not be less
than the greater of $1.0 million or two percent of aggregate debit balances
(primarily receivables from customers and broker-dealers) computed in accordance
with the SEC's Customer Protection Rule (Rule 15c3-3). CSA calculates its net
capital under the aggregate indebtedness method, whereby its aggregate
indebtedness may not be greater than fifteen times its net capital (as defined).
Both methods allow broker-dealers to increase their commitments to customers
only to the extent their net capital is deemed adequate to support an increase.
Our European subsidiaries, SN Ltd and TWPIL, are subject to the regulatory
supervision and requirements of the Financial Services Authority ("FSA") in the
United Kingdom.
For
further discussion of our net capital requirements, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."



The
financial services industry in the U.S. is subject to extensive regulation under
federal and state laws. The U.S. government recently enacted financial services
reform legislation known as the Dodd-Frank Wall Street Reform & Consumer
Protection Act ("Dodd-Frank Act"). Because of the nature of our business and
business practices, this legislation may have a significant direct impact on our
operations. However, because many of the implementing regulations will result
from further studies and are yet to be written by the various regulatory
agencies, the impact is uncertain.  



SN Canada,
our registered Canadian broker-dealer subsidiary, is subject to regulation by
the securities commissions of Ontario, Quebec, Alberta, British Columbia,
Manitoba, Saskatchewan, and Nova Scotia; is a member of the Investment Industry
Regulatory Organization of Canada ("IIROC"); and is a participating organization
of the Toronto Stock Exchange, a member of the TSX Venture Exchange, and a
dealer with the Canadian National Stock Exchange.



The
financial services industry in Canada is subject to comprehensive regulation
under both federal and provincial laws. Securities commissions have been
established in all provinces and territorial jurisdictions which are charged
with the administration of securities laws. Investment dealers in Canada are
also subject to regulation by SROs, which are responsible for the enforcement
of, and conformity with, securities legislation for their members and have been
granted the powers to prescribe their own rules of conduct and financial
requirements of members.



SN Canada
is required by the IIROC to belong to the Canadian Investors Protection Fund
("CIPF"), whose primary role is investor protection. The CIPF Board of Directors
determines the fund size required to meet its coverage obligations and sets a
quarterly assessment rate. The CIPF provides protection for securities and cash
held in client accounts. This coverage does not protect against market
fluctuations.



See the
section entitled "Liquidity and Capital Resources" in Item 7 of this report for
further information on SEC, FINRA, FSA, and IIROC regulations pertaining to
broker-dealer regulatory minimum net capital requirements.  



Our
company, as a bank and financial holding company, is subject to regulation,
including capital requirements, by the Federal Reserve. Stifel Bank is subject
to various regulatory capital requirements administered by the Federal Deposit
Insurance Corporation ("FDIC") and state banking authorities. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on our company's and Stifel Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, our company and Stifel Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Our company's and Stifel Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors. Quantitative measures established by
regulation to ensure capital adequacy require our company and Stifel Bank to
maintain minimum amounts and ratios of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as
defined) to average assets (as defined). We may be required to increase our
regulatory capital and pay higher FDIC premiums, including special assessments,
due to the impact of increased bank failures over the last two years on the
insurance fund of the FDIC.



10










The
statistical disclosures required to be made by a bank holding company are
included in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of this report.



In
addition, TWP and several other wholly owned subsidiaries of ours, including
Thomas Weisel Capital Management LLC, Thomas Weisel Asset Management LLC, TW
Asset Management LLC, and Thomas Weisel Global Growth Partners LLC, are
registered as investment advisers with the SEC and, therefore, are subject to
its regulation and oversight.



As a
public company whose common stock is listed on the New York Stock Exchange
("NYSE") and the Chicago Stock Exchange ("CHX"), we are subject to corporate
governance requirements established by the SEC, NYSE, and CHX, as well as
federal and state law. Under the Sarbanes-Oxley Act of 2002 (the "Act"), we are
required to meet certain requirements regarding business dealings with members
of the Board of Directors, the structure of our Audit and Compensation
Committees, ethical standards for our senior financial officers, implementation
of an internal control structure and procedures for financial reporting, and
additional responsibilities regarding financial statements for our Chief
Executive Officer and Chief Financial Officer and their assessment of our
internal controls over financial reporting. Compliance with all aspects of the
Act, particularly the provisions related to management's assessment of internal
controls, has imposed additional costs on our company, reflecting internal staff
and management time, as well as additional audit fees since the Act went into
effect.



11










Executive
Officers




Information regarding our executive officers and their ages as of February
28,
2011, are as follows:


	
		
		


		Name
		
		

		 
		
		


		Age
		
		

		 
		
		


		Position(s)
	
	
		
		


		Ronald J. Kruszewski

		

		 

		

		 
		
		

		 
		
		

		52

		

		 

		

		 
		
		

		 
		
		


		Co-Chairman of the Board of Directors, President, and Chief Executive
		Officer of the Company and Chairman of the Board of Directors and Chief
		Executive Officer of Stifel Nicolaus.
	
	
		
		


		Thomas W. Weisel
		
		

		 
		
		

		70
		
		

		 
		
		


		Co-Chairman of the Board of Directors of the Company.
	
	
		
		


		Scott B. McCuaig

		

		 
		
		

		 
		
		

		61

		

		 
		
		

		 
		
		


		Senior Vice President and Director of the Company and President,
		Co-Chief Operating Officer, and Director of Stifel Nicolaus.
	
	
		
		


		James M. Zemlyak

		

		 

		

		 
		
		

		 
		
		

		51

		

		 

		

		 
		
		

		 
		
		


		Senior Vice President, Chief Financial Officer, Treasurer, and Director
		of the Company and Executive Vice President, Co-Chief Operating Officer,
		and Director of Stifel Nicolaus.
	
	
		
		


		Richard J. Himelfarb

		

		 

		

		 
		
		

		 
		
		

		69

		

		 

		

		 
		
		

		 
		
		


		Vice Chairman, Senior Vice President, and Director of the Company and
		Executive Vice President, Chairman of Investment Banking, and Director
		of Stifel Nicolaus.
	
	
		
		


		David M. Minnick

		

		 
		
		

		 
		
		

		54

		

		 
		
		

		 
		
		


		Senior Vice President and General Counsel of the Company and Stifel
		Nicolaus.
	
	
		
		


		Thomas P. Mulroy

		

		 

		

		 
		
		

		 
		
		

		49

		

		 

		

		 
		
		

		 
		
		


		Senior Vice President and Director of the Company and Executive Vice
		President, Co-Director of Institutional Group, and Director of Stifel
		Nicolaus.
	
	
		
		


		Victor J. Nesi

		

		 

		

		 
		
		

		 
		
		

		50

		

		 

		

		 
		
		

		 
		
		


		Senior Vice President and Director of the Company and Executive Vice
		President, Director of Investment Banking, Co-Director of Institutional
		Group, and Director of Stifel Nicolaus.
	
	
		
		


		Ben A. Plotkin

		

		 
		
		

		 
		
		

		55

		

		 
		
		

		 
		
		


		Vice Chairman, Senior Vice President, and Director of the Company and
		Executive Vice President of Stifel Nicolaus.
	
	
		
		


		David D. Sliney

		

		 
		
		

		 
		
		

		41

		

		 
		
		

		 
		
		


		Senior Vice President of the Company and Senior Vice President and
		Director of Stifel Nicolaus.
	



12











Ronald J. Kruszewski
has been President and Chief Executive Officer of our company and Stifel
Nicolaus since September 1997 and Chairman of the Board of Directors of our
company and Stifel Nicolaus since April 2001. Prior thereto, Mr. Kruszewski
served as Managing Director and Chief Financial Officer of Baird Financial
Corporation and Managing Director of Robert W. Baird & Co. Incorporated, a
securities broker-dealer firm, from 1993 to September 1997. Mr. Kruszewski has
been a Director since September 1997.




Thomas W. Weisel
was elected Co-Chairman of the Board of Directors of our company in August 2010
after the completion of the merger between our company and Thomas Weisel
Partners Group, Inc. Prior thereto, Mr. Weisel served as Chairman and CEO of
Thomas Weisel Partners Group, Inc., a firm he founded, from 1998 to June 2010.
Prior to founding Thomas Weisel Partners, Mr. Weisel was a founder, in 1971, of
Robertson, Coleman, Siebel & Weisel that became Montgomery Securities in 1978,
where he was Chairman and CEO until September 1998. Mr. Weisel served as a Board
Member of the Stanford Endowment from 2001 to 2009 and as an Advisory Board
Member of Harvard Business School from 2007 to 2009. Mr. Weisel served as a
director on the NASDAQ Stock Market board of directors from 2002 to 2006.




Scott B. McCuaig
has been Senior Vice President and President of the Private Client Group and
Stifel Nicolaus and Director of Stifel Nicolaus since January 1998 and President
and Co-Chief Operating Officer of Stifel Nicolaus since August 2002. Prior
thereto, Mr. McCuaig served as Managing Director, head of marketing, and
regional sales manager of Robert W. Baird & Co. Incorporated from June 1988 to
January 1998. Mr. McCuaig has been a Director since April 2001.




James M. Zemlyak
joined Stifel Nicolaus in February 1999. Mr. Zemlyak has been our Senior Vice
President, Chief Financial Officer, and Treasurer and a member of the Board of
Directors of Stifel Nicolaus since February 1999, Co-Chief Operating Officer of
Stifel Nicolaus since August 2002, and Executive Vice President of Stifel
Nicolaus since December 1, 2005. Mr. Zemlyak also served as Chief Financial
Officer of Stifel Nicolaus from February 1999 to October 2006. Prior to joining
our company, Mr. Zemlyak served as Managing Director and Chief Financial Officer
of Baird Financial Corporation from 1997 to 1999 and Senior Vice President and
Chief Financial Officer of Robert W. Baird & Co. Incorporated from 1994 to 1999.




Richard J. Himelfarb

has served
as Senior Vice President and Director of our company
and Executive Vice President and Director of Stifel Nicolaus since December
2005. Mr. Himelfarb was designated Chairman of Investment Banking in July 2009.
Prior to that, Mr. Himelfarb served as Executive Vice President and Director of
Investment Banking from December 2005 through July 2009. Prior to joining our
company, Mr. Himelfarb served as a director of Legg Mason, Inc. from November
1983 and Legg Mason Wood Walker, Inc. from January 2005. Mr. Himelfarb was
elected Executive Vice President of Legg Mason and Legg Mason Wood Walker, Inc.
in July 1995, having previously served as Senior Vice President from November
1983.  




David M. Minnick
has served as Senior Vice President and General Counsel of our company and
Stifel Nicolaus since October 2004. Prior thereto, Mr. Minnick served as Vice
President and Counsel for A.G. Edwards & Sons, Inc. from August 2002 through
October 2004, Senior Regional Attorney for NASD Regulation, Inc. from November
2000 through July 2002, as an attorney in private law practice from September
1998 through November 2000, and as General Counsel and Managing Director of
Morgan Keegan & Company, Inc. from October 1990 through August 1998.




Thomas P. Mulroy
has served as Senior Vice President and Director of our company
and Executive Vice President and Director of Stifel Nicolaus since December
2005. Mr. Mulroy was named Co-Director of our Institutional Group in July 2009.
Prior to that, Mr. Mulroy served as Director of Equity Capital Markets from
December 2005 through July 2009. Mr. Mulroy has responsibility for institutional
equity sales, trading, and research. Prior to joining our company, Mr. Mulroy
was elected Executive Vice President of Legg Mason, Inc. in July 2002 and of
Legg Mason Wood Walker, Inc. in November 2000. Mr. Mulroy became a Senior Vice
President of Legg Mason, Inc. in July 2000 and Legg Mason Wood Walker, Inc. in
August 1998.  




Victor J. Nesi
has served as Executive Vice President, Director of Investment Banking, and
Co-Director of our Institutional Group since July 2009. Mr. Nesi has served as
Director of our company since August 2009. Mr. Nesi has responsibility for
corporate finance investment banking activities and is Co-Director of our
Capital Markets segment. Mr. Nesi has more than 20 years of banking and private
equity experience, most recently with Merrill Lynch, where he headed the global
private equity business for the telecommunications and media industry. From 2005
to 2007, he directed Merrill Lynch's investment banking group for the Americas
region. Prior to joining Merrill Lynch in 1996, Mr. Nesi spent seven years as an
investment banker at Salomon Brothers and Goldman Sachs.



Ben
A. Plotkin
has been Vice Chairman, Senior Vice President, and Director of our company since
August 2007 and Executive Vice President of Stifel Nicolaus since February 2007.
Mr. Plotkin also served as Chairman and Chief Executive Officer of Ryan Beck &
Company, Inc. from 1997 until its acquisition by our company in 2007. Mr.
Plotkin was elected Executive Vice President of Ryan Beck in 1990. Mr. Plotkin
became a Senior Vice President of Ryan Beck in 1989 and was appointed First Vice
President of Ryan Beck in December of 1987. Mr. Plotkin joined Ryan Beck in May
of 1987 as a Director and Vice President in the Investment Banking Division.



13











David D. Sliney
has been a Senior Vice President of our company since May 2003. In 1997, Mr.
Sliney began a Strategic Planning and Finance role with Stifel Nicolaus and has
served as a Director of Stifel Nicolaus since May 2003. Mr. Sliney is also
responsible for our company's Operations and Technology departments. Mr. Sliney
joined Stifel Nicolaus in 1992, and between 1992 and 1995, Mr. Sliney worked as
a fixed income trader and later assumed responsibility for the firm's Equity
Syndicate Department.




AVAILABLE INFORMATION



Our
internet address is www.stifel.com.
We make available, free of charge, through a link to the SEC web site, annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended, as well as proxy
statements, as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC.




Additionally, we make available on our web site under "Investor Relations -
Corporate Governance," and in print upon request of any shareholder to our Chief
Financial Officer, a number of our corporate governance documents. These
include: Executive Committee charter, Audit Committee charter, Compensation
Committee charter, Nominating/Corporate Governance Committee charter, Corporate
Governance Guidelines, Complaint Reporting Process, and the Code of Ethics for
Employees. Within the time period required by the SEC and the NYSE, we will post
on our web site any modifications to any of the available documents. The
information on our website is not incorporated by reference into this report.
Our Chief Financial Officer can be contacted at Stifel Financial Corp., One
Financial Plaza, 501 N. Broadway, St. Louis, Missouri 63102, telephone: (314)
342-2000.



14











ITEM 1A. 


RISK
FACTORS



In
addition to the other information set forth in this report, you should carefully
consider the following factors which could materially affect our business,
financial condition, or future results of operations. Although the risks
described below are those that management believes are the most significant,
these are not the only risks facing our company. Additional risks and
uncertainties not currently known to us or that we currently do not deem to be
material also may materially affect our business, financial condition, or future
results of operations. We may amend or supplement these risk factors from time
to time in other reports we file with the SEC.



Our
results of operations may be adversely affected by conditions in the global
financial markets and economic downturn.



We are
engaged in various financial services businesses. As such, we are affected by
economic and political conditions. These conditions may directly and indirectly
impact a number of factors that may be detrimental to our operating results,
including the inflation rate, the related impact on the securities markets,
including changes in volume and price levels of securities, fluctuations in
interest rates, reduced investor confidence, and a slowdown in economic
activity. These conditions historically have impacted our trading volume and net
revenues and affected our profitability. Additionally, a decline in the strength
of the U.S. economy can lead to deterioration in credit quality and decreased
loan demand. Continued or further credit dislocations or sustained market
downturns may result in a decrease in the volume of trades we execute for our
clients, a decline in the value of securities we hold in inventory as assets,
and potentially reduced investment banking revenues, given that associated fees
are directly related to the number and size of transactions in which we
participate.  



A
significant portion of our revenue is derived from commissions, margin interest
revenue, principal transactions, asset management and service fees, and
investment banking fees. Accordingly, severe market fluctuations, weak economic
conditions, or a decline in stock prices, trading volumes, or liquidity could
have an adverse effect on our profitability. Continued or further credit
dislocations or sustained market downturns may result in a decrease in the
volume of trades we execute for our clients, a decline in the value of
securities we hold in inventory as assets, and reduced investment banking
revenues.



Declines
in the market value of securities generally result in a decline in revenues from
fees based on the asset values of client portfolios and may result in the
failure of buyers and sellers of securities to fulfill their settlement
obligations, as well as the failure of our clients to fulfill their credit and
settlement obligations. Also, we permit our clients to purchase securities on
margin. During periods of steep declines in securities prices, the value of the
collateral securing client accounts margin purchases may drop below the amount
of the purchaser's indebtedness. If the clients are unable to provide additional
collateral for these loans, we may lose money on these margin transactions. This
may cause us to incur additional expenses defending or pursuing claims or
litigation related to counterparty or client defaults.



In
addition, in certain transactions, we are required to post collateral to secure
our obligations to our counterparties. In the event of a bankruptcy or
insolvency proceeding involving such counterparties, we may experience delays in
recovering our assets posted as collateral or may incur a loss to the extent
that a counterparty was holding collateral in excess of our obligation to such
counterparty. There is no assurance that any such losses would not materially
and adversely affect our business, financial condition, and results of
operations.



Recent legislative and regulatory actions, and
any such future actions, to address the current liquidity and credit crisis in
the financial industry may significantly affect our financial condition, results
of operation, liquidity, or stock price.



Recent
market and economic conditions have led to new legislation and numerous
proposals for changes in the regulation of the financial services industry,
including significant additional legislation and regulation in the United States
and abroad. The Dodd-Frank Act calls for sweeping changes in the supervision and
regulation of the financial industry designed to provide for greater oversight
of financial industry participants, reduce risk in banking practices and in
securities and derivatives trading, enhance public company corporate governance
practices and executive compensation disclosures, and provide for greater
protections to individual consumers and investors. Certain elements of the
Dodd-Frank Act became effective immediately, though the details of many
provisions are subject to additional studies and will not be known until final
rules are adopted by applicable regulatory agencies. The ultimate impact that
the Dodd-Frank Act will have on us, the financial industry, and the economy
cannot be known until all such rules and regulations called for under the
Dodd-Frank Act have been finalized.



15










Certain
provisions of the Dodd-Frank Act that may impact our business include, but are
not limited to: the establishment of a fiduciary standard for broker-dealers,
the imposition of capital requirements on financial holding companies, and to a
lesser extent, greater oversight over derivatives trading and restrictions on
proprietary trading. Other regulatory changes and proposed changes concerning
municipal securities and the issuance of public debt may adversely impact our
business. These initiatives include changes to existing 'pay to play' rules for
brokers, dealers, and municipal securities dealers; expansion of disclosure,
suitability and pricing obligations for brokers, dealers and municipal
securities dealers; and changes in the definition of, and registration
requirements for, municipal advisers.



A number
of changes have been proposed to the rules and regulations that govern our
securities business, and other rules and regulations have been adopted, which
may result in changes in the way in which we conduct our business.
These
legislative and regulatory initiatives could require us to change certain of our
business practices, impose additional costs on us, limit the products that we
offer, result in a loss of revenue, limit our competitiveness or our ability to
pursue business opportunities, cause business disruptions, impact the value of
assets that we hold, or otherwise adversely affect our business, results of
operations, or financial condition. The long-term impact of these initiatives on
our business practices and revenues will depend upon the successful
implementation of our strategies and competitors' responses to such initiatives,
all of which are difficult to predict.



Lack of
sufficient liquidity or access to capital could impair our business and
financial condition.



Liquidity
is essential to our business. If we have insufficient liquid assets, we will be
forced to curtail our operations, and our business will suffer. Our assets,
consisting mainly of cash or assets readily convertible into cash, are our
principal source of liquidity. These assets are financed primarily by our equity
capital, debentures to trusts, client credit balances, short-term bank loans,
proceeds from securities lending, customer deposits, and other payables. We
currently finance our client accounts and firm trading positions through
ordinary course borrowings at floating interest rates from various banks on a
demand basis and securities lending, with company-owned and client securities
pledged as collateral. Changes in securities market volumes, related client
borrowing demands, underwriting activity, and levels of securities inventory
affect the amount of our financing requirements.



The
capital and credit markets have been experiencing volatility and disruption
since early 2008, and reached unprecedented levels during the first quarter of
2009. In some cases, the markets have produced downward pressure on stock prices
and credit availability for certain issuers without regard to those issuers'
underlying financial strength. Despite recent improvements in market conditions,
if market disruption and volatility return to the unprecedented levels reached
in early 2009 or worsen, there can be no assurance that we will not experience
an adverse effect, which may be material to our business, financial condition,
and results of operations and affect our ability to access capital.



Our
liquidity requirements may change in the event we need to raise more funds than
anticipated to increase inventory positions, support more rapid expansion,
develop new or enhanced services and products, acquire technologies, or respond
to other unanticipated liquidity requirements. We rely exclusively on financing
activities and distributions from our subsidiaries for funds to implement our
business and growth strategies. Net capital rules or the borrowing arrangements
of our subsidiaries, as well as the earnings, financial condition, and cash
requirements of our subsidiaries, may each limit distributions to us from our
subsidiaries.



In the
event existing internal and external financial resources do not satisfy our
needs, we may have to seek additional outside financing. The availability of
outside financing will depend on a variety of factors, such as market
conditions, the general availability of credit, the volume of trading
activities, the overall availability of credit to the financial services
industry, credit ratings, and credit capacity, as well as the possibility that
lenders could develop a negative perception of our long-term or short-term
financial prospects if we incurred large trading losses or if the level of our
business activity decreased due to a market downturn or otherwise. We currently
do not have a credit rating, which could adversely affect our liquidity and
competitive position by increasing our borrowing costs and limiting access to
sources of liquidity that require a credit rating as a condition to providing
funds.



16









Current
trends in the global financial markets could cause significant fluctuations in
our stock price.



Stock
markets in general, and stock prices of financial services firms in particular,
including us, have in recent years, experienced significant price and volume
fluctuations. The market price of our common stock may continue to be subject to
similar market fluctuations which may be unrelated to our operating performance
or prospects, and increased volatility could result in an overall decline in the
market price of our common stock. Factors that could significantly impact the
volatility of our stock price include:  





Significant declines in the market price of our common stock or failure of the
market price of our common stock to increase could harm our ability to recruit
and retain key employees, including our executives and financial advisors and
other key professional employees and those who have joined us from companies we
have acquired, reduce our access to debt or equity capital, and otherwise harm
our business or financial condition. In addition, we may not be able to use our
common stock effectively as consideration in connection with future
acquisitions.



We face
intense competition in our industry.



All
aspects of our business and of the financial services industry in general are
intensely competitive. We expect competition to continue and intensify in the
future. Our business will suffer if we do not compete successfully. We compete
on the basis of a number of factors, including the quality of our personnel, the
quality and selection of our investment products and services, pricing (such as
execution pricing and fee levels), and reputation. Because of market unrest and
increased government intervention, the financial services industry has recently
undergone significant consolidation, which has further concentrated equity
capital and other financial resources in the industry and further increased
competition. Many of our competitors use their significantly greater financial
capital and scope of operations to offer their customers more products and
services, broader research capabilities, access to international markets, and
other products and services not currently offered by us.



We compete
directly with national full-service broker-dealers, investment banking firms,
and commercial banks, and to a lesser extent, with discount brokers and dealers
and investment advisors. In addition, we face competition from new entrants into
the market and increased use of alternative sales channels by other firms.
Domestic commercial banks and investment banking boutique firms have entered the
broker-dealer business, and large international banks have begun serving our
markets as well. Legislative and regulatory initiatives intended to ease
restrictions on the sale of securities and underwriting activities by commercial
banks have increased competition. We also compete indirectly for investment
assets with insurance companies, real estate firms, hedge funds, and others.
This increased competition could cause our business to suffer.



The
industry of electronic and/or discount brokerage services is continuing to
develop. Increased competition from firms using new technology to deliver these
products and services may materially and adversely affect our operating results
and financial position. Competitors offering internet-based or other electronic
brokerage services may have lower costs and offer their customers more
attractive pricing and more convenient services than we do. In addition, we
anticipate additional competition from underwriters who conduct offerings of
securities through electronic distribution channels, bypassing financial
intermediaries such as us altogether. These and other competitive pressures may
have an adverse effect on our competitive position and, as a result, our
operations, financial condition, and liquidity.



Regulatory
and legal developments could adversely affect our business and financial
condition.



The
financial services industry is subject to extensive regulation, and
broker-dealers and investment advisors are subject to regulations covering all
aspects of the securities business. We could be subject to civil liability,
criminal liability, or sanctions, including revocation of our subsidiaries'
registrations as investment advisors or broker-dealers, revocation of the
licenses of our financial advisors, censures, fines, or a temporary suspension
or permanent bar from conducting business if we violate such laws or
regulations. Any such liability or sanction could have a material adverse effect
on our business, financial condition, and prospects. Moreover, our independent
contractor subsidiaries, CSA and SN Ltd, give rise to a potentially higher risk
of noncompliance because of the nature of the independent contractor
relationships involved.



17










As a bank
holding company, we are subject to regulation by the Federal Reserve. Stifel
Bank is subject to regulation by the FDIC. As a result, we are subject to a risk
of loss resulting from failure to comply with banking laws. The recent economic
and political environment has caused regulators to increase their focus on the
regulation of the financial services industry, including introducing proposals
for new legislation. We are unable to predict whether any of these proposals
will be implemented and in what form, or whether any additional or similar
changes to statutes or regulations, including the interpretation or
implementation thereof, will occur in the future. Any such action could affect
us in substantial and unpredictable ways and could have an adverse effect on our
business, financial condition, and results of operations. We also may be
adversely affected as a result of changes in federal, state, or foreign tax
laws, or by changes in the interpretation or enforcement of existing laws and
regulations.  For additional information regarding
our regulatory environment and our approach to managing regulatory risk, see
Item 1, "Business - Regulation," and Item 7A, "Quantitative and Qualitative
Disclosures About Market Risk."



Our
company and its subsidiaries are named in and subject to various proceedings and
claims arising primarily from our securities business activities, including
lawsuits, arbitration claims, class actions, and regulatory matters. Some of
these claims seek substantial compensatory, punitive, or indeterminate damages.
Our company and its subsidiaries are also involved in other reviews,
investigations, and proceedings by governmental and self-regulatory
organizations regarding our business, which may result in adverse judgments,
settlements, fines, penalties, injunctions, and other relief.  



The
regulatory investigations include inquiries from the SEC, FINRA, and several
state regulatory authorities requesting information concerning our activities
with respect to auction rate securities ("ARS") and in connection with certain
investments made by other post-employment benefit ("OPEB") trusts formed by five
Southwestern Wisconsin school districts.



In
turbulent economic times such as these, the volume of claims and amount of
damages sought in litigation and regulatory proceedings against financial
institutions have historically increased. These risks include potential
liability under securities and other laws for alleged materially false or
misleading statements made in connection with securities offerings and other
transactions, issues related to the suitability of our investment advice based
on our clients' investment objectives, and potential liability for other advice
we provide to participants in strategic transactions. Legal actions brought
against us may result in judgments, settlements, fines, penalties, or other
results, any of which could materially adversely affect our business, financial
condition, or results of operations, or cause us serious reputational harm.



For a
discussion of our legal matters, including ARS and OPEB litigation, and our
approach to managing legal risk, see Item 3, "Legal Proceedings," and Item 7A,
"Quantitative and Qualitative Disclosures About Market Risk."



Failure to
comply with regulatory capital requirements would significantly harm our
business.



The SEC
requires broker-dealers to maintain adequate regulatory capital in relation to
their liabilities and the size of their customer business. These rules require
Stifel Nicolaus, TWP, and CSA, our broker-dealer subsidiaries, to maintain a
substantial portion of their assets in cash or highly liquid investments.
Failure to maintain the required net capital may subject our broker-dealer
subsidiaries to limitations on their activities, or in extreme cases, suspension
or revocation of their registration by the SEC and suspension or expulsion by
FINRA and other regulatory bodies, and, ultimately, liquidation. Our European
subsidiaries, SN Ltd and TWPIL, are subject to similar limitations under
applicable laws in the United Kingdom.
Our
Canadian subsidiary, SN Canada, is subject to the regulatory supervision and
requirements of the Investment Industry Regulatory Organization of Canada
("IIROC").
Failure to
comply with the net capital rules could have material and adverse consequences,
such as:




In
addition, a change in the net capital rules or the imposition of new rules
affecting the scope, coverage, calculation, or amount of net capital
requirements, or a significant operating loss or any large charge against net
capital, could have similar adverse effects. In addition, as a bank holding
company, we and our bank subsidiary are subject to various regulatory
requirements administered by the federal banking agencies, including capital
adequacy requirements pursuant to which we and our bank subsidiary must meet
specific capital guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. See Item 1, "Business - Regulation," for additional
information regarding our regulatory environment.



18










We have
experienced significant pricing pressure in areas of our business, which may
impair our revenues and profitability.



In recent
years, our business has experienced significant pricing pressures on trading
margins and commissions in fixed income and equity trading. In the fixed income
market, regulatory requirements have resulted in greater price transparency,
leading to increased price competition and decreased trading margins. In the
equity market, we have experienced increased pricing pressure from institutional
clients to reduce commissions, and this pressure has been augmented by the
increased use of electronic and direct market access trading, which has created
additional competitive downward pressure on trading margins. The trend towards
using alternative trading systems is continuing to grow, which may result in
decreased commission and trading revenue, reduce our participation in the
trading markets and our ability to access market information, and lead to the
creation of new and stronger competitors. Institutional clients also have
pressured financial services firms to alter "soft dollar" practices under which
brokerage firms bundle the cost of trade execution with research products and
services. Some institutions are entering into arrangements that separate (or
"unbundle") payments for research products or services from sales commissions.
These arrangements have increased the competitive pressures on sales commissions
and have affected the value our clients place on high-quality research.
Additional pressure on sales and trading revenue may impair the profitability of
our business. Moreover, our inability to reach agreement regarding the terms of
unbundling arrangements with institutional clients who are actively seeking such
arrangements could result in the loss of those clients, which would likely
reduce our institutional commissions. We believe that price competition and
pricing pressures in these and other areas will continue as institutional
investors continue to reduce the amounts they are willing to pay, including by
reducing the number of brokerage firms they use, and some of our competitors
seek to obtain market share by reducing fees, commissions, or margins.



Our
underwriting and market-making activities place our capital at risk.



We may
incur losses and be subject to reputational harm to the extent that, for any
reason, we are unable to sell securities we purchased as an underwriter at the
anticipated price levels. As an underwriter, we also are subject to heightened
standards regarding liability for material misstatements or omissions in
prospectuses and other offering documents relating to offerings we underwrite.
As a market maker, we may own large positions in specific securities, and these
undiversified holdings concentrate the risk of market fluctuations and may
result in greater losses than would be the case if our holdings were more
diversified.



Our
ability to attract, develop, and retain highly skilled and productive employees
is critical to the success of our business.



Our people
are our most valuable asset. Our ability to develop and retain our client base
and to obtain investment banking and advisory engagements depends upon the
reputation, judgment, business generation capabilities, and project execution
skills of highly skilled and often highly specialized employees, including our
executive officers. The unexpected loss of services of any of these key
employees and executive officers, or the inability to recruit and retain highly
qualified personnel in the future, could have an adverse effect on our business
and results of operations.



Financial
advisors typically take their clients with them when they leave us to work for a
competitor. From time to time, in addition to financial advisors, we have lost
equity research, investment banking, public finance, institutional sales and
trading professionals, and in some cases, clients, to our competitors.




Competition for personnel within the financial services industry is intense. The
cost of retaining skilled professionals in the financial services industry has
escalated considerably, as competition for these professionals has intensified.
Employers in the industry are increasingly offering guaranteed contracts,
upfront payments, and increased compensation. These can be important factors in
a current employee's decision to leave us as well as a prospective employee's
decision to join us. As competition for skilled professionals in the industry
increases, we may have to devote more significant resources to attracting and
retaining qualified personnel. In particular, our financial results may be
adversely affected by the amortization costs incurred by us in connection with
the upfront loans we offer to financial advisors.



Moreover,
companies in our industry whose employees accept positions with competitors
frequently claim that those competitors have engaged in unfair hiring practices.
We are currently subject to several such claims and may be subject to additional
claims in the future as we seek to hire qualified personnel, some of whom may
currently be working for our competitors. Some of these claims may result in
material litigation. We could incur substantial costs in defending ourselves
against these claims, regardless of their merits. Such claims could also
discourage potential employees who currently work for our competitors from
joining us.



19










We may
recruit financial advisors, make strategic acquisitions of businesses, or divest
or exit existing businesses, which could cause us to incur unforeseen expenses
and could have disruptive effects on our business and may strain our resources.



Our growth
strategies have included, and will continue to include, the recruitment of
financial advisors and strategic acquisitions. Over the last few years, we have
completed several significant acquisitions. These acquisitions or any
acquisition that we determine to pursue will be accompanied by a number of
risks. The growth of our business and expansion of our client base have
strained, and may continue to strain, our management and administrative
resources. Costs or difficulties relating to such transactions, including
integration of financial advisors and other employees, products and services,
technology systems, accounting systems, and management controls, may be greater
than expected. Unless offset by a growth of revenues, the costs associated with
these investments will reduce our operating margins. In addition, because, as
noted above, financial professionals typically take their clients with them when
they leave, if key employees or other senior management personnel of the
businesses we have acquired determine that they do not wish to remain with our
company over the long term or at all, we would not inherit portions of the
client base of those businesses, which would reduce the value of those
acquisitions to us.



In
addition to past growth, we cannot assure investors that we will be able to
manage our future growth successfully. The inability to do so could have a
material adverse effect on our business, financial condition, and results of
operations. After we announce or complete any given acquisition in the future,
our share price could decline if investors view the transaction as too costly or
unlikely to improve our competitive position. We may be unable to retain key
personnel after any such transaction, and the transaction may impair
relationships with customers and business partners. These difficulties could
disrupt our ongoing business, increase our expenses, and adversely affect our
operating results and financial condition. In addition, we may be unable to
achieve anticipated benefits and synergies from any such transaction as fully as
expected or within the expected time frame. Divestitures or elimination of
existing businesses or products could have similar effects.



Moreover,
to the extent we pursue increased expansion to different geographic markets or
grow generally through additional strategic acquisitions, we cannot assure you
that we will identify suitable acquisition candidates, that acquisitions will be
completed on acceptable terms, or that we will be able to successfully integrate
the operations of any acquired business into our existing business. Such
acquisitions could be of significant size and involve firms located in regions
of the United States where we do not currently operate, or internationally. To
acquire and integrate a separate organization would further divert management
attention from other business activities. This diversion, together with other
difficulties we may encounter in integrating an acquired business, could have a
material adverse effect on our business, financial condition, and results of
operations. In addition, we may need to borrow money to finance acquisitions,
which would increase our leverage. Such funds might not be available on terms as
favorable to us as our current borrowing terms or at all.



The rapid
growth of Stifel Bank may expose us to increased operational risk, credit risk,
and sensitivity to market interest rates along with increased regulation,
examinations, and supervision by regulators.  



We have
experienced rapid growth in the balance sheet of Stifel Bank. The increase is
primarily attributable to the growth in securities-based loans and deposits as a
result of the UBS Acquired Locations acquisition. Although our stock-secured
loans are collateralized by assets held in brokerage accounts, we are exposed to
some credit and operational risk associated with these loans. We describe some
of the integration-related operational risks associated with our recent
acquisitions above, which includes many of the same risks related to the growth
of Stifel Bank. With the increase in deposits and resulting liquidity, we have
been able to expand our investment portfolio, primarily with government agency
securities. In addition, Stifel Bank has significantly grown its mortgage
banking business. Although we believe we have adequate underwriting policies in
place, there are inherent risks associated with the mortgage banking business.
For further discussion of our segments, including our Stifel Bank reporting
unit, see Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Segment Analysis."



As a
result of the high percentage of our assets and liabilities that are in the form
of interest-bearing or interest-related instruments, we are more sensitive to
changes in interest rates, in the shape of the yield curve, or in relative
spreads between market interest rates.  



The
monetary, tax, and other policies of the government and its agencies, including
the Federal Reserve, have a significant impact on interest rates and overall
financial market performance. An important function of the Federal Reserve is to
regulate the national supply of bank credit and market interest rates. The
actions of the Federal Reserve influence the rates of interest that we charge on
loans and that we pay on borrowings and interest-bearing deposits, which may
also affect the value of our on-balance sheet and off-balance sheet financial
instruments. We cannot predict the nature or timing of future changes in
monetary, tax, and other policies or the effect that they may have on our
activities and results of operations.  



In
addition, Stifel Bank is heavily regulated at the state and federal level. This
regulation is to protect depositors, federal deposit insurance funds, consumers,
and the banking system as a whole, not our stockholders. Federal and state
regulations can significantly restrict our businesses, and we are subject to
various regulatory actions, which could include fines, penalties, or other
sanctions for violations of laws and regulatory rules if we are ultimately found
to be out of compliance.


20










We may
experience losses associated with mortgage repurchases and indemnification
obligations.  



Through
Stifel Bank, in the normal course of business, we originate residential mortgage
loans and sell them to investors. We are subject to the inherent risk associated
with selling mortgage loans in the secondary market. We may be required to
repurchase mortgage loans that have been sold to investors in the event there
are breaches of certain representations and warranties contained within the
sales agreements. While we have yet to repurchase a loan sold to an investor, we
may be required to repurchase mortgage loans that were sold to investors in the
event that there was inadequate underwriting or fraud, or in the event that the
loans become delinquent shortly after they are originated. We also may be
required to indemnify certain purchasers and others against losses they incur in
the event of breaches of representations and warranties and in various other
circumstances, and the amount of such losses could exceed the repurchase amount
of the related loans. Consequently, we may be exposed to credit risk associated
with sold loans. There is no assurance that any such losses would not materially
and adversely affect our business, financial condition, and results of
operations.  



Our risk
management policies and procedures may leave us exposed to unidentified or
unanticipated risk.



We seek to
manage, monitor, and control our operational, legal, and regulatory risk through
operational and compliance reporting systems, internal controls, management
review processes, and other mechanisms; however, there can be no assurance that
our procedures will be fully effective. Further, our risk management methods are
based on an evaluation of information regarding markets, clients, and other
matters that are based on assumptions that may no longer be accurate. In
addition, we have undergone significant growth in recent years. A failure to
adequately manage our growth, or to effectively manage our risk, could
materially and adversely affect our business and financial condition. We must
also address potential conflicts of interest that arise in our business. We have
procedures and controls in place to address conflicts of interest, but
identifying and managing potential conflicts of interest can be complex and
difficult, and our reputation could be damaged if we fail, or appear to fail, to
deal appropriately with conflicts of interest. See Item 7A, "Quantitative and
Qualitative Disclosures About Market Risk," for more information on how we
monitor and manage market and certain other risks.  



We
continually encounter technological change, and we may have fewer resources than
many of our competitors to continue to invest in technological improvements,
which are important to attract and retain financial advisors.



We rely
extensively on electronic data processing and communications systems. Adapting
or developing our technology systems to meet new regulatory requirements, client
needs, and industry demands is critical for our business. Introduction of new
technologies presents new challenges on a regular basis. In addition to better
serving our clients, the effective use of technology increases efficiency and
enables our company to reduce costs. Our future success will depend, in part,
upon our ability to successfully maintain and upgrade our systems and our
ability to address the needs of our clients by using technology to provide
products and services that will satisfy their demands for convenience, as well
as to create additional efficiencies in our operations. Many of our competitors
have substantially greater resources to invest in technological improvements. We
cannot assure you that we will be able to effectively upgrade our systems,
implement new technology-driven products and services, or be successful in
marketing these products and services to our clients.



Our
operations and infrastructure and those of the service providers upon which we
rely may malfunction or fail.



Our
business is highly dependent on our ability to process, on a daily basis, a
large number of transactions across diverse markets, and the transactions we
process have become increasingly complex. The inability of our systems to
accommodate an increasing volume of transactions could also constrain our
ability to expand our businesses. If any of these systems do not operate
properly or are disabled, or if there are other shortcomings or failures in our
internal processes, people, or systems, we could suffer impairments, financial
loss, a disruption of our businesses, liability to clients, regulatory
intervention, or reputational damage.



We have
outsourced certain aspects of our technology infrastructure, including trade
processing, data centers, disaster recovery systems, and wide area networks, as
well as market data servers, which constantly broadcast news, quotes, analytics,
and other important information to the desktop computers of our financial
advisors. We contract with other vendors to produce, batch, and mail our
confirmations and customer reports. We are dependent on our technology providers
to manage and monitor those functions. A disruption of any of the outsourced
services would be out of our control and could negatively impact our business.
We have experienced disruptions on occasion, none of which has been material to
our operations and results. However, there can be no guarantee that future
disruptions with these providers will not occur.



We also
face the risk of operational failure, termination, or capacity constraints of
any of the clearing agents, exchanges, clearing houses, or other financial
intermediaries we use to facilitate our securities transactions. Any such
failure or termination could adversely affect our ability to effect transactions
and to manage our exposure to risk.



21










Our
operations also rely on the secure processing, storage, and transmission of
confidential and other information in our computer systems and networks.
Although we take protective measures and endeavor to modify them as
circumstances warrant, our computer systems, software, and networks may be
vulnerable to unauthorized access, computer viruses or other malicious code, and
other events that could have a security impact. If one or more of such events
occur, this could jeopardize our or our clients' or counterparties' confidential
and other information processed, stored in, and transmitted through our computer
systems and networks, or otherwise cause interruptions or malfunctions in our,
our clients', our counterparties', or third parties' operations, which could
result in significant losses or reputational damage. We may be required to
expend significant additional resources to modify our protective measures, to
investigate and remediate vulnerabilities or other exposures, or to make
required notifications, and we may be subject to litigation and financial losses
that are either not insured or not fully covered through any insurance
maintained by us.



We may
suffer losses if our reputation is harmed.



Our
ability to attract and retain customers and employees may be adversely affected
to the extent our reputation is damaged. If we fail to deal with, or appear to
fail to deal with, various issues that may give rise to reputational risk, we
could harm our business prospects. These issues include, but are not limited to,
appropriately dealing with potential conflicts of interest, legal and regulatory
requirements, ethical issues, money-laundering, privacy, record-keeping, sales
and trading practices, and the proper identification of the legal, reputational,
credit, liquidity, and market risks inherent in our products. Failure to
appropriately address these issues could also give rise to additional legal risk
to us, which could, in turn, increase the size and number of claims and damages
asserted against us or subject us to regulatory enforcement actions, fines, and
penalties.



Our
current stockholders may experience dilution in their holdings if we issue
additional shares of common stock as a result of future offerings or
acquisitions where we use our common stock.



As part of
our business strategy, we may continue to seek opportunities for growth through
strategic acquisitions, in which we may consider issuing equity securities as
part of the consideration. Additionally, we may obtain additional capital
through the public or private sale of equity securities. If we sell equity
securities, the value of our common stock could experience dilution.
Furthermore, these securities could have rights, preferences, and privileges
more favorable than those of the common stock. Moreover, if we issue additional
shares of common stock in connection with future acquisitions or as a result of
a financing, investors' ownership interest in our company will be diluted.



The
issuance of any additional shares of common stock or securities convertible into
or exchangeable for common stock or that represent the right to receive common
stock or the exercise of such securities, could be substantially dilutive to
stockholders of our common stock. Holders of our shares of common stock have no
preemptive rights that entitle holders to purchase their pro rata share of any
offering of shares of any class or series and, therefore, such sales or
offerings could result in increased dilution to our stockholders. The market
price of our common stock could decline as a result of sales of shares of our
common stock or securities convertible into or exchangeable for common stock.



We are
subject to risks of legal proceedings, which may result in significant losses to
us that we cannot recover. Claimants in these proceedings may be customers,
employees, or regulatory agencies, among others, seeking damages for mistakes,
errors, negligence, or acts of fraud by our employees.



Many
aspects of our business subject us to substantial risks of potential liability
to customers and to regulatory enforcement proceedings by state and federal
regulators. Participants in the financial services industry face an increasing
amount of litigation and arbitration proceedings. Dissatisfied clients regularly
make claims against broker-dealers and their employees for, among others,
negligence, fraud, unauthorized trading, suitability, churning, failure to
supervise, breach of fiduciary duty, employee errors, intentional misconduct,
unauthorized transactions by financial advisors or traders, improper recruiting
activity, and failures in the processing of securities transactions. These types
of claims expose us to the risk of significant loss. Acts of fraud are difficult
to detect and deter, and while we believe our supervisory procedures are
reasonably designed to detect and prevent violations of applicable laws, rules,
and regulations, we cannot assure investors that our risk management procedures
and controls will prevent losses from fraudulent activity. In our role as
underwriter and selling agent, we may be liable if there are material
misstatements or omissions of material information in prospectuses and other
communications regarding underwritten offerings of securities. At any point in
time, the aggregate amount of existing claims against us could be material.
While we do not expect the outcome of any existing claims against us to have a
material adverse impact on our business, financial condition, or results of
operations, we cannot assure you that these types of proceedings will not
materially and adversely affect our company. We do not carry insurance that
would cover payments regarding these liabilities, with the exception of fidelity
coverage with respect to certain fraudulent acts of our employees. In addition,
our bylaws provide for the indemnification of our officers, directors, and
employees to the maximum extent permitted under Delaware law. In the future, we
may be the subject of indemnification assertions under these documents by our
officers, directors, or employees who have or may become defendants in
litigation. These claims for indemnification may subject us to substantial risks
of potential liability.  For a discussion of our legal matters (including ARS
and OPEB litigation) and our approach to managing legal risk, see Item 3, "Legal
Proceedings."


22










 



In
addition to the foregoing financial costs and risks associated with potential
liability, the costs of defending litigation and claims has increased over the
last several years. The amount of outside attorneys' fees incurred in connection
with the defense of litigation and claims could be substantial and might
materially and adversely affect our results of operations as such fees occur.
Securities class action litigation, in particular, is highly complex and can
extend for a protracted period of time, thereby substantially increasing the
costs incurred to resolve this litigation.



Misconduct
by our employees or by the employees of our business partners could harm us and
is difficult to detect and prevent.



There have
been a number of highly publicized cases involving fraud or other misconduct by
employees in the financial services industry in recent years, and we run the
risk that employee misconduct could occur at our company. For example,
misconduct could involve the improper use or disclosure of confidential
information, which could result in regulatory sanctions and serious reputational
or financial harm. It is not always possible to deter misconduct, and the
precautions we take to detect and prevent this activity may not be effective in
all cases. Our ability to detect and prevent misconduct by entities with which
we do business may be even more limited. We may suffer reputational harm for any
misconduct by our employees or those entities with which we do business.

Provisions
in our certificate of incorporation and bylaws and of Delaware law may prevent
or delay an acquisition of our company, which could decrease the market value of
our common stock.  



Our
articles of incorporation and bylaws and Delaware law contain provisions that
are intended to deter abusive takeover tactics by making them unacceptably
expensive to prospective acquirors and to encourage prospective acquirors to
negotiate with our board of directors rather than to attempt a hostile takeover.
Delaware law also imposes some restrictions on mergers and other business
combinations between us and any holder of 15% or more of our outstanding common
stock. We believe these provisions protect our stockholders from coercive or
otherwise unfair takeover tactics by requiring potential acquirors to negotiate
with our board of directors and by providing our board of directors with more
time to assess any acquisition proposal. These provisions are not intended to
make our company immune from takeovers. However, these provisions apply even if
the offer may be considered beneficial by some stockholders and could delay or
prevent an acquisition that our board of directors determines is not in the best
interests of our company and our stockholders.   



ITEM 1B. 


UNRESOLVED
STAFF COMMENTS



None.



23











ITEM 2. 


PROPERTIES



The
following table sets forth the location, approximate square footage, and use of
each of the principal properties used by our company during the year ended
December 31, 2010. We lease or sublease all of these properties. All properties
are leased under operating leases. Such leases expire at various times through
2021. We have multiple sublease arrangements for approximately 40,000 square
feet of office space in San Francisco, California, the terms of which expire on
April 30, 2012.


	
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
	
	
		
		


		Location
		
		

		 
		
		


		Approximate Square Footage
		
		

		 
		
		


		Use
	
	
		
		


		St. Louis, Missouri
		
		

		 
		
		


		127,000

		

		 

		

		 
		
		

		 
		
		


		Headquarters and administrative offices of Stifel Nicolaus, Global
		Wealth Management operations (including CSA), and Institutional Group
		operations.

		

		 
	
	
		
		


		New York, New York
		
		

		 
		
		


		103,000

		

		 
		
		

		 
		
		


		Global Wealth Management and Institutional Group operations.
	
	
		
		


		Baltimore, Maryland
		
		

		 
		
		


		76,000

		

		 
		
		

		 
		
		


		Institutional Group operations and Administrative offices.

		

		 
	
	
		
		


		San Francisco, California
		
		

		 
		
		


		68,000
		
		

		 
		
		


		Global Wealth Management and Institutional Group operations.
	
	
		
		


		Florham Park, New Jersey
		
		

		 
		
		


		50,000

		

		 

		

		 
		
		

		 
		
		


		Global Wealth Management and Institutional Group operations.
	
	
		
		


		Toronto, Ontario
		
		

		 
		
		


		20,000
		
		

		 
		
		


		Institutional Group operations.
	



We also
maintain operations in 305 branch offices in various locations throughout the
United States and in certain foreign countries, primarily for our broker-dealer
business. Our Global Wealth Management segment leases 285 offices, which are
primarily concentrated in the Midwest and Mid-Atlantic regions with a growing
presence in the Northeast, Southeast, and Western United States. In addition,
Stifel Bank leases one location in the St. Louis area for its administrative
offices and operations. Our Institutional Group segment leases 19 offices in the
United States and certain foreign locations. We believe that, at the present
time, the space available to us in the facilities under our current leases and
co-location arrangements are suitable and adequate to meet our needs and that
such facilities have sufficient productive capacity and are appropriately
utilized.



Leases for
the branch offices of CSA, our independent contractor firm, are the
responsibility of the respective independent financial advisors. The Geneva and
Madrid Institutional Group branch offices are the responsibility of the
respective consultancies associated with SN Ltd.



See Note
18 of the Notes to Consolidated Financial Statements for further information
regarding our lease obligations.



24










ITEM 3. 


LEGAL
PROCEEDINGS



Our
company and its subsidiaries are named in and subject to various proceedings and
claims arising primarily from our securities business activities, including
lawsuits, arbitration claims, class actions, and regulatory matters. Some of
these claims seek substantial compensatory, punitive, or indeterminate damages.
Our company and its subsidiaries are also involved in other reviews,
investigations, and proceedings by governmental and self-regulatory
organizations regarding our business, which may result in adverse judgments,
settlements, fines, penalties, injunctions, and other relief. We are contesting
the allegations in these claims, and we believe that there are meritorious
defenses in each of these lawsuits, arbitrations, and regulatory investigations.
In view of the number and diversity of claims against the company, the number of
jurisdictions in which litigation is pending, and the inherent difficulty of
predicting the outcome of litigation and other claims, we cannot state with
certainty what the eventual outcome of pending litigation or other claims will
be. In our opinion, based on currently available information, review with
outside legal counsel, and consideration of amounts provided for in our
consolidated financial statements with respect to these matters, the ultimate
resolution of these matters will not have a material adverse impact on our
financial position. However, resolution of one or more of these matters may have
a material effect on the results of operations in any future period, depending
upon the ultimate resolution of those matters and depending upon the level of
income for such period.



The
regulatory investigations include inquiries from the SEC and a state regulatory
authority relating to our role in investments made by five Southeastern
Wisconsin school districts (the "school districts") in transactions involving
collateralized debt obligations ("CDO"). We are fully cooperating with the SEC
and the state regulatory authority in these investigations and have provided
information and testimony.



We were
named in a civil lawsuit filed in the Circuit Court of Milwaukee, Wisconsin (the
"Wisconsin State Court") on September 29, 2008. The lawsuit has been filed
against our company, Stifel Nicolaus, Royal Bank of Canada Europe Ltd. ("RBC"),
and certain other RBC entities (collectively the "Defendants") by the school
districts and the individual trustees for other post-employment benefit ("OPEB")
trusts established by those school districts (collectively the "Plaintiffs").





The suit
arises out of purchases of certain CDO by the OPEB trusts. The RBC entities
structured and served as "arranger" for the CDO. We served as the placement
agent/broker in connection with the transactions.  The school districts each
formed trusts that made investments designed to address their OPEB liabilities. 
The total amount of the investments made by the OPEB trusts was $200.0 million.
Since the investments were made, we believe their value has declined
significantly and may ultimately result in a total loss for the OPEB trusts. 
The Plaintiffs have asserted that the school districts contributed $37.5 million
to the OPEB trusts to purchase the investments. The balance of $162.5 million
used to purchase the investments was borrowed by the OPEB trusts from Depfa
Bank.  The recourse of Depfa Bank, as the lender, is each of the OPEB trusts'
respective assets and the moral obligation of each school district. The legal
claims asserted include violation of the Wisconsin Securities Act, fraud, and
negligence. The lawsuit seeks equitable relief, unspecified compensatory
damages, treble damages, punitive damages, and attorney's fees and costs. The
Plaintiffs claim that the RBC entities and our company either made
misrepresentations or failed to disclose material facts in connection with the
sale of the CDO, and thus allegedly violated the Wisconsin Securities Act. We
believe the Plaintiffs reviewed and understood the relevant offering materials
and that the investments were suitable based upon, among other things, our
receipt of written acknowledgement of risks from each of the Plaintiffs. The
Wisconsin State Court denied the Defendants' motions to dismiss, and the
Defendants have responded to the allegations of the Second Amended Complaint,
denying the substantive allegations and asserting various affirmative defenses.
Stifel Nicolaus and the RBC entities have asserted cross-claims for indemnity
and contribution against each other. We believe, based upon currently available
information and review with outside counsel, that we have meritorious defenses
to this lawsuit, and intend to vigorously defend all of the Plaintiffs' claims.



Prior to
the acquisition of TWPG, FINRA commenced an administrative proceeding against
TWP, a wholly owned broker-dealer subsidiary of TWPG, related to a transaction
undertaken by a former employee in which approximately $15.7 million of ARS were
sold from a TWPG account to the accounts of three customers. FINRA has alleged
that TWP violated various NASD and FINRA rules, as well as Section 10(b) of the
Securities Exchange Act and Rule 10b-5. TWP has filed an answer denying the
substantive allegations and asserting various affirmative defenses. TWP has
repurchased the ARS at issue from the customers at par. FINRA is seeking fines
and other relief against TWP and the former employee. TWP is defending the FINRA
proceeding vigorously.



ITEM 4. 


(Removed
and Reserved)


25










PART
II



ITEM 5.   
MARKET FOR REGISTRANT'S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES



Market
Information



Our common
stock is traded on the New York Stock Exchange and Chicago Stock Exchange under
the symbol "SF." The closing sale price of our common stock as reported on the
New York Stock Exchange on February 23, 2011, was $70.00. As of that date, our
common stock was held by approximately 15,400 shareholders. The following table
sets forth for the periods indicated the high and low trades for our common
stock:


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
	
	
		
		


		 
		
		


		High
		
		


		 
		
		


		Low
		
		


		 
		
		


		High
		
		


		 
		
		


		Low
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		First quarter
		
		


		$
		
		


		59.63
		
		


		 
		
		


		$
		
		


		49.60
		
		


		 
		
		


		$
		
		


		48.41
		
		


		 
		
		


		$
		
		


		29.13
		
		


		 
	
	
		
		


		Second quarter
		
		


		$
		
		


		59.51
		
		


		 
		
		


		$
		
		


		43.05
		
		


		 
		
		


		$
		
		


		52.33
		
		


		 
		
		


		$
		
		


		41.00
		
		


		 
	
	
		
		


		Third quarter
		
		


		$
		
		


		50.00
		
		


		 
		
		


		$
		
		


		42.68
		
		


		 
		
		


		$
		
		


		57.23
		
		


		 
		
		


		$
		
		


		43.43
		
		


		 
	
	
		
		


		Fourth quarter
		
		


		$
		
		


		63.13
		
		


		 
		
		


		$
		
		


		43.88
		
		


		 
		
		


		$
		
		


		59.54
		
		


		 
		
		


		$
		
		


		50.76
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



We did not
pay cash dividends during 2010 or 2009 and do not anticipate paying cash
dividends in the foreseeable future. The payment of dividends on our common
stock is subject to several factors, including operating results, financial
requirements of our company, and the availability of funds from our
subsidiaries. See Note 20 of the Notes to Consolidated Financial Statements for
more information on the capital restrictions placed on our broker-dealer
subsidiaries and Stifel Bank.



Securities
Authorized for Issuance Under Equity Compensation Plans




Information about securities authorized for issuance under our equity
compensation plans is contained in Item 12 - "Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters."



Issuer Purchases of Equity Securities





There were
no unregistered sales of equity securities during the quarter ended December 31,
2010. There were also no purchases made by or on behalf of Stifel Financial
Corp. or any "affiliated purchaser"
(as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934) of
our common stock during the quarter ended December 31, 2010.



We have an
ongoing authorization, as amended, from the Board of Directors to repurchase our
common stock in the open market or in negotiated transactions. On August 3,
2010, the Board authorized the repurchase of an additional 2,000,000 shares. At
December 31, 2010, the maximum number of shares that may yet be purchased under
this plan was
2,038,517.




26










Stock
Performance Graph



Five-Year
Shareholder Return Comparison



The graph
below compares the cumulative stockholder return on our common stock with the
cumulative total return of a Peer Group Index, the Standard & Poor's 500 Index
("S&P 500"), and the Securities Broker-Dealer Index for the five year period
ended December 31, 2010. The AMEX Securities Broker-Dealer Index consists of
twelve firms in the brokerage sector. The Broker-Dealer Index does not include
our company. The stock price information shown on the graph below is not
necessarily indicative of future price performance.  



The
material in this report is not deemed "filed" with the SEC and is not to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filings.



The
following table and graph assume that $100.00 was invested on December 31, 2005,
in our common stock, the Peer Group Index, the S&P 500 Index, and the AMEX
Securities Broker-Dealer Index, with reinvestment of dividends.


	
		
		


		 
		
		


		 
		
		


		2006
		
		


		 
		
		


		2007
		
		


		 
		
		


		2008
		
		


		 
		
		


		2009
		
		


		 
		
		


		2010
		
		


		 
	
	
		
		


		Stifel Financial Corp.
		
		


		 
		
		


		$
		
		


		104
		
		


		 
		
		


		$
		
		


		140
		
		


		 
		
		


		$
		
		


		183
		
		


		 
		
		


		$
		
		


		236
		
		


		 
		
		


		$
		
		


		248
		
		


		 
	
	
		
		


		Peer Group
		
		


		 
		
		


		$
		
		


		135
		
		


		 
		
		


		$
		
		


		132
		
		


		 
		
		


		$
		
		


		91
		
		


		 
		
		


		$
		
		


		122
		
		


		 
		
		


		$
		
		


		139
		
		


		 
	
	
		
		


		S&P 500 Index
		
		


		 
		
		


		$
		
		


		116
		
		


		 
		
		


		$
		
		


		122
		
		


		 
		
		


		$
		
		


		77
		
		


		 
		
		


		$
		
		


		97
		
		


		 
		
		


		$
		
		


		112
		
		


		 
	
	
		
		


		AMEX Securities Broker-Dealer Index
		
		


		 
		
		


		$
		
		


		123
		
		


		 
		
		


		$
		
		


		106
		
		


		 
		
		


		$
		
		


		39
		
		


		 
		
		


		$
		
		


		59
		
		


		 
		
		


		$
		
		


		62
		
		


		 
	





* Compound Annual Growth Rate


27










The Peer
Group Index consists of the following companies that serve the same markets as
us and which compete with us in one or more markets:


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Oppenheimer Holdings, Inc.
		
		


		 
		
		


		SWS Group, Inc.
		
		


		 
	
	
		
		


		Sanders Morris Harris Group Inc.
		
		


		 
		
		


		Stifel Financial Corp.
		
		


		 
	
	
		
		


		Raymond James Financial, Inc.
		
		


		 
		
		


		Piper Jaffray Companies
		
		


		 
	



 


28










ITEM
6.   
SELECTED
FINANCIAL DATA



The
following selected consolidated financial data (presented in thousands, except
per share amounts) is derived from our consolidated financial statements. This
data should be read in conjunction with the consolidated financial statements
and notes thereto and with Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."



	
		
			
			

			

			 
			
			


			 
			
			


			Year Ended December 31,
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			2010
			
			


			 
			
			


			2009
			
			


			 
			
			


			2008
			
			


			 
			
			


			2007
			
			


			 
			
			


			2006
			
			


			 
		
		
			
			

			

			Revenues:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Principal transactions
			
			


			 
			
			


			$
			
			


			453,533
			
			


			 
			
			


			$ 
			
			


			458,188
			
			


			 
			
			


			$ 
			
			


			293,285
			
			


			 
			
			


			$
			
			


			139,248
			
			


			 
			
			


			$
			
			


			86,365
			
			


			 
		
		
			
			


			Commissions
			
			


			 
			
			


			 
			
			


			445,260
			
			


			 
			
			


			 
			
			


			345,520
			
			


			 
			
			


			 
			
			


			341,090
			
			


			 
			
			


			 
			
			


			315,514
			
			


			 
			
			


			 
			
			


			199,056
			
			


			 
		
		
			
			


			Investment banking
			
			


			 
			
			


			 
			
			


			218,104
			
			


			 
			
			


			 
			
			


			125,807
			
			


			 
			
			


			 
			
			


			83,710
			
			


			 
			
			


			 
			
			


			169,413
			
			


			 
			
			


			 
			
			


			82,856
			
			


			 
		
		
			
			


			Asset management and service fees
			
			


			 
			
			


			 
			
			


			193,159
			
			


			 
			
			


			 
			
			


			117,357
			
			


			 
			
			


			 
			
			


			122,773
			
			


			 
			
			


			 
			
			


			101,610
			
			


			 
			
			


			 
			
			


			57,713
			
			


			 
		
		
			
			


			Interest
			
			


			 
			
			


			 
			
			


			65,326
			
			


			 
			
			


			 
			
			


			46,860
			
			


			 
			
			


			 
			
			


			50,148
			
			


			 
			
			


			 
			
			


			59,071
			
			


			 
			
			


			 
			
			


			35,804
			
			


			 
		
		
			
			


			Other income/(loss)
			
			


			 
			
			


			 
			
			


			19,855
			
			


			 
			
			


			 
			
			


			9,138
			
			


			 
			
			


			 
			
			


			(2,159
			
			


			)
			
			


			 
			
			


			8,234
			
			


			 
			
			


			 
			
			


			9,594
			
			


			 
		
		
			
			


			Total revenues
			
			


			 
			
			


			 
			
			


			1,395,237
			
			


			 
			
			


			 
			
			


			1,102,870
			
			


			 
			
			


			 
			
			


			888,847
			
			


			 
			
			


			 
			
			


			793,090
			
			


			 
			
			


			 
			
			


			471,388
			
			


			 
		
		
			
			


			Interest expense
			
			


			 
			
			


			 
			
			


			13,211
			
			


			 
			
			


			 
			
			


			12,234
			
			


			 
			
			


			 
			
			


			18,510
			
			


			 
			
			


			 
			
			


			30,025
			
			


			 
			
			


			 
			
			


			19,581
			
			


			 
		
		
			
			


			Net revenues
			
			


			 
			
			


			 
			
			


			1,382,026
			
			


			 
			
			


			 
			
			


			1,090,636
			
			


			 
			
			


			 
			
			


			870,337
			
			


			 
			
			


			 
			
			


			763,065
			
			


			 
			
			


			 
			
			


			451,807
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			Non-interest expenses:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Compensation and benefits
			
			


			 
			
			


			 
			
			


			1,056,202
			
			


			 
			
			


			 
			
			


			718,115
			
			


			 
			
			


			 
			
			


			582,778
			
			


			 
			
			


			 
			
			


			543,021
			
			


			 
			
			


			 
			
			


			329,703
			
			


			 
		
		
			
			


			Occupancy and equipment rental
			
			


			 
			
			


			 
			
			


			115,742
			
			


			 
			
			


			 
			
			


			89,741
			
			


			 
			
			


			 
			
			


			67,984
			
			


			 
			
			


			 
			
			


			57,796
			
			


			 
			
			


			 
			
			


			30,751
			
			


			 
		
		
			
			


			Communications and office supplies
			
			


			 
			
			


			 
			
			


			69,929
			
			


			 
			
			


			 
			
			


			54,745
			
			


			 
			
			


			 
			
			


			45,621
			
			


			 
			
			


			 
			
			


			42,355
			
			


			 
			
			


			 
			
			


			26,666
			
			


			 
		
		
			
			


			Commissions and floor brokerage
			
			


			 
			
			


			 
			
			


			26,301
			
			


			 
			
			


			 
			
			


			23,416
			
			


			 
			
			


			 
			
			


			13,287
			
			


			 
			
			


			 
			
			


			9,921
			
			


			 
			
			


			 
			
			


			6,388
			
			


			 
		
		
			
			


			Other operating expenses
			
			


			 
			
			


			 
			
			


			114,081
			
			


			 
			
			


			 
			
			


			84,205
			
			


			 
			
			


			 
			
			


			68,898
			
			


			 
			
			


			 
			
			


			56,126
			
			


			 
			
			


			 
			
			


			31,930
			
			


			 
		
		
			
			


			Total non-interest expenses
			
			


			 
			
			


			 
			
			


			1,382,255
			
			


			 
			
			


			 
			
			


			970,222
			
			


			 
			
			


			 
			
			


			778,568
			
			


			 
			
			


			 
			
			


			709,219
			
			


			 
			
			


			 
			
			


			425,438
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			Income before income tax expense
			
			


			 
			
			


			 
			
			


			(229
			
			


			) 
			
			


			 
			
			


			120,414
			
			


			 
			
			


			 
			
			


			91,769
			
			


			 
			
			


			 
			
			


			53,846
			
			


			 
			
			


			 
			
			


			26,369
			
			


			 
		
		
			
			


			Provision for income taxes
			
			


			 
			
			


			 
			
			


			(2,136
			
			


			) 
			
			


			 
			
			


			44,616
			
			


			 
			
			


			 
			
			


			36,267
			
			


			 
			
			


			 
			
			


			21,676
			
			


			 
			
			


			 
			
			


			10,938
			
			


			 
		
		
			
			

			

			Net income
			
			


			 
			
			


			$
			
			


			1,907
			
			


			 
			
			


			$
			
			


			75,798
			
			


			 
			
			


			$
			
			


			55,502
			
			


			 
			
			


			$
			
			


			32,170
			
			


			 
			
			


			$
			
			


			15,431
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			Earnings per common share:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Basic
			
			


			 
			
			


			$
			
			


			0.06
			
			


			 
			
			


			$
			
			


			2.68
			
			


			 
			
			


			$
			
			


			2.31
			
			


			 
			
			


			$
			
			


			1.48
			
			


			 
			
			


			$
			
			


			0.89
			
			


			 
		
		
			
			


			Diluted
			
			


			 
			
			


			$
			
			


			0.05
			
			


			 
			
			


			$
			
			


			2.35
			
			


			 
			
			


			$
			
			


			1.98
			
			


			 
			
			


			$
			
			


			1.25
			
			


			 
			
			


			$
			
			


			0.74
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			Weighted average number of common shares outstanding:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Basic
			
			


			 
			
			


			 
			
			


			32,482
			
			


			 
			
			


			 
			
			


			28,297
			
			


			 
			
			


			 
			
			


			24,069
			
			


			 
			
			


			 
			
			


			21,754
			
			


			 
			
			


			 
			
			


			17,269
			
			


			 
		
		
			
			


			Diluted
			
			


			 
			
			


			 
			
			


			38,448
			
			


			 
			
			


			 
			
			


			32,294
			
			


			 
			
			


			 
			
			


			28,073
			
			


			 
			
			


			 
			
			


			25,723
			
			


			 
			
			


			 
			
			


			20,863
			
			


			 
		
		
			
			

			

			Financial Condition
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Total assets
			
			


			 
			
			


			$
			
			


			4,218,030
			
			


			 
			
			


			$
			
			


			3,167,356
			
			


			 
			
			


			$
			
			


			1,558,145
			
			


			 
			
			


			$
			
			


			1,499,440
			
			


			 
			
			


			$
			
			


			1,084,774
			
			


			 
		
		
			
			


			Long-term obligations
			
			


			 
			
			


			$
			
			


			90,741
			
			


			 
			
			


			$
			
			


			101,979
			
			


			 
			
			


			$
			
			


			106,860
			
			


			 
			
			


			$
			
			


			124,242
			
			


			 
			
			


			$
			
			


			98,379
			
			


			 
		
		
			
			


			Shareholders' equity
			
			


			 
			
			


			$
			
			


			1,258,798
			
			


			 
			
			


			$
			
			


			873,446
			
			


			 
			
			


			$
			
			


			593,185
			
			


			 
			
			


			$
			
			


			424,637
			
			


			 
			
			


			$
			
			


			220,265
			
			


			 
		
	




On May 12,
2008, our Board of Directors approved a 50% stock dividend, in the form of a
three-for-two stock split, of our common stock payable on June 12, 2008 to
stockholders of record as of May 29, 2008. Per share data, for all periods
presented, have been adjusted to give effect to this stock split.



The
following items should be considered when comparing the data from year-to-year:
1) the continued expansion of our Private Client Group, including the
acquisition of MJSK in December 2006; 2) the acquisition of Ryan Beck in
February 2007; 3) the acquisition of FirstService Bank in April 2007; 4) the
acquisition of Butler Wick on December 31, 2008; 5) the acquisition of the UBS
Acquired Locations during the third and fourth quarters of 2009; 6) the merger
with TWPG on July 1, 2010; and 7) the acceleration of our deferred compensation
expense during 2010 as a result of the plan modification. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," made part hereof, for a discussion of these items and other items
that may affect the comparability of data from year-to-year.


29










ITEM 7. 



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS



The
following discussion of the financial condition and results of operations of our
company should be read in conjunction with the Consolidated Financial Statements
and Notes thereto included in this Annual Report on Form 10-K for the year ended
December 31, 2010.




Unless otherwise indicated, the terms "we," "us," "our," or "our company" in
this report refer to Stifel Financial Corp. and its wholly owned subsidiaries.



Executive
Summary



We operate
as a financial services and bank holding company.
We have built a diversified business serving private clients, institutional
investors, and investment banking clients located across the country. Our
principal activities are: (i) private client services, including securities
transaction and financial planning services; (ii) institutional equity and fixed
income sales, trading and research, and municipal finance; (iii) investment
banking services, including mergers and acquisitions, public offerings, and
private placements; and (iv) retail and commercial banking, including personal
and commercial lending programs.



Our core
philosophy is based upon a tradition of trust, understanding, and studied
advice. We attract and retain experienced professionals by fostering a culture
of entrepreneurial, long-term thinking. We provide our private, institutional
and corporate clients quality, personalized service, with the theory that if we
place clients' needs first, both our clients and our company will prosper. Our
unwavering client and employee focus have earned us a reputation as one of the
leading brokerage and investment banking firms off Wall Street. We have grown
our business both organically and through opportunistic acquisitions.





We plan to
maintain our focus on revenue growth with a continued appreciation for the
development of quality client relationships. Within our private client business,
our efforts will be focused on recruiting experienced financial advisors with
established client relationships. Within our capital markets business, our focus
continues to be on providing quality client management and product
diversification. In executing our growth strategy, we will continue to seek out
opportunities that allow us to take advantage of the consolidation among
middle-market firms, whereby allowing us to increase market share in our private
client and institutional group businesses.



Our
ability to attract and retain highly skilled and productive employees is
critical to the success of our business. Accordingly, compensation and benefits
comprise the largest component of our expenses, and our performance is dependent
upon our ability to attract, develop, and retain highly skilled employees who
are motivated and committed to providing the highest quality of service and
guidance to our clients.



On
July 1,
2010, we acquired Thomas Weisel Partners Group, Inc. ("TWPG"),
an investment bank focused principally on the growth sectors of the economy,
which generated revenues from three principal sources: investment banking,
brokerage, and asset management. The investment banking group is comprised of
two primary categories of services: corporate finance and strategic advisory.
The brokerage group provided equity sales and trading services to institutional
investors and offered brokerage and advisory services to high net worth
individuals and corporate clients. The asset management group consists of:
private investment funds, public equity investment products, and distribution
management. We believe the combination of our company and TWPG will allow us to
realize the benefits of the firms' highly complementary investment banking and
research platforms; accelerate our investment banking business growth by
expanding our presence in key growth areas of the global economy, particularly
in Technology, Healthcare, and Natural Resources; raise our profile within the
venture capital community, where TWPG maintains key relationships; enhance our
mergers and acquisitions advisory services and equities lead manager
credentials; and realize benefits from the expansion of our west coast market
presence and the expansion of our international capabilities through the
operations of SN Canada.



The
employees of the investment banking, research, and institutional brokerage
businesses of Thomas Weisel Partners, LLC ("TWP"), a wholly owned subsidiary of
TWPG, were transitioned into Stifel Nicolaus during the third quarter of 2010.
TWP will remain a wholly owned broker-dealer subsidiary of our company.



30










Our
overall financial results continue to be highly and directly correlated to the
direction and activity levels of the United States equity and fixed income
markets, our expansion of the Institutional Group segment, and the continued
expansion of our Global Wealth Management segment. Despite the significant
volatility in the market during the first half of 2010, we began to see signs of
improvement in the capital markets during the third and fourth quarters of 2010.
At December 31, 2010, the key indicators of the markets' performance, the Dow
Jones Industrial Average, the NASDAQ, and the S&P 500 closed 11.0%, 16.9%, and
12.8%, respectively, higher than their December 31, 2009 closing prices.





Results
for the year ended December 31, 2010



For the
year ended December 31, 2010, our net revenues increased 26.7% to a record $1.4
billion compared to $1.1 billion for the prior year, which represents our
fifteenth consecutive annual increase in net revenues. Net income decreased
97.5% to $1.9 million for the year ended December 31, 2010, compared to $75.8
million in 2009. Net income for 2010 included several significant expense items
(after-tax): (1)
$106.4
million of deferred compensation expense due to
the
modification of our deferred compensation plan, and (2) merger-related expenses
of $16.5 million related to the merger with TWPG.



Our
revenue growth was primarily derived from improved equity market conditions, the
acquisition of the UBS Acquired Locations at the end of 2009, and the recently
completed merger with TWPG. The increase in financial advisors, client assets,
and productivity and the improving equity capital markets have contributed to
the increase in our commissions and asset management fee revenues. Principal
transactions revenues, while positively impacted by the improved equity market
conditions, remained relatively consistent with 2009 as challenging fixed income
market conditions negatively impacted our principal transaction revenues. Our
fixed income institutional brokerage business was negatively impacted by the
challenging fixed income market conditions during 2010, which contributed to
lower trading volumes and the tightening of corporate bond spreads. The improved
market conditions and our merger with TWPG have contributed to the improvement
in our investment banking revenues from 2009. Our business does not produce
predictable earnings and is affected by many risk factors, such as the global
economic and credit slowdown, among others.



While we
have experienced an increase in market share due to market upheaval, we have
incurred additional expenses related to increased SIPC assessments, higher FDIC
premiums, including special assessments, increased litigation costs, and an
increase in the cost of growth as we continue our expansion efforts. These
additional costs have reduced our profit margins and may continue to do so in
the future if our revenue growth does not absorb the additional costs of
operating in the current environment. In addition to our increased operating
costs resulting from organic growth, we incurred significant costs related to
the acquisition of TWPG and a significant increase in compensation and benefits
expense resulting from the acceleration of our deferred compensation plan, which
aligned the requirements for vesting with
that of the TWPG deferred compensation plan.



External
Factors Impacting Our Business




Performance in the financial services industry in which we operate is highly
correlated to the overall strength of economic conditions and financial market
activity. Overall market conditions are a product of many factors, which are
beyond our control and mostly unpredictable. These factors may affect the
financial decisions made by investors, including their level of participation in
the financial markets. In turn, these decisions may affect our business results.
With respect to financial market activity, our profitability is sensitive to a
variety of factors, including the demand for investment banking services, as
reflected by the number and size of equity and debt financings and merger and
acquisition transactions, the volatility of the equity and fixed income markets,
the level and shape of various yield curves, the volume and value of trading in
securities, and the value of our customers' assets under management.



Although
we do not engage in significant proprietary trading for our own account, the
inventory of securities held to facilitate customer trades and our market-making
activities are sensitive to market movements. We do not have any significant
direct exposure to the sub-prime market, but are subject to market fluctuations
resulting from news and corporate events in the sub-prime mortgage markets,
associated write-downs by other financial services firms, and interest rate
fluctuations. Stock prices for companies in this industry, including Stifel
Financial Corp., have been volatile as a result of reactions to the global
credit crisis and the continued volatility in the financial services industry.





As a
participant in the financial services industry, we are subject to complicated
and extensive regulation of our business. The recent economic and political
environment has led to legislative and regulatory initiatives, both enacted and
proposed, that could substantially intensify the regulation of the financial
services industry and may significantly impact us. This increased focus has
resulted in the Dodd-Frank Act, which was signed into law during the third
quarter of 2010. The Dodd-Frank Act will significantly restructure and increase
regulation in the financial services industry, which could increase our cost of
doing business, change certain business practices, and alter the competitive
landscape.



31










RESULTS
OF OPERATIONS



The
following table presents consolidated financial information for the periods
indicated (in thousands, except percentages):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31,
		
		


		 
		
		


		Percentage



		Change  
		
		


		 
		
		


		 
		
		


		As a Percentage of



		Net Revenues



		for the Year Ended



		December 31,
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2010 vs. 2009
		
		


		 
		
		


		2009 vs. 2008
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Revenues:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Principal transactions
		
		


		 
		
		


		$
		
		


		453,533
		
		


		 
		
		


		$
		
		


		458,188
		
		


		 
		
		


		$
		
		


		293,285
		
		


		 
		
		


		(1.0)
		
		


		%
		
		


		56.2
		
		


		%
		
		


		 
		
		


		32.8
		
		


		%
		
		


		42.0
		
		


		%
		
		


		33.7
		
		


		%
	
	
		
		


		Commissions
		
		


		 
		
		


		 
		
		


		445,260
		
		


		 
		
		


		 
		
		


		345,520
		
		


		 
		
		


		 
		
		


		341,090
		
		


		 
		
		


		28.9
		
		


		 
		
		


		1.3
		
		


		 
		
		


		 
		
		


		32.2
		
		


		 
		
		


		31.7
		
		


		 
		
		


		39.2
		
		


		 
	
	
		
		


		Investment banking
		
		


		 
		
		


		 
		
		


		218,104
		
		


		 
		
		


		 
		
		


		125,807
		
		


		 
		
		


		 
		
		


		83,710
		
		


		 
		
		


		73.4
		
		


		 
		
		


		50.3
		
		


		 
		
		


		 
		
		


		15.8
		
		


		 
		
		


		11.5
		
		


		 
		
		


		9.6
		
		


		 
	
	
		
		


		Asset management and service fees
		
		


		 
		
		


		 
		
		


		193,159
		
		


		 
		
		


		 
		
		


		117,357
		
		


		 
		
		


		 
		
		


		122,773
		
		


		 
		
		


		64.6
		
		


		 
		
		


		(4.4
		
		


		)
		
		


		 
		
		


		14.0
		
		


		 
		
		


		10.8
		
		


		 
		
		


		14.1
		
		


		 
	
	
		
		


		Interest
		
		


		 
		
		


		 
		
		


		65,326
		
		


		 
		
		


		 
		
		


		46,860
		
		


		 
		
		


		 
		
		


		50,148
		
		


		 
		
		


		39.4
		
		


		 
		
		


		(6.6
		
		


		)
		
		


		 
		
		


		4.7
		
		


		 
		
		


		4.3
		
		


		 
		
		


		5.7
		
		


		 
	
	
		
		


		Other income/(loss)
		
		


		 
		
		


		 
		
		


		19,855
		
		


		 
		
		


		 
		
		


		9,138
		
		


		 
		
		


		 
		
		


		(2,159
		
		


		) 
		
		


		117.3
		
		


		 
		
		


		*
		
		


		 
		
		


		 
		
		


		1.5
		
		


		 
		
		


		0.8
		
		


		 
		
		


		(0.2
		
		


		)
	
	
		
		

		

		Total revenues
		
		


		 
		
		


		 
		
		


		1,395,237
		
		


		 
		
		


		 
		
		


		1,102,870
		
		


		 
		
		


		 
		
		


		888,847
		
		


		 
		
		


		26.5
		
		


		 
		
		


		24.1
		
		


		 
		
		


		 
		
		


		101.0
		
		


		 
		
		


		101.1
		
		


		 
		
		


		102.1
		
		


		 
	
	
		
		


		Interest expense
		
		


		 
		
		


		 
		
		


		13,211
		
		


		 
		
		


		 
		
		


		12,234
		
		


		 
		
		


		 
		
		


		18,510
		
		


		 
		
		


		8.0
		
		


		 
		
		


		(33.9
		
		


		)
		
		


		 
		
		


		1.0
		
		


		 
		
		


		1.1
		
		


		 
		
		


		2.1
		
		


		 
	
	
		
		

		

		Net revenues
		
		


		 
		
		


		 
		
		


		1,382,026
		
		


		 
		
		


		 
		
		


		1,090,636
		
		


		 
		
		


		 
		
		


		870,337
		
		


		 
		
		


		26.7
		
		


		 
		
		


		25.3
		
		


		 
		
		


		 
		
		


		100.0
		
		


		 
		
		


		100.0
		
		


		 
		
		


		100.0
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Non-interest expenses:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Compensation and benefits
		
		


		 
		
		


		 
		
		


		1,056,202
		
		


		 
		
		


		 
		
		


		718,115
		
		


		 
		
		


		 
		
		


		582,778
		
		


		 
		
		


		47.1
		
		


		 
		
		


		23.2
		
		


		 
		
		


		 
		
		


		76.4
		
		


		 
		
		


		65.8
		
		


		 
		
		


		67.0
		
		


		 
	
	
		
		


		Occupancy and equipment rental
		
		


		 
		
		


		 
		
		


		115,742
		
		


		 
		
		


		 
		
		


		89,741
		
		


		 
		
		


		 
		
		


		67,984
		
		


		 
		
		


		29.0
		
		


		 
		
		


		32.0
		
		


		 
		
		


		 
		
		


		8.4
		
		


		 
		
		


		8.2
		
		


		 
		
		


		7.8
		
		


		 
	
	
		
		


		Communication and office supplies
		
		


		 
		
		


		 
		
		


		69,929
		
		


		 
		
		


		 
		
		


		54,745
		
		


		 
		
		


		 
		
		


		45,621
		
		


		 
		
		


		27.7
		
		


		 
		
		


		20.0
		
		


		 
		
		


		 
		
		


		5.1
		
		


		 
		
		


		5.0
		
		


		 
		
		


		5.2
		
		


		 
	
	
		
		


		Commissions and floor brokerage
		
		


		 
		
		


		 
		
		


		26,301
		
		


		 
		
		


		 
		
		


		23,416
		
		


		 
		
		


		 
		
		


		13,287
		
		


		 
		
		


		12.3
		
		


		 
		
		


		76.2
		
		


		 
		
		


		 
		
		


		1.9
		
		


		 
		
		


		2.2
		
		


		 
		
		


		1.5
		
		


		 
	
	
		
		


		Other operating expenses
		
		


		 
		
		


		 
		
		


		114,081
		
		


		 
		
		


		 
		
		


		84,205
		
		


		 
		
		


		 
		
		


		68,898
		
		


		 
		
		


		35.5
		
		


		 
		
		


		22.2
		
		


		 
		
		


		 
		
		


		8.3
		
		


		 
		
		


		7.8
		
		


		 
		
		


		7.9
		
		


		 
	
	
		
		

		

		Total non-interest expenses
		
		


		 
		
		


		 
		
		


		1,382,255
		
		


		 
		
		


		 
		
		


		970,222
		
		


		 
		
		


		 
		
		


		778,568
		
		


		 
		
		


		42.5
		
		


		 
		
		


		24.6
		
		


		 
		
		


		 
		
		


		100.1
		
		


		 
		
		


		89.0
		
		


		 
		
		


		89.4
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Income before income taxes
		
		


		 
		
		


		 
		
		


		(229
		
		


		)
		
		


		 
		
		


		120,414
		
		


		 
		
		


		 
		
		


		91,769
		
		


		 
		
		


		(100.0
		
		


		) 
		
		


		31.2
		
		


		 
		
		


		 
		
		


		(0.1
		
		


		)
		
		


		11.0
		
		


		 
		
		


		10.6
		
		


		 
	
	
		
		


		Provision for income taxes
		
		


		 
		
		


		 
		
		


		(2,136
		
		


		)
		
		


		 
		
		


		44,616
		
		


		 
		
		


		 
		
		


		36,267
		
		


		 
		
		


		(104.8
		
		


		) 
		
		


		23.0
		
		


		 
		
		


		 
		
		


		(0.2
		
		


		) 
		
		


		4.1
		
		


		 
		
		


		4.2
		
		


		 
	
	
		
		

		

		Net income
		
		


		 
		
		


		$
		
		


		1,907
		
		


		 
		
		


		$
		
		


		75,798
		
		


		 
		
		


		$
		
		


		55,502
		
		


		 
		
		


		(97.5)
		
		


		%
		
		


		36.6
		
		


		%
		
		


		 
		
		


		0.1
		
		


		%
		
		


		6.9
		
		


		%
		
		


		6.4
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		* Percentage not meaningful.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



For the
year ended December 31, 2010, our net revenues increased 26.7% to a record $1.4
billion compared to $1.1 billion for the prior year, which represents our
fifteenth consecutive annual increase in net revenues. Net income decreased
97.5% to $1.9 million for the year ended December 31, 2010, compared to $75.8
million in 2009. Net income for 2010 included several significant expense items
(after-tax): (1)
$106.4
million of deferred compensation expense due to
the
modification of our deferred compensation plan, and (2) merger-related expenses
of $16.5 million related to the merger with TWPG.



32










NET
REVENUES



The
following table presents consolidated net revenues for the periods indicated 
(in thousands, except percentages):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31,  
		
		


		 
		
		


		Percentage Change
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2010 vs. 2009
		
		


		 
		
		


		2009 vs. 2008
		
		


		 
	
	
		
		

		

		Revenues:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Principal transactions
		
		


		 
		
		


		$
		
		


		453,533
		
		


		 
		
		


		$
		
		


		458,188
		
		


		 
		
		


		$
		
		


		293,285
		
		


		 
		
		


		 
		
		


		(1.0)
		
		


		%
		
		


		 
		
		


		56.2
		
		


		%
	
	
		
		


		Commissions
		
		


		 
		
		


		 
		
		


		445,260
		
		


		 
		
		


		 
		
		


		345,520
		
		


		 
		
		


		 
		
		


		341,090
		
		


		 
		
		


		 
		
		


		28.9
		
		


		 
		
		


		 
		
		


		1.3
		
		


		 
	
	
		
		


		Investment banking:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Capital raising
		
		


		 
		
		


		 
		
		


		135,898
		
		


		 
		
		


		 
		
		


		76,563
		
		


		 
		
		


		 
		
		


		45,205
		
		


		 
		
		


		 
		
		


		77.5
		
		


		 
		
		


		 
		
		


		69.4
		
		


		 
	
	
		
		


		Advisory
		
		


		 
		
		


		 
		
		


		82,206
		
		


		 
		
		


		 
		
		


		49,244
		
		


		 
		
		


		 
		
		


		38,505
		
		


		 
		
		


		 
		
		


		66.9
		
		


		 
		
		


		 
		
		


		27.9
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		218,104
		
		


		 
		
		


		 
		
		


		125,807
		
		


		 
		
		


		 
		
		


		83,710
		
		


		 
		
		


		 
		
		


		73.4
		
		


		 
		
		


		 
		
		


		50.3
		
		


		 
	
	
		
		


		Asset management and service fees
		
		


		 
		
		


		 
		
		


		193,159
		
		


		 
		
		


		 
		
		


		117,357
		
		


		 
		
		


		 
		
		


		122,773
		
		


		 
		
		


		 
		
		


		64.6
		
		


		 
		
		


		 
		
		


		(4.4
		
		


		)
	
	
		
		


		Net interest
		
		


		 
		
		


		 
		
		


		52,115
		
		


		 
		
		


		 
		
		


		34,626
		
		


		 
		
		


		 
		
		


		31,638
		
		


		 
		
		


		 
		
		


		50.5
		
		


		 
		
		


		 
		
		


		9.4
		
		


		 
	
	
		
		


		Other income/(loss)
		
		


		 
		
		


		 
		
		


		19,855
		
		


		 
		
		


		 
		
		


		9,138
		
		


		 
		
		


		 
		
		


		(2,159
		
		


		) 
		
		


		 
		
		


		117.3
		
		


		 
		
		


		 
		
		


		*
		
		


		 
	
	
		
		

		

		Total net revenues
		
		


		 
		
		


		$ 
		
		


		1,382,026
		
		


		 
		
		


		$ 
		
		


		1,090,636
		
		


		 
		
		


		$
		
		


		870,337
		
		


		 
		
		


		 
		
		


		26.7
		
		


		%
		
		


		 
		
		


		25.3
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		*     Percentage is not meaningful.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	


Year Ended
December 31, 2010 Compared With Year Ended December 31, 2009



Except as
noted in the following discussion of variances, the increase in revenue can be
attributed principally to the increased number of private client group offices
and financial advisors in our Global Wealth Management segment, the increased
number of revenue producers in our Institutional Group segment, and the
acquisitions of the UBS Acquired Locations during the third and fourth quarters
of 2009 and TWPG on July 1, 2010. The results of operations for the UBS Acquired
Locations are included in our results prospectively from the date of their
respective acquisitions. For the year ended December 31, 2010, the acquisition
generated net revenues of $111.4 million compared to $27.1 million during 2009.
The prior year revenues of the UBS Acquired Locations were generated from the
date of acquisition through the end of the year. The investment banking,
research, and institutional brokerage businesses of TWPG were integrated with
Stifel Nicolaus immediately after the merger; therefore, the revenues, expenses,
and net income of the integrated businesses are not distinguishable within the
results of our company.




Principal transactions
- For the year ended December 31, 2010, principal transactions revenues
decreased 1.0% to $453.5 million from $458.2 million in 2009. The growth of our
company, both organically and through acquisitions, has been negatively impacted
by the challenging fixed income market conditions that existed during most of
2010, which significantly impacted the flow in our fixed income business. The
decline in principal transactions from 2009 is primarily attributable to
decreases in revenue from corporate bonds and mortgage-backed securities.






Commissions -
Commission revenues are primarily generated from agency transactions in OTC and
listed equity securities, insurance products, and options. In addition,
commission revenues also include distribution fees for promoting and
distributing mutual funds.  



For the
year ended December 31, 2010, commission revenues increased 28.9% to $445.3
million from $345.5 million in the prior year. The increase is primarily
attributable to an increase in the number of financial advisors, client assets,
and higher productivity.  




Investment banking - 

Investment
banking revenues include: (i) capital-raising revenues representing fees earned
from the underwriting of debt and equity securities, (ii) sales credits, and
(iii) strategic advisory fees related to corporate debt and equity offerings,
municipal debt offerings, merger and acquisitions, private placements, and other
investment banking advisory fees.  



For the
year ended December 31, 2010, investment banking revenues increased $92.3
million, or 73.4%, to $218.1 million from $125.8 million in 2009. The increase
was primarily attributable to our acquisition of TWPG on July 1, 2010, and
improved equity markets during the second half of 2010.



33










For the
year ended December 31, 2010, capital-raising revenues increased $59.3 million,
or 77.5%, to $135.9 million from $76.6 million in 2009. For the year ended
December 31, 2010, equity capital-raising revenues increased 76.2% to $92.6
million from $52.6 million in 2009. For the year ended December 31, 2010, fixed
income capital-raising revenues increased 34.8% to $26.8 million from $19.9
million in 2009.  



For the
year ended December 31, 2010, strategic advisory fees increased 66.9% to $82.2
million from $49.2 million in the prior year. The increase is primarily
attributable to an increase in the number of completed equity transactions and
the aggregate transaction value from the prior year.  




Asset management and service fees -
Asset management and service fees include fees for asset-based financial
services provided to individuals and institutional clients, fees from investment
partnerships we manage, and fees we earn from the management of equity
distributions we receive from our clients. Asset management and service fees are
charged based on the value of assets in fee-based accounts. Asset management and
service fees are affected by changes in the balances of client assets due to
market fluctuations and levels of net new client assets.  



For the
year ended December 31, 2010, asset management and service fee revenues
increased 64.6% to $193.2 million from $117.4 million in 2009. The increase is
primarily a result of an increase in the value of assets in fee-based accounts,
the number of managed accounts during 2010, and the impact of the addition of
the TWPG asset management business.  During the year ended December 31, 2010, we
experienced a reduction in fees for money-fund balances due to the waiving of
fees by certain fund managers of approximately $50.0 million compared to
approximately $30.0 million in the prior year. See "Assets in fee-based
accounts" included in the table in "Results of Operations - Global Wealth
Management."




Other income -
For the year ended December 31, 2010, other income increased $10.8 million to
$19.9 million from $9.1 million in 2009. The increase is primarily attributable
to an increase in investment gains on our private equity investments, which were
acquired from TWPG, of $4.8 million and the recognition of a $2.1

million gain on the conversion of our seat membership on the Chicago Board
Options Exchange to shares in conjunction with its initial public offering
during the second quarter of 2010 and an increase in mortgage fees due to the
increase in loan originations at Stifel Bank.  



Year Ended
December 31, 2009 Compared With Year Ended December 31, 2008



Except as
noted in the following discussion of variances, the increase in revenue can be
attributed principally to the increased number of private client group offices
and financial advisors in our Global Wealth Management segment, the increased
number of revenue producers in our Capital Markets segment, the acquisition of
Butler Wick on December 31, 2008, and the closing of the UBS Acquired Locations
acquisition during the third and fourth quarters of 2009.
The results of operations for the UBS Acquired Locations are included in our
results prospectively from the date of their respective conversion. For the year
ended December 31, 2009, these business acquisitions generated net revenues of
$23.0 million and $27.1 million, respectively.




Principal transactions
- For the year ended December 31, 2009, principal transactions revenue increased
56.2% to $458.2 million from $293.3 million in 2008. The increase was primarily
attributable to increased principal transactions, primarily in corporate debt,
over-the-counter ("OTC") equity, mortgage-backed bonds, and municipal debt as a
result of turbulent markets and customers returning to traditional fixed income
products.




Commissions -  
For the
year ended December 31, 2009, commission revenues increased 1.3% to $345.5
million from $341.1 million in 2008. While the equity markets began showing
signs of improvement during the second half of 2009, the volatility in capital
markets during the first half of 2009 resulted in modest revenue growth for the
year ended December 31, 2009. The continued expansion of our private client
group through acquisitions and organic growth was offset by a decrease in
trading volumes, as customers returned to traditional fixed income products.




Investment banking - 

For the
year ended December 31, 2009, investment banking revenues increased 50.3% to
$125.8 million from $83.7 million in the prior year.  




Capital-raising revenues increased 69.4% to $76.6 million for the year ended
December 31, 2009, from $45.2 million in 2008. Equity and fixed income
capital-raising revenues were $52.6 million and $19.9 million, respectively, an
increase of $23.8 million, or 82.6%, and $8.6 million, or 76.2%, respectively,
from the prior year.  



34










During the
second half of 2009, capital market conditions continued to build upon the
improvement that began in the second quarter for both equity and fixed income,
and we raised capital for our clients in a number of successful corporate and
public finance underwritings. The significant rebound in equity and fixed income
financings during the second half of 2009 was offset by the challenging market
conditions that began during the second half of 2008 and continued into the
first half of 2009.  



Strategic
advisory fees increased 27.9% to $49.2 million for the year ended December 31,
2009, from $38.5 million in 2008. The increase is primarily attributable to an
increase in the number of completed equity transactions and the aggregate
transaction value over the prior year.  




Asset management and service fees -  
For the
year ended December 31, 2009, asset management and service fee revenues
decreased 4.4% to $117.4 million from $122.8 million in 2008. The decrease was
primarily a result of a reduction in fees for money-fund balances due to the
waiving of fees by certain fund managers and lower assets under management as a
result of market depreciation, offset by an increase in the number of managed
accounts attributable principally to the continued growth of the private client
group.  See Assets in Fee-based Accounts included in the table in "Results of
Operations - Global Wealth Management."




Other income -  
For the
year ended December 31, 2009, other income increased $11.3 million to $9.1
million from a loss of $2.2 million in 2008. The increase was primarily
attributable to the reduction of investment losses during the year ended
December 31, 2009, offset by the recognition of other-than-temporary impairment
of $1.9 million on our held-to-maturity debt security.



35










NET
INTEREST INCOME



The
following tables present average balance data and operating interest revenue and
expense data, as well as related interest yields for the periods indicated 
(in thousands, except rates):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
		
		


		December 31, 2009
		
		


		 
		
		


		December 31, 2008
	
	
		
		

		

		 
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Interest Income/ Expense
		
		


		 
		
		


		Average Interest Rate
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Interest Income/ Expense
		
		


		 
		
		


		Average Interest Rate
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Interest Income/ Expense
		
		


		 
		
		


		Average Interest Rate
	
	
		
		

		

		Interest-earning assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Margin balances (Stifel Nicolaus)
		
		


		 
		
		


		$
		
		


		385,040
		
		


		 
		
		


		$
		
		


		16,532
		
		


		 
		
		


		4.29
		
		


		%
		
		


		 
		
		


		$
		
		


		290,043
		
		


		 
		
		


		$
		
		


		12,499
		
		


		 
		
		


		4.31
		
		


		%
		
		


		 
		
		


		$
		
		


		382,536
		
		


		 
		
		


		$
		
		


		20,930
		
		


		 
		
		


		5.47
		
		


		%
	
	
		
		


		Interest-earning assets (Stifel Bank) *
		
		


		 
		
		


		 
		
		


		1,293,339
		
		


		 
		
		


		 
		
		


		35,146
		
		


		 
		
		


		2.72
		
		


		%
		
		


		 
		
		

		 
		
		


		687,232
		
		


		 
		
		


		 
		
		


		20,283
		
		


		 
		
		


		2.95
		
		


		%
		
		


		 
		
		


		 
		
		


		273,893
		
		


		 
		
		


		 
		
		


		15,253
		
		


		 
		
		


		5.57
		
		


		%
	
	
		
		


		Stock borrow (Stifel Nicolaus)
		
		


		 
		
		


		 
		
		


		78,313
		
		


		 
		
		


		 
		
		


		22
		
		


		 
		
		


		0.03
		
		


		%
		
		


		 
		
		

		 
		
		


		32,588
		
		


		 
		
		


		 
		
		


		43
		
		


		 
		
		


		0.13
		
		


		%
		
		


		 
		
		

		 
		
		


		61,097
		
		


		 
		
		


		 
		
		


		733
		
		


		 
		
		


		1.20
		
		


		%
	
	
		
		


		Other (Stifel Nicolaus)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		13,626
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		14,035
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		13,232
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total interest revenue
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		65,326
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		46,860
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		


		$
		
		


		50,148
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Interest-bearing liabilities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Short-term borrowings (Stifel Nicolaus)
		
		


		 
		
		


		$ 
		
		


		108,784
		
		


		 
		
		


		$
		
		


		1,102
		
		


		 
		
		


		1.01
		
		


		%
		
		


		 
		
		


		$
		
		


		107,383
		
		


		 
		
		


		$
		
		


		1,065
		
		


		 
		
		


		0.99
		
		


		%
		
		


		 
		
		


		$
		
		


		132,660
		
		


		 
		
		


		$
		
		


		3,021
		
		


		 
		
		


		2.28
		
		


		%
	
	
		
		


		Interest-bearing liabilities (Stifel Bank) *
		
		


		 
		
		

		 
		
		


		1,191,747
		
		


		 
		
		


		 
		
		


		5,188
		
		


		 
		
		


		0.44
		
		


		% 
		
		


		 
		
		

		 
		
		


		626,754
		
		


		 
		
		


		 
		
		


		4,649
		
		


		 
		
		


		0.74
		
		


		%
		
		


		 
		
		

		 
		
		


		229,205
		
		


		 
		
		


		 
		
		


		5,434
		
		


		 
		
		


		2.37
		
		


		%
	
	
		
		


		Stock loan (Stifel Nicolaus)
		
		


		 
		
		

		 
		
		


		69,507
		
		


		 
		
		


		 
		
		


		1,071
		
		


		 
		
		


		1.54
		
		


		%
		
		


		 
		
		

		 
		
		


		53,110
		
		


		 
		
		


		 
		
		


		570
		
		


		 
		
		


		1.07
		
		


		%
		
		


		 
		
		

		 
		
		


		105,424
		
		


		 
		
		


		 
		
		


		2,608
		
		


		 
		
		


		2.47
		
		


		%
	
	
		
		


		Interest-bearing liabilities (Capital Trusts)
		
		


		 
		
		

		 
		
		


		82,500
		
		


		 
		
		


		 
		
		


		5,077
		
		


		 
		
		


		6.15
		
		


		%
		
		


		 
		
		

		 
		
		


		82,500
		
		


		 
		
		


		 
		
		


		5,488
		
		


		 
		
		


		6.65
		
		


		%
		
		


		 
		
		

		 
		
		


		93,019
		
		


		 
		
		


		 
		
		


		6,233
		
		


		 
		
		


		6.70
		
		


		%
	
	
		
		


		Other (Stifel Nicolaus)
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		773
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		462
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		1,214
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total interest expense
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$ 
		
		


		13,211
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$ 
		
		


		12,234
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		18,510
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Net interest income
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		52,115
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		34,626
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		31,638
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



* See Distribution of Assets, Liabilities, and
Shareholders' Equity; Interest Rates and Interest Rate Differential table
included in "Results of Operations - Global Wealth Management" for additional
information on Stifel Bank's average balances and interest income and expense.



Year Ended
December 31, 2010 Compared With Year Ended December 31, 2009



Net
interest income -
Net interest income is the difference between interest earned on
interest-earning assets and interest paid on funding sources. Net interest
income is affected by changes in the volume and mix of these assets and
liabilities, as well as by fluctuations in interest rates and portfolio
management strategies. For the year ended December 31, 2010, net interest income
increased 50.5% to $52.1 million from $34.6 million in 2009.



For the
year ended December 31, 2010, interest revenue increased 39.4%, or $18.4
million, to $65.3 million from $46.9 million in 2009, principally as a result of
a $14.9 million increase in interest revenue generated from the interest-earning
assets of Stifel Bank and a $4.0 million increase in interest revenue from
customer margin borrowing. The average interest-earning assets of Stifel Bank
increased to $1.3 billion during the year ended December 31, 2010, compared to $687.2
million in 2009 at weighted average interest rates of 2.72% and
2.95%,
respectively. The average margin balances of Stifel Nicolaus increased to $385.0
million during the year ended December 31, 2010, compared to $290.0 million in
2009 at weighted average interest rates of 4.29% and
4.31%,
respectively.



For the
year ended December 31, 2010, interest expense increased 8.0% to $13.2 million
from $12.2 million in 2009. See "Net Interest Income" table above for more
details.



36










Year Ended
December 31, 2009 Compared With Year Ended December 31, 2008



Net
interest income -
For the year ended December 31, 2009, net interest income increased 9.4% to
$34.6 million from $31.6 million in 2008.



For the
year ended December 31, 2009, interest revenue decreased 6.6%, or $3.3 million,
to $46.9 million from $50.1 million in 2008, principally as a result of an $8.4
million decrease in interest revenue from customer margin borrowing, offset by
increased interest revenues of $5.0 million from the interest-earning assets of
Stifel Bank. The average margin balances of Stifel Nicolaus decreased to $290.0
million for the year ended December 31, 2009, compared to $382.5 million in 2008
at weighted average interest rates of 4.31% and 5.47%, respectively. The average
interest-earning assets of Stifel Bank increased to $687.2 million for the year
ended December 31, 2009, compared to $273.9 million in 2008 at weighted average
interest rates of 2.95% and 5.57%, respectively.



For the
year ended December 31, 2009, interest expense decreased 33.9%, or $6.3 million,
to $12.2 million from $18.5 million in the prior year. The decrease was due to
decreased interest rates charged by banks on lower levels of borrowings to
finance customer borrowing and firm inventory, decreased interest rates on stock
loan borrowings, and the extinguishment of $12.5 million of 6.78% Stifel
Financial Capital Trust IV Cumulative Preferred Securities in November 2008. See
"Net Interest Income" table above for more details.




NON-INTEREST EXPENSES



The
following table presents consolidated non-interest expenses for the periods
indicated (in thousands, except percentages):


	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31,  
		
		


		 
		
		


		Percentage Change
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2010 vs. 2009
		
		


		 
		
		


		2009 vs. 2008
		
		


		 
	
	
		
		

		

		Non-interest expenses:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Compensation and benefits
		
		


		 
		
		


		$
		
		


		1,056,202
		
		


		 
		
		


		$
		
		


		718,115
		
		


		 
		
		


		$
		
		


		582,778
		
		


		 
		
		


		 
		
		


		47.1
		
		


		%
		
		


		 
		
		


		23.2
		
		


		%
	
	
		
		


		Occupancy and equipment rental
		
		


		 
		
		


		 
		
		


		115,742
		
		


		 
		
		


		 
		
		


		89,741
		
		


		 
		
		


		 
		
		


		67,984
		
		


		 
		
		


		 
		
		


		29.0
		
		


		 
		
		


		 
		
		


		32.0
		
		


		 
	
	
		
		


		Communications and office supplies
		
		


		 
		
		


		 
		
		


		69,929
		
		


		 
		
		


		 
		
		


		54,745
		
		


		 
		
		


		 
		
		


		45,621
		
		


		 
		
		


		 
		
		


		27.7
		
		


		 
		
		


		 
		
		


		20.0
		
		


		 
	
	
		
		


		Commissions and floor brokerage
		
		


		 
		
		


		 
		
		


		26,301
		
		


		 
		
		


		 
		
		


		23,416
		
		


		 
		
		


		 
		
		


		13,287
		
		


		 
		
		


		 
		
		


		12.3
		
		


		 
		
		


		 
		
		


		76.2
		
		


		 
	
	
		
		


		Other operating expenses
		
		


		 
		
		


		 
		
		


		114,081
		
		


		 
		
		


		 
		
		


		84,205
		
		


		 
		
		


		 
		
		


		68,898
		
		


		 
		
		


		 
		
		


		35.5
		
		


		 
		
		


		 
		
		


		22.2
		
		


		 
	
	
		
		

		

		Total non-interest expenses
		
		


		 
		
		


		$ 
		
		


		1,382,255
		
		


		 
		
		


		$ 
		
		


		970,222
		
		


		 
		
		


		$
		
		


		778,568
		
		


		 
		
		


		 
		
		


		42.5
		
		


		%
		
		


		 
		
		


		24.6
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Year Ended
December 31, 2010 Compared With Year Ended December 31, 2009



Except as
noted in the following discussion of variances, the increase in non-interest
expenses can be attributed principally to our continued expansion, both
organically and through our acquisitions of TWPG on July 1, 2010, and the UBS
Acquired Locations in the third and fourth quarters of 2009, and an increase in
administrative overhead to support our growth.  




Compensation and benefits -
Compensation and benefits expenses, which are the largest component of our
expenses, include salaries, bonuses, transition pay, benefits, amortization of
stock-based compensation, employment taxes, and other employee-related costs. A
significant portion of compensation expense is comprised of production-based
variable compensation, including discretionary bonuses, which fluctuates in
proportion to the level of business activity, increasing with higher revenues
and operating profits. Other compensation costs, including base salaries,
stock-based compensation amortization, and benefits, are more fixed in nature.



For the
year ended December 31, 2010, compensation and benefits expense increased 47.1%,
or $338.1 million, to $1.1 billion from $718.1 million in 2009. The increase is
primarily attributable to an increase in
deferred
compensation expense as a result of
the
modification of our deferred compensation plan. We accelerated all unvested
deferred compensation as a result of the plan modification resulting in a
non-cash, pre-tax charge of $179.5 million.  



37










Excluding
the acceleration of deferred compensation expenses and merger-related expenses,
compensation and benefits expense as a percentage of net revenues was 62.9% for
the year ended December 31, 2010, compared to
65.8%
in 2009.  



A portion
of compensation and benefits expenses includes transition pay, principally in
the form of upfront notes, signing bonuses, and retention awards in connection
with our continuing expansion efforts, of $79.8 million (5.8% of net revenues)
for the year ended December 31, 2010, compared to $56.2 million (5.2% of net
revenues) in 2009. The upfront notes are amortized over a five- to ten-year
period
if the individual satisfies certain conditions, usually based on continued
employment and certain performance standards.




Occupancy and equipment rental -  
For the
year ended December 31, 2010, occupancy and equipment rental expense increased
29.0% to $115.7 million from $89.7 million during the year ended December 31,
2009. The increase was attributable to additional occupancy expense from organic
growth and our merger with TWPG, including costs related to abandonment of
certain leased property as a result of our continued integration effort. As of
December 31, 2010, we had 312 locations compared to 294 at December 31, 2009.




Communications and office supplies -
Communications expense includes costs for telecommunication and data
communication, primarily for obtaining third-party market data information. For
the year ended December 31, 2010, communications and office supplies expense
increased 27.7% to $69.9 million from $54.7 million in 2009.  




Commissions and floor brokerage -  
For the
year ended December 31, 2010, commissions and floor brokerage expense increased
12.3% to $26.3 million from $23.4 million in 2009.




Other operating expenses -  
Other
operating expenses primarily include license and registration fees,
litigation-related expenses, which consist of amounts we reserve and/or pay out
related to legal and regulatory matters, travel and entertainment, promotional
expenses, and expenses for professional services.



For the
year ended December 31, 2010, other operating expenses increased 35.5% to $114.1
million from $84.2 million during the year ended December 31, 2009. The increase
is primarily attributable to the continued growth in all segments during 2010,
which included increased license and registration fees, SIPC and FDIC
assessments, securities processing fees, travel and promotion, transaction costs
associated with the TWPG acquisition, and legal expenses. The increase in legal
expenses is attributable to an increase in the number of customer claims arising
from volatile market conditions. We are subject to various proceedings and
claims arising primarily from our securities business activities, including
lawsuits, arbitration claims, class actions, and regulatory matters.




Provision for income taxes/(benefit) -  
For the
year ended December 31, 2010, our provision for income taxes was a benefit of
$2.1 million compared to expense of $44.6 million in 2009.  



The
current year effective tax rate was impacted by state tax adjustments, a change
in our valuation allowance, and an increase in the rate applied to our deferred
tax assets, all of which had a noticeable impact on our effective rate because
of the small pre-tax loss we incurred for the year. The effective tax rate for
the year ended December 31, 2009, was reduced due to the recognition of a tax
benefit related to an investment and jobs creation tax credit during the third
quarter of 2009.



38










Year Ended
December 31, 2009 Compared With Year Ended December 31, 2008



Except as
noted in the following discussion of variances, the increase in non-interest
expenses was attributable principally to our continued expansion, increased
administrative overhead to support the growth in our segments, and the
transaction costs associated with the UBS Acquired Locations acquisition.






Compensation and benefits -
For the year ended December 31, 2009, compensation and benefits expense
increased 23.2%, or $135.3 million, to $718.1 million from $582.8 million in
2008.  The increase in compensation and benefits expense was
primarily attributable to increased headcount and higher production-based
variable compensation.




Compensation and benefits expense as a percentage of net revenues decreased to
65.8% for the year ended December 31, 2009, from 67.0% in 2008. The decrease in
compensation and benefits expense as a percent of net revenues was primarily
attributable to increased net revenues as compared to the year ended December
31, 2008, offset by an increase in transition pay and base salaries.



A portion
of compensation and benefits expense includes transition pay of $56.2 million
(5.2% of net revenues) for the year ended December 31, 2009, compared to $34.3
million (3.9% of net revenues) in 2008. In addition, for the year ended December
31, 2008, compensation and benefits expense included $25.6 million for
amortization of units awarded to Legg Mason ("LM Capital Markets") associates,
which were fully amortized as of December 31, 2008.




Occupancy and equipment rental -  
For the
year ended December 31, 2009, occupancy and equipment rental expense increased
32.0% to $89.7 million from $68.0 million in 2008. The increase was primarily
due to the continued expansion of our segments, which increased our rent and
depreciation expense.  As of December 31, 2009, we had 294 locations compared to
225 at December 31, 2008.




Communications and office supplies -  
For the
year ended December 31, 2009, communications and office supplies expense
increased 20.0% to $54.7 million from $45.6 million in 2008. The increases were
primarily attributable to our continued expansion as we sustained our growth
initiatives throughout 2009.  




Commissions and floor brokerage -  
For the
year ended December 31, 2009, commissions and floor brokerage expense increased
76.2% to $23.4 million from $13.3 million in 2008. The increase from the prior
year is attributable to a rebate of $1.5 million received during the first
quarter of 2008 related to 2007 clearing fees. We received no such rebates in
2009.




Other operating expenses -  
For the
year ended December 31, 2009, other operating expenses increased 22.2% to $84.2
million from $68.9 million in 2008.  



The
increase was primarily attributable to the continued growth in all segments
during 2009, which included increased license and registration fees, SIPC
assessments, securities processing fees, travel and promotion, legal expenses,
and the UBS Acquired Locations acquisition costs of $3.4 million. The increase
in legal expenses was attributable to an increase in litigation associated with
ARS investigations and litigation costs to defend industry
recruitment claims.




Provision for income taxes -  
For the
year ended December 31, 2009, our provision for income taxes was $44.6 million,
representing an effective tax rate of 37.1%, compared to $36.3 million in 2008,
representing an effective tax rate of 39.5%. Our 2009 effective tax rate was
reduced due to the recognition of a tax benefit of $3.4 million during the third
quarter related to an investment and jobs creation tax credit.



39










SEGMENT
ANALYSIS  



Our
reportable segments include Global Wealth Management, Institutional Group, and
Other. The UBS Acquired Locations acquisition and related customer account
conversion to our platform has enabled us to leverage our customers' assets,
which allows us the ability to provide a full array of financial products to
both our private client group and Stifel Bank customers. As a result, during the
third quarter of 2009, we changed how we manage these reporting units, and
consequently, they were combined to form the Global Wealth Management segment.
Previously reported segment information has been revised to reflect this change.



As a
result of organizational changes in the second quarter of 2009, which included a
change in the management reporting structure of our company, the segments
formerly reported as Equity Capital Markets and Fixed Income Capital Markets
have been combined into a single segment called Institutional Group. Previously
reported segment information has been revised to reflect this change.



Our Global
Wealth Management segment consists of two businesses, the private client group
and Stifel Bank.  The private client group includes branch offices and
independent contractor offices of our broker-dealer subsidiaries located
throughout the United States, primarily in the Midwest and Mid-Atlantic regions
with a growing presence in the Northeast, Southeast, and Western United States.
These branches provide securities brokerage services, including the sale of
equities, mutual funds, fixed income products, and insurance, as well as
offering banking products to their private clients through Stifel Bank, which
provides

residential, consumer, and commercial lending, as well as Federal Depository
Insurance Corporation-insured deposit accounts to customers of our broker-dealer
subsidiaries and to the general public.



The
Institutional Group segment includes institutional sales and trading. It
provides securities brokerage, trading, and research services to institutions,
with an emphasis on the sale of equity and fixed income products. This segment
also includes the management of and participation in underwritings for both
corporate and public finance (exclusive of sales credits, which are included in
the Global Wealth Management segment), merger and acquisition, and financial
advisory services.  



The Other
segment includes interest income from stock borrow activities, unallocated
interest expense, interest income and gains and losses from investments held,
compensation expense associated with the deferred compensation plan
modification, and all unallocated overhead cost associated with the execution of
orders; processing of securities transactions; custody of client securities;
receipt, identification, and delivery of funds and securities; compliance with
regulatory and legal requirements; internal financial accounting and controls;
and general administration and acquisition charges primarily related to the TWPG
acquisition.



We
evaluate the performance of our segments and allocate resources to them based on
various factors, including prospects for growth, return on investment, and
return on revenues.



40










 Results of
Operations - Global Wealth Management



The
following table presents consolidated financial information for the Global
Wealth Management segment for the periods indicated (in thousands, except
percentages):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31,
		
		


		 
		
		


		Percentage



		Change  
		
		


		 
		
		


		 
		
		


		As a Percentage of



		Net Revenues



		for the Year Ended



		December 31,
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2010 vs. 2009
		
		


		 
		
		


		2009 vs. 2008
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Revenues:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Commissions
		
		


		 
		
		


		$
		
		


		321,541
		
		


		 
		
		


		$
		
		


		234,052
		
		


		 
		
		


		$
		
		


		191,542
		
		


		 
		
		


		37.4
		
		


		%
		
		


		22.2
		
		


		%
		
		


		 
		
		


		38.2
		
		


		%
		
		


		39.3
		
		


		%
		
		


		40.4
		
		


		%
	
	
		
		


		Principal transactions
		
		


		 
		
		


		 
		
		


		239,851
		
		


		 
		
		


		 
		
		


		194,384
		
		


		 
		
		


		 
		
		


		124,578
		
		


		 
		
		


		23.4
		
		


		 
		
		


		56.0
		
		


		 
		
		


		 
		
		


		28.4
		
		


		 
		
		


		32.6
		
		


		 
		
		


		26.3
		
		


		 
	
	
		
		


		Asset management and service fees
		
		


		 
		
		


		 
		
		


		192,073
		
		


		 
		
		


		 
		
		


		116,818
		
		


		 
		
		


		 
		
		


		121,894
		
		


		 
		
		


		64.4
		
		


		 
		
		


		(4.2
		
		


		)
		
		


		 
		
		


		22.8
		
		


		 
		
		


		19.6
		
		


		 
		
		


		25.7
		
		


		 
	
	
		
		


		Interest
		
		


		 
		
		


		 
		
		


		54,543
		
		


		 
		
		


		 
		
		


		35,269
		
		


		 
		
		


		 
		
		


		38,207
		
		


		 
		
		


		54.6
		
		


		 
		
		


		(7.7
		
		


		)
		
		


		 
		
		


		6.5
		
		


		 
		
		


		5.9
		
		


		 
		
		


		8.1
		
		


		 
	
	
		
		


		Investment banking
		
		


		 
		
		


		 
		
		


		22,768
		
		


		 
		
		


		 
		
		


		14,906
		
		


		 
		
		


		 
		
		


		15,515
		
		


		 
		
		


		52.7
		
		


		 
		
		


		(3.9
		
		


		)
		
		


		 
		
		


		2.7
		
		


		 
		
		


		2.5
		
		


		 
		
		


		3.3
		
		


		 
	
	
		
		


		Other income/(loss)
		
		


		 
		
		


		 
		
		


		22,202
		
		


		 
		
		


		 
		
		


		8,626
		
		


		 
		
		


		 
		
		


		(1,174
		
		


		) 
		
		


		157.4
		
		


		 
		
		


		*
		
		


		 
		
		


		 
		
		


		2.6
		
		


		 
		
		


		1.5
		
		


		 
		
		


		(0.2
		
		


		)
	
	
		
		

		

		Total revenues
		
		


		 
		
		


		 
		
		


		852,978
		
		


		 
		
		


		 
		
		


		604,055
		
		


		 
		
		


		 
		
		


		490,562
		
		


		 
		
		


		41.2
		
		


		 
		
		


		23.1
		
		


		 
		
		


		 
		
		


		101.2
		
		


		 
		
		


		101.4
		
		


		 
		
		


		103.5
		
		


		 
	
	
		
		


		Interest expense
		
		


		 
		
		


		 
		
		


		9,709
		
		


		 
		
		


		 
		
		


		8,081
		
		


		 
		
		


		 
		
		


		16,710
		
		


		 
		
		


		20.1
		
		


		 
		
		


		(51.6
		
		


		)
		
		


		 
		
		


		1.2
		
		


		 
		
		


		1.4
		
		


		 
		
		


		3.5
		
		


		 
	
	
		
		

		

		Net revenues
		
		


		 
		
		


		 
		
		


		843,269
		
		


		 
		
		


		 
		
		


		595,974
		
		


		 
		
		


		 
		
		


		473,852
		
		


		 
		
		


		41.5
		
		


		 
		
		


		25.8
		
		


		 
		
		


		 
		
		


		100.0
		
		


		 
		
		


		100.0
		
		


		 
		
		


		100.0
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Non-interest expenses:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Compensation and benefits
		
		


		 
		
		


		 
		
		


		503,456
		
		


		 
		
		


		 
		
		


		370,157
		
		


		 
		
		


		 
		
		


		289,207
		
		


		 
		
		


		36.0
		
		


		 
		
		


		28.0
		
		


		 
		
		


		 
		
		


		59.7
		
		


		 
		
		


		62.1
		
		


		 
		
		


		61.0
		
		


		 
	
	
		
		


		Occupancy and equipment rental
		
		


		 
		
		


		 
		
		


		60,886
		
		


		 
		
		


		 
		
		


		50,487
		
		


		 
		
		


		 
		
		


		36,200
		
		


		 
		
		


		20.6
		
		


		 
		
		


		39.5
		
		


		 
		
		


		 
		
		


		7.2
		
		


		 
		
		


		8.5
		
		


		 
		
		


		7.6
		
		


		 
	
	
		
		


		Communication and office supplies
		
		


		 
		
		


		 
		
		


		31,356
		
		


		 
		
		


		 
		
		


		26,628
		
		


		 
		
		


		 
		
		


		19,341
		
		


		 
		
		


		17.8
		
		


		 
		
		


		37.7
		
		


		 
		
		


		 
		
		


		3.7
		
		


		 
		
		


		4.4
		
		


		 
		
		


		4.1
		
		


		 
	
	
		
		


		Commissions and floor brokerage
		
		


		 
		
		


		 
		
		


		12,126
		
		


		 
		
		


		 
		
		


		7,606
		
		


		 
		
		


		 
		
		


		4,452
		
		


		 
		
		


		59.4
		
		


		 
		
		


		70.9
		
		


		 
		
		


		 
		
		


		1.5
		
		


		 
		
		


		1.3
		
		


		 
		
		


		0.9
		
		


		 
	
	
		
		


		Other operating expenses
		
		


		 
		
		


		 
		
		


		41,422
		
		


		 
		
		


		 
		
		


		36,397
		
		


		 
		
		


		 
		
		


		23,708
		
		


		 
		
		


		13.8
		
		


		 
		
		


		53.5
		
		


		 
		
		


		 
		
		


		4.9
		
		


		 
		
		


		6.1
		
		


		 
		
		


		5.0
		
		


		 
	
	
		
		

		

		Total non-interest expenses
		
		


		 
		
		


		 
		
		


		649,246
		
		


		 
		
		


		 
		
		


		491,275
		
		


		 
		
		


		 
		
		


		372,908
		
		


		 
		
		


		32.2
		
		


		 
		
		


		31.7
		
		


		 
		
		


		 
		
		


		77.0
		
		


		 
		
		


		82.4
		
		


		 
		
		


		78.7
		
		


		 
	
	
		
		

		

		Income before income taxes
		
		


		 
		
		


		$
		
		


		194,023
		
		


		 
		
		


		$
		
		


		104,699
		
		


		 
		
		


		$
		
		


		100,944
		
		


		 
		
		


		85.3
		
		


		%
		
		


		3.7
		
		


		 %
		
		


		 
		
		


		23.0
		
		


		%
		
		


		17.6
		
		


		%
		
		


		21.3
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		*     Percentage is not meaningful.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
		
		


		 
		
		


		December 31, 2008
		
		


		 
	
	
		
		


		Branch offices (actual)
		
		


		 
		
		


		 
		
		


		285
		
		


		 
		
		


		 
		
		


		272
		
		


		 
		
		


		 
		
		


		196
		
		


		 
	
	
		
		


		Financial advisors (actual)
		
		


		 
		
		


		 
		
		


		1,775
		
		


		 
		
		


		 
		
		


		1,719
		
		


		 
		
		


		 
		
		


		1,142
		
		


		 
	
	
		
		


		Independent contractors (actual)
		
		


		 
		
		


		 
		
		


		160
		
		


		 
		
		


		 
		
		


		166
		
		


		 
		
		


		 
		
		


		173
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Assets in fee-based accounts:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Value (in thousands)
		
		


		 
		
		


		$
		
		


		13,001,502
		
		


		 
		
		


		$
		
		


		9,309,775
		
		


		 
		
		


		$
		
		


		5,775,565
		
		


		 
	
	
		
		


		Number of accounts (actual)
		
		


		 
		
		


		 
		
		


		57,220
		
		


		 
		
		


		 
		
		


		44,071
		
		


		 
		
		


		 
		
		


		24,177
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	




41












Year
Ended December 31, 2010 Compared With Year Ended December 31, 2009

NET
REVENUES



For the
year ended December 31, 2010, Global Wealth Management net revenues increased

41.5%
to $843.3
million from $596.0 million in 2009. The increase in net revenues for the year
ended December 31, 2010, from the prior year is attributable to growth across
all revenue line items, primarily due to an increase in financial advisors and
client assets resulting from the acquisition of the UBS Acquired Locations
during the third and fourth quarters of 2009 and the acquisition of TWPG on July
1, 2010. For the year ended December 31, 2010, revenues generated in the Global
Wealth Management segment from the UBS Acquired Locations was $111.4 million

compared to $27.1 million in 2009.
The
prior year revenues of the
UBS
Acquired Locations
were generated from the date of acquisition through the end of the year.






Commissions -  
For the
year ended December 31, 2010, commission revenues increased 37.4% to $321.5
million from $234.1 million in 2009. The increase is primarily attributable to
an increase in agency transactions in mutual fund and insurance products. These
increases are primarily attributable to an increase in the number of financial
advisors, client assets, and higher productivity. In addition, the market
turmoil and downturns, which were at unprecedented levels at the beginning of
2009, have improved in 2010.




Principal transactions
- For the year ended December 31, 2010, principal transactions revenues
increased 23.4% to $239.9 million from $194.4 million in 2009. The increase is
primarily attributable to increased principal transactions, primarily in OTC
equity and municipal debt.




Asset management and service fees -  
For the
year ended December 31, 2010, asset management and service fees increased 64.4%
to $192.1 million from $116.8 million in 2009. The increase is primarily a
result of a 39.7% increase in the value of assets in fee-based accounts in the
current year and a 29.8% increase in the number of managed accounts attributable
principally to the continued growth of the private client group and the impact
of the addition of the TWPG asset management business. During the year ended
December 31, 2010, we experienced a reduction in fees for money-fund balances
due to the waiving of fees by certain fund managers of approximately $50.0
million compared to approximately $30.0 million in the prior year. See "Assets
in fee-based accounts" included in the table above for further details.




Interest revenue -  
For the
year ended December 31, 2010, interest revenue increased 54.6% to $54.5 million
from $35.3 million in 2009. The increase is primarily due to an increase in
interest revenue from customer margin borrowing to finance trading activity and
higher average customer margin balances. The increase is also attributable to
the growth of the interest-earning assets of Stifel Bank.
See "Net
Interest Income - Stifel Bank" below for a further discussion of the changes in
net revenues.




Investment banking -  
For the
year ended December 31, 2010, investment banking revenues, which represents
sales credits related to the management of and participation in corporate and
public finance underwritings, increased
52.7%
to $22.8
million from $14.9 million in 2009. See "Investment banking" in the
Institutional Group segment discussion for additional information regarding the
changes in our investment banking revenues.




Other income -
For the year ended December 31, 2010, other income increased 157.4% to $22.2
million from $8.6 million in 2009. The increase is primarily attributable to an
increase in investment gains recorded on our investment that hedges our deferred
compensation liability, gains on our private equity investments, and an increase
in mortgage fees due to an increase in loan originations at Stifel Bank.






Interest expense -  
For the
year ended December 31, 2010, interest expense increased 20.1% to $9.7 million
from $8.1 million in 2009. The increase is primarily due to the growth of the
interest-bearing liabilities of Stifel Bank, offset by lower interest rates.
See
"Net Interest Income - Stifel Bank" below for a further discussion of the
changes in net revenues.  



42











NON-INTEREST EXPENSES 




For the
year ended December 31, 2010, Global Wealth Management non-interest expenses
increased
32.2%
to $649.2
million from $491.3 million in 2009.  



The
fluctuations in non-interest expenses, discussed below, were primarily
attributable to the continued growth of our Private Client Group during 2010.
Our expansion efforts include the UBS Acquired Locations acquisition in the
third and fourth quarters of 2009 and TWPG on July 1, 2010, as well as organic
growth. As of December 31, 2010, we had 285 branch offices compared to 272 at
December 31, 2009. In addition, since December 31, 2009, we have added 339
financial advisors and support staff.




Compensation and benefits -  
For the
year ended December 31, 2010, compensation and benefits expense increased 36.0%
to $503.5 million from $370.2 million in 2009.
The
increase is principally due to increased variable compensation as a result of
increased production due to the growth in the number of financial advisors and
fixed compensation for the additional administrative support staff, offset by
the elimination of deferred compensation expense as a result of the modification
to our deferred compensation plan, whereby we removed the service requirement
during the third quarter of 2010. See "Compensation and benefits" in the Other
segment discussion for additional information on the plan modification.




Compensation and benefits expense as a percentage of net revenues decreased to
59.7% for the year ended December 31, 2010, compared to
62.1%
in 2009. The decrease in compensation and benefits expense as a percent of net
revenues is primarily attributable to the increase in net revenues and, to a
lesser extent, the reduction in deferred compensation expense, offset by an
increase in transition pay, which consists of the amortization of upfront notes,
which are amortized over a five- to ten-year period, signing bonuses and
retention awards, and increased overhead in connection with our continued
expansion efforts. Transition pay was $54.9 million (6.5% of net revenues) for
the year ended December 31, 2010, compared to $40.6 million (6.9% of net
revenues) in 2009.  




Occupancy and equipment rental -  
For the
year ended December 31, 2010, occupancy and equipment rental expense increased
20.6% to $60.9 million from $50.5
million in 2009.




Communications and office supplies -  
For the
year ended December 31, 2010, communications and office supplies expense
increased 17.8% to $31.4 million from $26.6
million in 2009.




Commissions and floor brokerage -  
For the
year ended December 31, 2009, commissions and floor brokerage expense increased
59.4% to $12.1 million from $7.6
million in 2009.  




Other operating expenses -  
For the
year ended December 31, 2010, other operating expenses increased 13.8% to $41.4
million from $36.4
million in 2009. The increase is primarily attributable to the growth of our
private client business, as well as an increase in litigation costs to defend
industry recruiting claims. On a comparative basis, the increase over the prior
year is offset by non-recurring license and registration fees, securities
processing fees, and travel-related expenses associated with the UBS Acquired
Locations acquisition during the fourth quarter of 2009.



INCOME
BEFORE INCOME TAXES



For the
year ended December 31, 2010, income before
income taxes increased $89.3
million, or
85.3%,
to $194.0
million from $104.7 million in 2009. Profit margins have improved as a result of
the increase in revenue growth, a reduction in deferred compensation expense,
and a decline in start-up costs associated with the branches we opened during
2009, both organically and through the acquisition of the UBS Acquired
Locations.



43










Year Ended
December 31, 2009 Compared With Year Ended December 31, 2008



Except as
noted in the following discussion of variances, the increase in revenue can be
attributed principally to the increased number of private client group offices
and financial advisors, the acquisition of Butler Wick on December 31, 2008, and
the closing of the UBS Acquired Locations acquisition during the third and
fourth quarters of 2009. During the year ended December 31, 2009, we added 99
private client group offices and 645 financial advisors, including 56 offices
and 321 Financial Advisors from UBS and 17 offices and 67 financial advisors
from Butler Wick as part of our ongoing footprint expansion efforts.



NET
REVENUES



For the
year ended December 31, 2009, Global Wealth Management net revenues increased
25.8% to $596.0 million from $473.9 million in 2008. The increase in net
revenues was primarily attributable to an increase in principal transactions,
commissions, and net interest revenues, offset by decreases in asset management
and service fees and investment banking.  




Commissions -  
For the
year ended December 31, 2009, commission revenues increased 22.2% to $234.1
million from $191.5 million in 2008. The increase was primarily attributable to
an increase in agency transactions in OTC and listed equity securities, mutual
fund, and insurance products.  




Principal transactions
- For the year ended December 31, 2009, principal transactions revenue increased
56.0% to $194.4 million from $124.6 million in 2008. The increase was primarily
attributable to increased principal transactions, primarily in corporate debt,
OTC equity, mortgage-backed bonds, and municipal debt due to turbulent markets
and customers returning to traditional fixed income products.




Asset management and service fees -  
For the
year ended December 31, 2009, asset management and service fees decreased 4.2%
to $116.8 million from $121.9 million in 2008. The decrease was primarily a
result of a reduction in fees for money-fund balances due to the waiving of fees
by certain fund managers, offset by an increase in the number of managed
accounts attributable principally to the continued growth of the private client
group through the UBS Acquired Locations acquisition and organic growth and the
growth in the value of assets in fee-based accounts from December 31, 2008. See
Assets in Fee-based Accounts included in the table above for further details.




Interest revenue -  
For the
year ended December 31, 2009, interest revenue decreased 7.7% to $35.3 million
from $38.2 million in 2008. The decrease was primarily due to a decrease in
interest revenue from customer margin borrowing to finance trading activity and
lower average customer margin balances, offset by increased interest revenues of
$4.7 million from the interest-earning assets of Stifel Bank.
See
"Distribution of Assets, Liabilities, and Shareholders' Equity; Interest Rates
and Interest Rate Differential" below for a further discussion of the changes in
interest revenues.




Investment banking -
For the year ended December 31, 2009, investment banking revenues decreased 3.9%
to $14.9 million from $15.5 million in 2008.
While
there was a significant rebound in investment banking activity, which began
during the second quarter of 2009, the full-year results were negatively
impacted by the challenging market conditions that began during the second half
of 2008 and continued into the first half of 2009.
See
"Investment banking" in the Institutional Group segment discussion for
additional information regarding the changes in our investment banking revenues.




Interest expense -  
For the
year ended December 31, 2009, interest expense decreased 51.6% to $8.1 million
from $16.7 million in 2008. The decrease was primarily due to decreased interest
rates charged by banks on lower levels of borrowings.  See
"Distribution of Assets, Liabilities, and Shareholders' Equity; Interest Rates
and Interest Rate Differential" below for a further discussion of the changes in
interest expense.




NON-INTEREST EXPENSES 




For the
year ended December 31, 2009, Global Wealth Management non-interest expenses
increased 31.7% to $491.3 million from $372.9 million in 2008.



Unless
specifically discussed below, the fluctuations in non-interest expenses were
primarily attributable to the continued growth of our private client group
during the year ended December 31, 2009. Our expansion efforts include the
acquisitions of the UBS Acquired Locations and Butler Wick, as well as organic
growth. As of December 31, 2009, we have 272 branch offices compared to 196 at
December 31, 2008. In addition, during the year ended December 31, 2009, we
added 1,087 financial advisors and support staff.




Compensation and benefits -  
For the
year ended December 31, 2009, compensation and benefits expense increased 28.0%
to $370.2 million from $289.2 million in 2008.
The
increase was principally due to increased variable compensation as a result of
increased production and increased fixed compensation as a result of the
expansion of our branch office support.  



44











Compensation and benefits expense as a percentage of net revenues increased to
62.1% for the year ended December 31, 2009, compared to 61.0% in 2008. The
increase in compensation and benefits expense as a percent of net revenues was
primarily attributable to increased transition pay, which consisted of the
amortization of upfront notes, which are amortized over a five- to ten-year
period, signing bonuses and retention awards, and increased overhead in
connection with our continued expansion efforts. For the year ended December 31,
2009, transition pay was $40.6 million (6.9% of net revenues) compared to $28.2
million (6.0% of net revenues) for the year ended December 31, 2008.  





Occupancy and equipment rental -  
For the
year ended December 31, 2009, occupancy and equipment rental expense increased
39.5% to $50.5 million from $36.2 million in 2008.  




Communications and office supplies -  
For the
year ended December 31, 2009, communications and office supplies expense
increased 37.7% to $26.6 million from $19.3 million in 2008.




Commissions and floor brokerage -  
For the
year ended December 31, 2009, commissions and floor brokerage expense increased
$3.1 million, or 70.9%, to $7.6 million from $4.5 million in 2008.




Other operating expenses -
For the year ended December 31, 2009, other operating expenses increased 53.5%
to $36.4 million from $23.7 million in 2008. As a result of the growth of the
private client group during the year ended December 31, 2009, there was an
increase in license and registration fees, securities processing fees, as well
as litigation costs to defend industry recruiting claims. In addition, we
incurred expenses associated with our acquisition of the UBS Acquired Locations
of $3.4 million.



INCOME
BEFORE INCOME TAXES



For the
year ended December 31, 2009, income before
income taxes increased 3.7% to $104.7 million from $100.9 million in 2008.
Profit margins for the year ended December 31, 2009, have decreased to 17.6%
from 21.3% in 2008. Profit margins have diminished resulting from start-up costs
associated with branch office openings and the transaction costs associated with
the UBS Acquired Locations acquisition.



45










The
information required by Securities Act Guide 3 - Statistical Disclosure by
Bank Holding Company is presented below:



I.    
Distribution of Assets, Liabilities, and Shareholders' Equity; Interest Rates
and Interest Rate Differential



The
following table presents average balance data and operating interest revenue and
expense data for Stifel Bank, as well as related interest yields for the periods
indicated (in thousands, except rates):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
		
		


		December 31, 2009
	
	
		
		

		

		 
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Interest Income/

		
		

		Expense
		
		


		 
		
		


		Average Interest Rate
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Interest Income/



		Expense
		
		


		 
		
		


		Average Interest Rate
	
	
		
		

		

		Assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Federal funds sold
		
		


		 
		
		


		$
		
		


		148,533
		
		


		 
		
		


		$
		
		


		404
		
		


		 
		
		


		0.27
		
		


		%
		
		


		 
		
		


		$
		
		


		195,783
		
		


		 
		
		


		$
		
		


		763
		
		


		 
		
		


		0.39
		
		


		%
	
	
		
		


		U.S.
		government agencies
		
		


		 
		
		


		 
		
		


		56,796
		
		


		 
		
		


		 
		
		


		609
		
		


		 
		
		


		1.07
		
		


		 
		
		


		 
		
		


		 
		
		


		1,775
		
		


		 
		
		


		 
		
		


		97
		
		


		 
		
		


		5.46
		
		


		 
	
	
		
		


		State and political subdivisions:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Taxable
		
		


		 
		
		


		 
		
		


		20,819
		
		


		 
		
		


		 
		
		


		1,031
		
		


		 
		
		


		4.95
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Non-taxable  (1)
		
		


		 
		
		


		 
		
		


		1,324
		
		


		 
		
		


		 
		
		


		49
		
		


		 
		
		


		3.70
		
		


		 
		
		


		 
		
		


		 
		
		


		1,096
		
		


		 
		
		


		 
		
		


		45
		
		


		 
		
		


		4.11
		
		


		 
	
	
		
		


		Mortgage-backed securities
		
		


		 
		
		


		 
		
		


		549,666
		
		


		 
		
		


		 
		
		


		14,804
		
		


		 
		
		


		2.69
		
		


		 
		
		


		 
		
		


		 
		
		


		162,694
		
		


		 
		
		


		 
		
		


		5,878
		
		


		 
		
		


		3.61
		
		


		 
	
	
		
		


		Corporate bonds
		
		


		 
		
		


		 
		
		


		57,606
		
		


		 
		
		


		 
		
		


		2,254
		
		


		 
		
		


		3.91
		
		


		 
		
		


		 
		
		


		 
		
		


		27,627
		
		


		 
		
		


		 
		
		


		1,244
		
		


		 
		
		


		4.50
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		11,450
		
		


		 
		
		


		 
		
		


		320
		
		


		 
		
		


		2.79
		
		


		 
		
		


		 
		
		


		 
		
		


		16,997
		
		


		 
		
		


		 
		
		


		717
		
		


		 
		
		


		4.22
		
		


		 
	
	
		
		


		Federal Home Loan Bank ("FHLB") and other capital stock
		
		


		 
		
		


		 
		
		


		1,272
		
		


		 
		
		


		 
		
		


		27
		
		


		 
		
		


		2.12
		
		


		 
		
		


		 
		
		


		 
		
		


		762
		
		


		 
		
		


		 
		
		


		9
		
		


		 
		
		


		1.18
		
		


		 
	
	
		
		


		Loans (2)  
		
		


		 
		
		


		 
		
		


		364,811
		
		


		 
		
		


		 
		
		


		12,347
		
		


		 
		
		


		3.38
		
		


		 
		
		


		 
		
		


		 
		
		


		239,879
		
		


		 
		
		


		 
		
		


		9,914
		
		


		 
		
		


		4.13
		
		


		 
	
	
		
		


		Loans held for sale
		
		


		 
		
		


		 
		
		


		81,062
		
		


		 
		
		


		 
		
		


		3,301
		
		


		 
		
		


		4.07
		
		


		 
		
		


		 
		
		


		 
		
		


		40,619
		
		


		 
		
		


		 
		
		


		1,616
		
		


		 
		
		


		3.98
		
		


		 
	
	
		
		

		

		Total interest-earning assets  
		(3)
		
		


		 
		
		


		$
		
		


		1,293,339
		
		


		 
		
		


		$
		
		


		35,146
		
		


		 
		
		


		2.72
		
		


		%
		
		


		 
		
		


		$
		
		


		687,232
		
		


		 
		
		


		$
		
		


		20,283
		
		


		 
		
		


		2.95
		
		


		%
	
	
		
		


		Cash and due from banks
		
		


		 
		
		


		 
		
		


		6,717
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		4,927
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Other non interest-earning assets
		
		


		 
		
		


		 
		
		


		39,518
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		23,289
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total

		assets
		
		


		 
		
		


		$
		
		


		1,339,574
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		715,448
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Liabilities and shareholders' equity:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Deposits:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Money market
		
		


		 
		
		


		$
		
		


		1,162,749
		
		


		 
		
		


		$
		
		


		4,919
		
		


		 
		
		


		0.42
		
		


		%
		
		


		 
		
		


		$
		
		


		591,961
		
		


		 
		
		


		$
		
		


		3,841
		
		


		 
		
		


		0.65
		
		


		%
	
	
		
		


		Demand deposits
		
		


		 
		
		


		 
		
		


		20,568
		
		


		 
		
		


		 
		
		


		31
		
		


		 
		
		


		0.15
		
		


		 
		
		


		 
		
		


		 
		
		


		11,072
		
		


		 
		
		


		 
		
		


		29
		
		


		 
		
		


		0.26
		
		


		 
	
	
		
		


		Time deposits
		
		


		 
		
		


		 
		
		


		7,686
		
		


		 
		
		


		 
		
		


		217
		
		


		 
		
		


		2.82
		
		


		 
		
		


		 
		
		


		 
		
		


		20,104
		
		


		 
		
		


		 
		
		


		676
		
		


		 
		
		


		3.36
		
		


		 
	
	
		
		


		Savings
		
		


		 
		
		


		 
		
		


		92
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		303
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		FHLB advances
		
		


		 
		
		


		 
		
		


		652
		
		


		 
		
		


		 
		
		


		21
		
		


		 
		
		


		3.22
		
		


		 
		
		


		 
		
		


		 
		
		


		3,304
		
		


		 
		
		


		 
		
		


		103
		
		


		 
		
		


		3.12
		
		


		 
	
	
		
		


		Federal funds and repurchase agreements
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		10
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		-
		
		


		 
	
	
		
		

		

		Total interest-bearing liabilities  
		(3)
		
		


		 
		
		


		$
		
		


		1,191,747
		
		


		 
		
		


		$
		
		


		5,188
		
		


		 
		
		


		0.44
		
		


		%
		
		


		 
		
		


		$
		
		


		626,754
		
		


		 
		
		


		$
		
		


		4,649
		
		


		 
		
		


		0.74
		
		


		%
	
	
		
		


		Non-interest-bearing deposits
		
		


		 
		
		


		 
		
		


		18,192
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		15,054
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Other non-interest-bearing liabilities
		
		


		 
		
		


		 
		
		


		14,352
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		3,014
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total liabilities
		
		


		 
		
		


		 
		
		


		1,224,291
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		644,822
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Shareholders' equity
		
		


		 
		
		


		 
		
		


		115,283
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		70,626
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total liabilities and shareholders' equity
		
		


		 
		
		


		$
		
		


		1,339,574
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		715,448
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net interest margin
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		29,958
		
		


		 
		
		


		2.32
		
		


		%
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		15,634
		
		


		 
		
		


		2.27
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1)
Due to the immaterial amount of income
recognized on tax-exempt securities, yields were not calculated on a tax
equivalent basis.



(2)
Loans on non-accrual status are included in average balances.



(3)
See Net Interest Income table included in "Results of Operations" for additional
information on our average balances and interest income and expenses.



46









	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31, 2008
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Interest Income/

		
		

		Expense
		
		


		 
		
		


		Average Interest Rate
		
		


		 
	
	
		
		

		

		Assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Federal funds sold
		
		


		 
		
		


		$
		
		


		10,027
		
		


		 
		
		


		$
		
		


		214
		
		


		 
		
		


		2.14
		
		


		%
		
		


		 
	
	
		
		


		U.S.
		government agencies
		
		


		 
		
		


		 
		
		


		13,361
		
		


		 
		
		


		 
		
		


		824
		
		


		 
		
		


		6.17
		
		


		 
		
		


		 
	
	
		
		


		State and political subdivisions:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Taxable
		
		


		 
		
		


		 
		
		


		9,240
		
		


		 
		
		


		 
		
		


		375
		
		


		 
		
		


		4.05
		
		


		 
		
		


		 
	
	
		
		


		Non-taxable  (1)
		
		


		 
		
		


		 
		
		


		1,530
		
		


		 
		
		


		 
		
		


		58
		
		


		 
		
		


		3.81
		
		


		 
		
		


		 
	
	
		
		


		Mortgage-backed securities
		
		


		 
		
		


		 
		
		


		32,916
		
		


		 
		
		


		 
		
		


		1,731
		
		


		 
		
		


		5.26
		
		


		 
		
		


		 
	
	
		
		


		Corporate bonds
		
		


		 
		
		


		 
		
		


		926
		
		


		 
		

		 
		
		


		57
		
		


		 
		
		


		6.12
		
		


		 
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		20,060
		
		


		 
		
		


		 
		
		


		1,519
		
		


		 
		
		


		7.57
		
		


		 
		
		


		 
	
	
		
		


		FHLB and other capital stock
		
		


		 
		
		


		 
		
		


		991
		
		


		 
		
		


		 
		
		


		28
		
		


		 
		
		


		2.82
		
		


		 
		
		


		 
	
	
		
		


		Loans (2)  
		
		


		 
		
		


		 
		
		


		170,244
		
		


		 
		
		


		 
		
		


		9,807
		
		


		 
		
		


		5.76
		
		


		 
		
		


		 
	
	
		
		


		Loans held for sale
		
		


		 
		
		


		 
		
		


		14,598
		
		


		 
		
		


		 
		
		


		640
		
		


		 
		
		


		4.38
		
		


		 
		
		


		 
	
	
		
		

		

		Total interest-earning assets  
		(3)
		
		


		 
		
		


		$
		
		


		273,893
		
		


		 
		
		


		$
		
		


		15,253
		
		


		 
		
		


		5.57
		
		


		%
		
		


		 
	
	
		
		


		Cash and due from banks
		
		


		 
		
		


		 
		
		


		3,444
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Other non interest-earning assets
		
		


		 
		
		


		 
		
		


		23,350
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total

		assets
		
		


		 
		
		


		$
		
		


		300,687
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Liabilities and shareholders' equity:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Deposits:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Money market
		
		


		 
		
		


		$
		
		


		178,198
		
		


		 
		
		


		$
		
		


		3,491
		
		


		 
		
		


		1.96
		
		


		%
		
		


		 
	
	
		
		


		Demand deposits
		
		


		 
		
		


		 
		
		


		2,755
		
		


		 
		
		


		 
		
		


		44
		
		


		 
		
		


		1.60
		
		


		 
		
		


		 
	
	
		
		


		Time deposits
		
		


		 
		
		


		 
		
		


		36,287
		
		


		 
		
		


		 
		
		


		1,600
		
		


		 
		
		


		4.41
		
		


		 
		
		


		 
	
	
		
		


		Savings
		
		


		 
		
		


		 
		
		


		339
		
		


		 
		
		


		 
		
		


		3
		
		


		 
		
		


		0.97
		
		


		 
		
		


		 
	
	
		
		


		FHLB advances
		
		


		 
		
		


		 
		
		


		10,739
		
		


		 
		
		


		 
		
		


		275
		
		


		 
		
		


		2.56
		
		


		 
		
		


		 
	
	
		
		


		Federal funds and repurchase agreements
		
		


		 
		
		


		 
		
		


		887
		
		


		 
		
		


		 
		
		


		21
		
		


		 
		
		


		2.41
		
		


		 
		
		


		 
	
	
		
		

		

		Total interest-bearing liabilities  
		(3)
		
		


		 
		
		


		$
		
		


		229,205
		
		


		 
		
		


		$
		
		


		5,434
		
		


		 
		
		


		2.37
		
		


		%
		
		


		 
	
	
		
		


		Non-interest-bearing deposits
		
		


		 
		
		


		 
		
		


		15,293
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Other non-interest-bearing liabilities
		
		


		 
		
		


		 
		
		


		1,480
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total liabilities
		
		


		 
		
		


		 
		
		


		245,978
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Shareholders' equity
		
		


		 
		
		


		 
		
		


		54,709
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Total liabilities and shareholders' equity
		
		


		 
		
		


		$
		
		


		300,687
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net interest margin
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		9,819
		
		


		 
		
		


		3.58
		
		


		%
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1)
Due to the immaterial amount of income
recognized on tax-exempt securities, yields were not calculated on a tax
equivalent basis.



(2)
Loans on non-accrual status are included in average balances.



(3)
See Net Interest Income table included in "Results of Operations" for additional
information on our average balances and interest income and expenses.



47










Net
interest income -
Net interest income is the difference between interest earned on
interest-earning assets and interest paid on funding sources. Net interest
income is affected by changes in the volume and mix of these assets and
liabilities, as well as by fluctuations in interest rates and portfolio
management strategies.



For the
year ended December 31, 2010, interest revenue of $35.1 million was generated
from weighted average interest-earning assets of $1.3 billion at a weighted
average interest rate of 2.72%. For the year ended December 31, 2009, interest
revenue of $20.3 million was generated from weighted average interest-earning
assets of $687.2
million at a weighted average interest rate of 2.95%. For the year ended
December 31, 2008, interest revenue of $15.3 million was generated from weighted
average interest-earning assets of $273.9
million at a weighted average interest rate of 5.57%. Interest-earning assets
principally consist of residential, consumer, and commercial loans, securities,
and federal funds sold.



Interest
expense represents interest on customer money market accounts, interest on time
deposits, and other interest expense. The weighted average balance of
interest-bearing liabilities during the year ended December 31, 2010, was $1.2
billion at a weighted average interest rate of 0.44%. For the year ended
December 31, 2009, the weighted average balance of interest-bearing liabilities
was $626.8
million at a weighted average interest rate of
0.74%.
For the year ended December 31, 2008, the weighted average balance of
interest-bearing liabilities was $229.2
million at a weighted average interest rate of
2.37%.



The growth
in Stifel Bank has been primarily driven by: (i) the conversion of the former
UBS branches to the Stifel Nicolaus platform with money market funds and
FDIC-insured balances, and (ii) the growth in deposits associated with brokerage
customers of Stifel Nicolaus. At December 31, 2010, the balance of Stifel
Nicolaus brokerage customer deposits at Stifel Bank was $1.6 billion compared to
$1.0 billion at December 31, 2009.  



See the
average balances and interest rates for Stifel Bank presented above
for more information regarding average balances, interest income and expense,
and average interest rate yields.



48










The
following table sets forth an analysis of the effect on net interest income of
volume and rate changes for the periods indicated (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Year Ended December 31, 2010

		Compared to Year Ended

		December 31, 2009
		
		


		 
		
		


		Year Ended December 31, 2008

		Compared to Year Ended 

		December 31, 2007
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Increase (decrease) due to:
		
		


		 
		
		


		Increase (decrease) due to:
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Volume
		
		


		 
		
		


		Rate
		
		


		 
		
		


		Total
		
		


		 
		
		


		Volume
		
		


		 
		
		


		Rate
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		

		

		Interest income:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Federal funds sold
		
		


		 
		
		


		$
		
		


		(375
		
		


		)
		
		


		$
		
		


		16
		
		


		 
		
		


		$
		
		


		(359
		
		


		)
		
		


		$
		
		


		862
		
		


		 
		
		


		$
		
		


		(313
		
		


		)
		
		


		$
		
		


		549
		
		


		 
	
	
		
		


		U.S.
		government agencies
		
		


		 
		
		


		 
		
		


		454
		
		


		 
		
		


		 
		
		


		58
		
		


		 
		
		


		 
		
		


		512
		
		


		 
		
		


		 
		
		


		(646
		
		


		)
		
		


		 
		
		


		(81
		
		


		)
		
		


		 
		
		


		(727
		
		


		)
	
	
		
		


		State and political subdivisions:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Taxable
		
		


		 
		
		


		 
		
		


		515
		
		


		 
		
		


		 
		
		


		516
		
		


		 
		
		


		 
		
		


		1,031
		
		


		 
		
		


		 
		
		


		(187
		
		


		)
		
		


		 
		
		


		(188
		
		


		)
		
		


		 
		
		


		(375
		
		


		)
	
	
		
		


		Non-taxable
		
		


		 
		
		


		 
		
		


		8
		
		


		 
		
		


		 
		
		


		(4
		
		


		)
		
		


		 
		
		


		4
		
		


		 
		
		


		 
		
		


		(17
		
		


		)
		
		


		 
		
		


		4
		
		


		 
		
		


		 
		
		


		(13
		
		


		)
	
	
		
		


		Mortgage-backed securities
		
		


		 
		
		


		 
		
		


		9,696
		
		


		 
		
		


		 
		
		


		(770
		
		


		)
		
		


		 
		
		


		8,926
		
		


		 
		
		


		 
		
		


		4,846
		
		


		 
		
		


		 
		
		


		(699
		
		


		)
		
		


		 
		
		


		4,147
		
		


		 
	
	
		
		


		Corporate bonds
		
		


		 
		
		


		 
		
		


		1,019
		
		


		 
		
		


		 
		
		


		(9
		
		


		)
		
		


		 
		
		


		1,010
		
		


		 
		
		


		 
		
		


		1,206
		
		


		 
		
		


		 
		
		


		(19
		
		


		)
		
		


		 
		
		


		1,187
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		(102
		
		


		)
		
		


		 
		
		


		(295
		
		


		)
		
		


		 
		
		


		(397
		
		


		)
		
		


		 
		
		


		(205
		
		


		)
		
		


		 
		
		


		(597
		
		


		)
		
		


		 
		
		


		(802
		
		


		)
	
	
		
		


		FHLB and other capital stock
		
		


		 
		
		


		 
		
		


		5
		
		


		 
		
		


		 
		
		


		13
		
		


		 
		
		


		 
		
		


		18
		
		


		 
		
		


		 
		
		


		(5
		
		


		)
		
		


		 
		
		


		(14
		
		


		)
		
		


		 
		
		


		(19
		
		


		)
	
	
		
		


		Loans  
		
		


		 
		
		


		 
		
		


		7,862
		
		


		 
		
		


		 
		
		


		(5,429
		
		


		)
		
		


		 
		
		


		2,433
		
		


		 
		
		


		 
		
		


		3,697
		
		


		 
		
		


		 
		
		


		(3,590
		
		


		)
		
		


		 
		
		


		107
		
		


		 
	
	
		
		


		Loans held for sale
		
		


		 
		
		


		 
		
		


		1,714
		
		


		 
		
		


		 
		
		


		(29
		
		


		)
		
		


		 
		
		


		1,685
		
		


		 
		
		


		 
		
		


		912
		
		


		 
		
		


		 
		
		


		64
		
		


		 
		
		


		 
		
		


		976
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		20,796
		
		


		 
		
		


		$
		
		


		(5,933
		
		


		)
		
		


		$
		
		


		14,863
		
		


		 
		
		


		$
		
		


		10,463
		
		


		 
		
		


		$
		
		


		(5,433
		
		


		)
		
		


		$
		
		


		5,030
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Increase (decrease) due to:
		
		


		 
		
		


		Increase (decrease) due to:
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Volume
		
		


		 
		
		


		Rate
		
		


		 
		
		


		Total
		
		


		 
		
		


		Volume
		
		


		 
		
		


		Rate
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		

		

		Interest expense:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Deposits:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Money market
		
		


		 
		
		


		$
		
		


		1,514
		
		


		 
		
		


		$
		
		


		(436
		
		


		)
		
		


		$
		
		


		1,078
		
		


		 
		
		


		$
		
		


		3,900
		
		


		 
		
		


		$
		
		


		(3,550
		
		


		)
		
		


		$
		
		


		350
		
		


		 
	
	
		
		


		Time deposits
		
		


		 
		
		


		 
		
		


		(300
		
		


		)
		
		


		 
		
		


		(159
		
		


		)
		
		


		 
		
		


		(459
		
		


		)
		
		


		 
		
		


		(603
		
		


		)
		
		


		 
		
		


		(321
		
		


		)
		
		


		 
		
		


		(924
		
		


		)
	
	
		
		


		Demand deposits
		
		


		 
		
		


		 
		
		


		3
		
		


		 
		
		


		 
		
		


		(1
		
		


		)
		
		


		 
		
		


		2
		
		


		 
		
		


		 
		
		


		46
		
		


		 
		
		


		 
		
		


		(61
		
		


		)
		
		


		 
		
		


		(15
		
		


		)
	
	
		
		


		Savings
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(3
		
		


		)
		
		


		 
		
		


		(3
		
		


		)
	
	
		
		


		FHLB advances
		
		


		 
		
		


		 
		
		


		(120
		
		


		)
		
		


		 
		
		


		38
		
		


		 
		
		


		 
		
		


		(82
		
		


		)
		
		


		 
		
		


		(222
		
		


		)
		
		


		 
		
		


		50
		
		


		 
		
		


		 
		
		


		(172
		
		


		)
	
	
		
		


		Federal funds and repurchase agreements
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(11
		
		


		)
		
		


		 
		
		


		(10
		
		


		)
		
		


		 
		
		


		(21
		
		


		)
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		1,097
		
		


		 
		
		


		$
		
		


		(558
		
		


		)
		
		


		$
		
		


		539
		
		


		 
		
		


		$
		
		


		3,110
		
		


		 
		
		


		$
		
		


		(3,895
		
		


		)
		
		


		$
		
		


		(785
		
		


		)
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Increases
and decreases in interest revenue and interest expense result from changes in
average balances (volume) of interest-earning bank assets and liabilities, as
well as changes in average interest rates. The effect of changes in volume is
determined by multiplying the change in volume by the previous year's average
yield/cost. Similarly, the effect of rate changes is calculated by multiplying
the change in average yield/cost by the previous year's volume. Changes
applicable to both volume and rate have been allocated proportionately.



49










II.   
Investment Portfolio



The
following tables provide a summary of the amortized cost and fair values of the
available-for-sale and held-to-maturity securities for the periods indicated 
(in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Gross unrealized
		

		
		

		gains  (1)
		
		


		 
		
		


		Gross unrealized losses  (1)
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
	
	
		
		

		

		Available-for-sale
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government securities
		
		


		 
		
		


		$
		
		


		24,972
		
		


		 
		
		


		$
		
		


		58
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		25,030
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		26,678
		
		


		 
		
		


		 
		
		


		727
		
		


		 
		
		


		 
		
		


		(1,062
		
		


		)
		
		


		 
		
		


		26,343
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		692,922
		
		


		 
		
		


		 
		
		


		6,938
		
		


		 
		
		


		 
		
		


		(2,697
		
		


		)
		
		


		 
		
		


		697,163
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		29,319
		
		


		 
		
		


		 
		
		


		744
		
		


		 
		
		


		 
		
		


		(790
		
		


		)
		
		


		 
		
		


		29,273
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		66,912
		
		


		 
		
		


		 
		
		


		1,212
		
		


		 
		
		


		 
		
		


		(128
		
		


		)
		
		


		 
		
		


		67,996
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		153,523
		
		


		 
		
		


		 
		
		


		1,705
		
		


		 
		
		


		 
		
		


		(327
		
		


		)
		
		


		 
		
		


		154,901
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		11,331
		
		


		 
		
		


		 
		
		


		677
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		12,008
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		1,005,657
		
		


		 
		
		


		$
		
		


		12,061
		
		


		 
		
		


		$
		
		


		(5,004
		
		


		)
		
		


		$
		
		


		1,012,714
		
		


		 
	
	
		
		

		

		Held-to-maturity  (2)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Municipal auction rate securities
		
		


		 
		
		


		$
		
		


		43,719
		
		


		 
		
		


		$
		
		


		3,803
		
		


		 
		
		


		$
		
		


		(171
		
		


		)
		
		


		$
		
		


		47,351
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		8,921
		
		


		 
		
		


		 
		
		


		198
		
		


		 
		
		


		 
		
		


		(3,486
		
		


		)
		
		


		 
		
		


		5,633
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		52,640
		
		


		 
		
		


		$
		
		


		4,001
		
		


		 
		
		


		$
		
		


		(3,657
		
		


		)
		
		


		$
		
		


		52,984
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Gross unrealized
		

		
		

		gains  (1)
		
		


		 
		
		


		Gross unrealized losses  (1)
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
	
	
		
		

		

		Available-for-sale
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government securities
		
		


		 
		
		


		$
		
		


		998
		
		


		 
		
		


		$
		
		


		13
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		1,011
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		960
		
		


		 
		
		


		 
		
		


		32
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		992
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		432,820
		
		


		 
		
		


		 
		
		


		1,880
		
		


		 
		
		


		 
		
		


		(1,681
		
		


		)
		
		


		 
		
		


		433,019
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		39,905
		
		


		 
		
		


		 
		
		


		683
		
		


		 
		
		


		 
		
		


		(2,122
		
		


		)
		
		


		 
		
		


		38,466
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		47,274
		
		


		 
		
		


		 
		
		


		683
		
		


		 
		
		


		 
		
		


		(317
		
		


		)
		
		


		 
		
		


		47,640
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		40,788
		
		


		 
		
		


		 
		
		


		2,102
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		42,890
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		13,235
		
		


		 
		
		


		 
		
		


		1,235
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		14,470
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		575,980
		
		


		 
		
		


		$
		
		


		6,628
		
		


		 
		
		


		$
		
		


		(4,120
		
		


		)
		
		


		$
		
		


		578,488
		
		


		 
	
	
		
		

		

		Held-to-maturity  (2)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		$
		
		


		7,574
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(3,298
		
		


		)
		
		


		$
		
		


		4,276
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1)
Unrealized gains/(losses) related to available-for-sale securities are reported
in other comprehensive income.



(2)
Held-to-maturity securities are carried on the consolidated statements of
financial condition at amortized cost, and the changes in the value of these
securities, other than impairment charges, are not reported on the consolidated
financial statements.



50









	
		
		

		

		 
		
		


		 
		
		


		December 31, 2008
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Gross unrealized
		

		
		

		gains  (1)
		
		


		 
		
		


		Gross unrealized losses  (1)
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
	
	
		
		

		

		Available-for-sale
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government securities
		
		


		 
		
		


		$
		
		


		8,447
		
		


		 
		
		


		$
		
		


		144
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		8,591
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		1,513
		
		


		 
		
		


		 
		
		


		19
		
		


		 
		
		


		 
		
		


		(1
		
		


		)
		
		


		 
		
		


		1,531
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		12,821
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(391
		
		


		)
		
		


		 
		
		


		12,430
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		23,091
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(5,669
		
		


		)
		
		


		 
		
		


		17,422
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		11,400
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(977
		
		


		)
		
		


		 
		
		


		10,423
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		57,272
		
		


		 
		
		


		$
		
		


		163
		
		


		 
		
		


		$
		
		


		(7,038
		
		


		)
		
		


		$
		
		


		50,397
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Held-to-maturity  (2)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		$
		
		


		7,574
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(1,324
		
		


		)
		
		


		$
		
		


		6,250
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1)
Unrealized gains/(losses) related to available-for-sale securities are reported
in other comprehensive income.



(2)
Held-to-maturity securities are carried on the consolidated statements of
financial condition at amortized cost, and the changes in the value of these
securities, other than impairment charges, are not reported on the consolidated
financial statements.




Other-Than-Temporary Impairment



We
evaluate our investment securities portfolio on a quarterly basis for
other-than-temporary impairment ("OTTI"). We assess whether OTTI has occurred
when the fair value of a debt security is less than the amortized cost basis at
the balance sheet date. Under these circumstances, OTTI is considered to have
occurred: (1) if we intend to sell the security, (2) if it is more likely than
not we will be required to sell the security before recovery of its amortized
cost basis, or (3) the present value of the expected cash flows is not
sufficient to recover the entire amortized cost basis. For securities that we do
not expect to sell or will not be required to sell, credit-related OTTI,
represented by the expected loss in principal, is recognized in earnings, while
non-credit-related OTTI is recognized in other comprehensive income. For
securities which we expect to sell, all OTTI is recognized in earnings.




Non-credit-related OTTI results from several factors, including increased
liquidity spreads and extension of the security. Presentation of OTTI is made in
the income statement on a gross basis with a reduction for the amount of OTTI
recognized in accumulated other comprehensive income. We applied the related
OTTI guidance on the debt security types described below.



Pooled
trust preferred securities represent collateralized debt obligations ("CDO")
backed by a pool of debt securities issued by financial institutions. The
collateral generally consisted of trust preferred securities and subordinated
debt securities issued by banks, bank holding companies, and insurance
companies. A full cash flow analysis was used to estimate fair values and assess
impairment for each security within this portfolio. We utilized an internal
resource with industry experience in pooled trust preferred securities
valuations to provide assistance in estimating the fair value and expected cash
flows for each security in this portfolio. Relying on cash flows was necessary
because there was a lack of observable transactions in the market and many of
the original sponsors or dealers for these securities were no longer able to
provide a fair value that was compliant with Topic 820.



Based on
the evaluation, we recognized a credit-related other-than-temporary impairment
of $0.9
million
through earnings for the year ended December 31, 2010. During the year ended
December 31, 2010, the remaining balance of other comprehensive income related
to the CDO was written off, and consequently, we reduced the amortized cost of
the security. If certain loss thresholds are exceeded, this bond would
experience an event of default that would allow the senior class to liquidate
the collateral securing this investment, which could adversely impact our
valuation.



51










As of
December 31, 2010, management has evaluated all other investment securities with
unrealized losses and all non-marketable securities for impairment. The
unrealized losses were primarily the result of wider liquidity spreads on
asset-backed securities and, additionally, increased market volatility on
non-agency mortgage and asset-backed securities that are backed by certain
mortgage loans. The fair values of these assets have been impacted by various
market conditions. In addition, the expected average lives of the asset-backed
securities backed by trust preferred securities have been extended, due to
changes in the expectations of when the underlying securities would be repaid.
The contractual terms and/or cash flows of the investments do not permit the
issuer to settle the securities at a price less than the amortized cost. We have
reviewed our asset-backed portfolio and do not believe there is additional OTTI
from these securities other than what has already been recorded.  



Since the
decline in fair value of the securities is not attributable to credit quality
but rather to changes in interest rates and the liquidity issues that have had a
pervasive impact on the market, and because we do not have the intent to sell
these securities and it is not likely we would be required to sell these
securities until a fair value recovery or maturity, we do not consider these
securities to be other-than-temporarily impaired as of December 31, 2010.



The
maturities and related weighted-average yields of available-for-sale and
held-to-maturity securities at December 31, 2010, are as follows (in
thousands, except rates):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Within 1



		Year
		
		


		 
		
		


		1-5 Years
		
		


		 
		
		


		5-10 Years
		
		


		 
		
		


		After 10 Years
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		

		

		Available-for-sale:  (1)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government securities
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		25,030
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		25,030
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		2,938
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		23,405
		
		


		 
		
		


		 
		
		


		26,343
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		49,661
		
		


		 
		
		


		 
		
		


		647,502
		
		


		 
		
		


		 
		
		


		697,163
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		6,195
		
		


		 
		
		


		 
		
		


		23,078
		
		


		 
		
		


		 
		
		


		29,273
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		10,119
		
		


		 
		
		


		 
		
		


		15,151
		
		


		 
		
		


		 
		
		


		42,726
		
		


		 
		
		


		 
		
		


		67,996
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		14,067
		
		


		 
		
		


		 
		
		


		139,654
		
		


		 
		
		


		 
		
		


		1,180
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		154,901
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		7,073
		
		


		 
		
		


		 
		
		


		4,935
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		12,008
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		14,067
		
		


		 
		
		


		$
		
		


		184,814
		
		


		 
		
		


		$
		
		


		77,122
		
		


		 
		
		


		$
		
		


		736,711
		
		


		 
		
		


		$
		
		


		1,012,714
		
		


		 
	
	
		
		

		

		Held-to-Maturity:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Municipal auction rate securities
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		43,719
		
		


		 
		
		


		$
		
		


		43,719
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		8,921
		
		


		 
		
		


		 
		
		


		8,921
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		52,640
		
		


		 
		
		


		$
		
		


		52,640
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Weighted-average yield
		
		


		 
		
		


		 
		
		


		3.64
		
		


		%
		
		


		 
		
		


		2.31
		
		


		%
		
		


		 
		
		


		3.20
		
		


		%
		
		


		 
		
		


		3.29
		
		


		%
		
		


		 
		
		


		3.12
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1) 
Due to the
immaterial amount of income recognized on tax-exempt securities, yields were not
calculated on a tax equivalent basis.



We did not
hold securities from any single issuer that exceeded ten percent of our
shareholders' equity at December 31, 2010.



52










III.  Loan
Portfolio



The
following table presents the balance and associated percentage of each major
loan category in Stifel Bank's loan portfolio for the periods indicated (in
thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		As of December 31,
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2007  (1)
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Consumer
		
		


		 
		
		


		$
		
		


		266,806
		
		


		 
		
		


		$
		
		


		227,436
		
		


		 
		
		


		$
		
		


		19,662
		
		


		 
		
		


		$
		
		


		4,044
		
		


		 
	
	
		
		


		Residential real estate
		
		


		 
		
		


		 
		
		


		49,550
		
		


		 
		
		


		 
		
		


		52,086
		
		


		 
		
		


		 
		
		


		58,778
		
		


		 
		
		


		 
		
		


		24,285
		
		


		 
	
	
		
		


		Commercial  
		
		


		 
		
		


		 
		
		


		41,965
		
		


		 
		
		


		 
		
		


		11,294
		
		


		 
		
		


		 
		
		


		27,538
		
		


		 
		
		


		 
		
		


		31,417
		
		


		 
	
	
		
		


		Home equity lines of credit
		
		


		 
		
		


		 
		
		


		30,966
		
		


		 
		
		


		 
		
		


		33,369
		
		


		 
		
		


		 
		
		


		28,612
		
		


		 
		
		


		 
		
		


		1,524
		
		


		 
	
	
		
		


		Commercial real estate
		
		


		 
		
		


		 
		
		


		1,637
		
		


		 
		
		


		 
		
		


		10,152
		
		


		 
		
		


		 
		
		


		38,446
		
		


		 
		
		


		 
		
		


		39,184
		
		


		 
	
	
		
		


		Construction and land
		
		


		 
		
		


		 
		
		


		524
		
		


		 
		
		


		 
		
		


		952
		
		


		 
		
		


		 
		
		


		13,968
		
		


		 
		
		


		 
		
		


		24,447
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		391,448
		
		


		 
		
		


		 
		
		


		335,289
		
		


		 
		
		


		 
		
		


		187,004
		
		


		 
		
		


		 
		
		


		124,901
		
		


		 
	
	
		
		


		Unamortized loan origination costs, net of loan fees
		
		


		 
		
		


		 
		
		


		392
		
		


		 
		
		


		 
		
		


		1,556
		
		


		 
		
		


		 
		
		


		591
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Loans in process
		
		


		 
		
		


		 
		
		


		233
		
		


		 
		
		


		 
		
		


		14
		
		


		 
		
		


		 
		
		


		(3,878
		
		


		)
		
		


		 
		
		


		109
		
		


		 
	
	
		
		


		Allowance for loan losses
		
		


		 
		
		


		 
		
		


		(2,331
		
		


		)
		
		


		 
		
		


		(1,702
		
		


		)
		
		


		 
		
		


		(2,448
		
		


		)
		
		


		 
		
		


		(1,685
		
		


		)
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		389,742
		
		


		 
		
		


		$
		
		


		335,157
		
		


		 
		
		


		$
		
		


		181,269
		
		


		 
		
		


		$
		
		


		123,325
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(1) 
		
		

		Stifel Bank was acquired on April 2, 2007.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



The
maturities of the loan portfolio at December 31, 2010, are as follows (in
thousands):


	
		
		


		 
		
		


		 
		
		


		Within 1 Year
		
		


		 
		
		


		1-5 Years
		
		


		 
		
		


		Over 5 Years
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		281,046
		
		


		 
		
		


		$
		
		


		48,047
		
		


		 
		
		


		$
		
		


		62,355
		
		


		 
		
		


		$
		
		


		391,448
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



The
sensitivity of loans with maturities in excess of one year at December 31, 2010,
is as follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		1-5 Years
		
		


		 
		
		


		Over 5 Years
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed rate loans
		
		


		 
		
		


		$
		
		


		16,248
		
		


		 
		
		


		$
		
		


		3,867
		
		


		 
		
		


		$
		
		


		20,115
		
		


		 
	
	
		
		


		Variable or adjustable rate loans
		
		


		 
		
		


		 
		
		


		31,799
		
		


		 
		
		


		 
		
		


		58,488
		
		


		 
		
		


		 
		
		


		90,287
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		48,047
		
		


		 
		
		


		$
		
		


		62,355
		
		


		 
		
		


		$
		
		


		110,402
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



53










Changes in
the allowance for loan losses at Stifel Bank were as follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2007  (1)
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Allowance for loan losses, beginning of period
		
		


		 
		
		


		$
		
		


		1,702
		
		


		 
		
		


		$
		
		


		2,448
		
		


		 
		
		


		$ 
		
		


		1,685
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		Acquisition of Stifel Bank
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,127
		
		


		 
	
	
		
		


		Provision for loan losses
		
		


		 
		
		


		 
		
		


		460
		
		


		 
		
		


		 
		
		


		604
		
		


		 
		
		


		 
		
		


		1,923
		
		


		 
		
		


		 
		
		


		558
		
		


		 
	
	
		
		


		Charge-offs:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Real estate construction loans
		
		


		 
		
		


		 
		
		


		(216
		
		


		)
		
		


		 
		
		


		(213
		
		


		)
		
		


		 
		
		


		(414
		
		


		)
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Construction and land
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(859
		
		


		)
		
		


		 
		
		


		(493
		
		


		)
		
		


		 
		
		


		(2
		
		


		)
	
	
		
		


		Commercial real estate
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(294
		
		


		)
		
		


		 
		
		


		(253
		
		


		)
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		(2
		
		


		)
		
		


		 
		
		


		(25
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Total charge-offs
		
		


		 
		
		


		 
		
		


		(218
		
		


		)
		
		


		 
		
		


		(1,391
		
		


		)
		
		


		 
		
		


		(1,160
		
		


		)
		
		


		 
		
		


		(2
		
		


		)
	
	
		
		


		Recoveries
		
		


		 
		
		


		 
		
		


		387
		
		


		 
		
		


		 
		
		


		41
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		2
		
		


		 
	
	
		
		


		Allowance for loan losses, end of period
		
		


		 
		
		


		$
		
		


		2,331
		
		


		 
		
		


		$
		
		


		1,702
		
		


		 
		
		


		$
		
		


		2,448
		
		


		 
		
		


		$
		
		


		1,685
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net charge-offs to average bank loans outstanding, net
		
		


		 
		
		


		 
		
		


		(0.05)
		
		


		%
		
		


		 
		
		


		0.58
		
		


		%
		
		


		 
		
		


		0.64
		
		


		%
		
		


		 
		
		


		0.00
		
		


		%
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		(1) 
		
		

		The results of Stifel Bank are included prospectively from April 2,
		2007, the date of acquisition.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



The
following is a breakdown of the allowance for loan losses by type for the
periods indicated (in thousands, except rates):  


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Balance
		
		


		 
		
		


		Percent(1)
		
		


		 
		
		


		 
		
		


		Balance
		
		


		 
		
		


		Percent(1)
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		$ 
		
		


		696
		
		


		 
		
		


		 
		
		


		10.7
		
		


		%
		
		


		 
		
		


		$  
		
		


		321
		
		


		 
		
		


		 
		
		


		3.4
		
		


		%
	
	
		
		


		Residential real estate
		
		


		 
		
		


		 
		
		


		681
		
		


		 
		
		


		 
		
		


		12.7
		
		


		 
		
		


		 
		
		


		 
		
		


		619
		
		


		 
		
		


		 
		
		


		15.8
		
		


		 
	
	
		
		


		Commercial real estate
		
		


		 
		
		


		 
		
		


		278
		
		


		 
		
		


		 
		
		


		0.4
		
		


		 
		
		


		 
		
		


		 
		
		


		610
		
		


		 
		
		


		 
		
		


		3.0
		
		


		 
	
	
		
		


		Consumer
		
		


		 
		
		


		 
		
		


		288
		
		


		 
		
		


		 
		
		


		68.2
		
		


		 
		
		


		 
		
		


		 
		
		


		152
		
		


		 
		
		


		 
		
		


		77.8
		
		


		 
	
	
		
		


		Unallocated
		
		


		 
		
		


		 
		
		


		388
		
		


		 
		
		


		 
		
		


		8.0
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		2,331
		
		


		 
		
		


		 
		
		


		100.0
		
		


		%
		
		


		 
		
		


		$
		
		


		1,702
		
		


		 
		
		


		 
		
		


		100.0
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	


 


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31, 2008
		
		


		 
		
		


		 
		
		


		December 31, 2007(2)
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Balance
		
		


		 
		
		


		Percent(1)
		
		


		 
		
		


		 
		
		


		Balance
		
		


		 
		
		


		Percent(1)
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		$
		
		


		646
		
		


		 
		
		


		 
		
		


		14.7
		
		


		%
		
		


		 
		
		


		$
		
		


		56
		
		


		 
		
		


		 
		
		


		3.3
		
		


		%
	
	
		
		


		Residential real estate
		
		


		 
		
		


		 
		
		


		584
		
		


		 
		
		


		 
		
		


		44.8
		
		


		 
		
		


		 
		
		


		 
		
		


		100
		
		


		 
		
		


		 
		
		


		5.9
		
		


		 
	
	
		
		


		Commercial real estate
		
		


		 
		
		


		 
		
		


		1,192
		
		


		 
		
		


		 
		
		


		30.0
		
		


		 
		
		


		 
		
		


		 
		
		


		972
		
		


		 
		
		


		 
		
		


		57.7
		
		


		 
	
	
		
		


		Consumer
		
		


		 
		
		


		 
		
		


		26
		
		


		 
		
		


		 
		
		


		10.5
		
		


		 
		
		


		 
		
		


		 
		
		


		8
		
		


		 
		
		


		 
		
		


		0.5
		
		


		 
	
	
		
		


		Unallocated
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		549
		
		


		 
		
		


		 
		
		


		32.6
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		2,448
		
		


		 
		
		


		 
		
		


		100.0
		
		


		%
		
		


		 
		
		


		$
		
		


		1,685
		
		


		 
		
		


		 
		
		


		100.0
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		(1) 
		
		

		Percent of

		loans to loan portfolio total.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		(2) 
		
		

		Stifel Bank was acquired on April 2, 2007.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	


54










At
December 31, 2010, Stifel Bank had $1.1 million of non-accrual loans that were
more than 90 days past due, for which there was a specific allowance of $0.2
million. Further, Stifel Bank had $0.4 million and $0.5 million in troubled debt
restructurings at December 31, 2010 and 2009, respectively. At December 31,
2009, 2008, and 2007, Stifel Bank had $1.4 million, $0.6 million, and $0.7
million in non-accrual loans, respectively, for which there was a specific
reserve of $0.1 million,
$0.2
million, and $0.3 million, respectively.
In
addition, there were no accrual loans delinquent 90 days or more or troubled
debt restructurings at December 31, 2008 and 2007.  



Stifel
Bank does not engage in sub-prime lending.
The gross interest income related to impaired loans, which would have been
recorded had these loans been current in accordance with their original terms,
and the interest income recognized on these loans during the years ended
December 31, 2010, 2009, 2008, and 2007, were immaterial to the consolidated
financial statements.



See the
section entitled "Critical Accounting Policies and Estimates" herein regarding
Stifel Bank's policies for establishing loan loss reserves, including placing
loans on non-accrual status.



V.   
Deposits



Deposits
consist of money market and savings accounts, certificates of deposit, and
demand deposits. The average balances of deposits and the associated weighted
average interest rates for the periods indicated are as follows (in
thousands, except percentages):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year ended December 31,
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
	
	
		
		


		 
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Average Interest Rate
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Average Interest Rate
		
		


		 
		
		


		Average Balance
		
		


		 
		
		


		Average Interest Rate
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Demand deposits (interest bearing)
		
		


		 
		
		


		$
		
		


		1,183,317
		
		


		 
		
		


		0.15
		
		


		%
		
		


		 
		
		


		$
		
		


		603,033
		
		


		 
		
		


		0.64
		
		


		%
		
		


		 
		
		


		$
		
		


		180,953
		
		


		 
		
		


		1.95
		
		


		%
	
	
		
		


		Certificates of deposit (time deposits)
		
		


		 
		
		


		$
		
		


		7,686
		
		


		 
		
		


		2.82
		
		


		%
		
		


		 
		
		


		$
		
		


		20,104
		
		


		 
		
		


		3.36
		
		


		%
		
		


		 
		
		


		$
		
		


		36,287
		
		


		 
		
		


		4.41
		
		


		%
	
	
		
		


		Demand deposits (non-interest bearing)
		
		


		 
		
		


		$
		
		


		18,192
		
		


		 
		
		


		*
		
		


		 
		
		


		 
		
		


		$
		
		


		15,054
		
		


		 
		
		


		*
		
		


		 
		
		


		 
		
		


		$
		
		


		15,293
		
		


		 
		
		


		*
		
		

		 
	
	
		
		


		Savings accounts
		
		


		 
		
		


		$
		
		


		92
		
		


		 
		
		


		-
		
		


		%
		
		


		 
		
		


		$
		
		


		303
		
		


		 
		
		


		-
		
		


		%
		
		


		 
		
		


		$
		
		


		339
		
		


		 
		
		


		0.97
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		* Not applicable.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Scheduled
maturities of certificates of deposit greater than $100,000 at December 31,
2010, were as follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		0-3 Months
		
		


		 
		
		


		3-6 Months
		
		


		 
		
		


		6-12 Months
		
		


		 
		
		


		Over 12 Months
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		199
		
		


		 
		
		


		$
		
		


		493
		
		


		 
		
		


		$
		
		


		1,020
		
		


		 
		
		


		$
		
		


		1,712
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



55










VI. 
Return on Equity and Assets


	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Return on assets (net income as a percentage of average total assets)
		
		


		 
		
		


		 
		
		


		0.05
		
		


		%
		
		


		 
		
		


		2.93
		
		


		%
		
		


		 
		
		


		3.32
		
		


		%
	
	
		
		


		Return on equity (net income as a percentage of average shareholders'
		equity)
		
		


		 
		
		


		 
		
		


		0.18
		
		


		%
		
		


		 
		
		


		9.97
		
		


		%
		
		


		 
		
		


		11.10
		
		


		%
	
	
		
		


		Dividend payout ratio  (1)
		
		


		 
		
		


		 
		
		


		-
		
		


		%
		
		


		 
		
		


		-
		
		


		%
		
		


		 
		
		


		-
		
		


		%
	
	
		
		


		Equity to assets ratio (average shareholders' equity as a percentage of
		average total assets)
		
		


		 
		
		


		 
		
		


		29.16
		
		


		%
		
		


		 
		
		


		29.35
		
		


		%
		
		


		 
		
		


		29.90
		
		


		%
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(1)
		We did not declare or pay any dividends during 2010, 2009, or 2008.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	




VII.  Short-Term Borrowings



The
following is a summary of our short-term borrowings for the periods indicated 
(in thousands, except rates):


	
		
		


		 
		
		


		 
		
		


		Short-Term Borrowings
		
		


		 
		
		


		 
		
		


		Stock Loan
		
		


		 
	
	
		
		


		Year Ended December 31, 2010:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Amount outstanding at December 31, 2010
		
		


		 
		
		


		$
		
		


		109,600
		
		


		 
		
		


		 
		
		


		$
		
		


		27,907
		
		


		 
	
	
		
		


		Weighted average interest rate thereon
		
		


		 
		
		


		 
		
		


		1.05
		
		


		%
		
		


		 
		
		


		 
		
		


		0.26
		
		


		%
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Maximum amount outstanding at any month-end
		
		


		 
		
		


		$
		
		


		259,700
		
		


		 
		
		


		 
		
		


		$
		
		


		101,580
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Average amount outstanding during the year
		
		


		 
		
		


		$
		
		


		108,784
		
		


		 
		
		


		 
		
		


		$
		
		


		69,507
		
		


		 
	
	
		
		


		Weighted average interest rate thereon
		
		


		 
		
		


		 
		
		


		1.01
		
		


		%
		
		


		 
		
		


		 
		
		


		1.54
		
		


		%
	
	
		
		


		Year Ended December 31, 2009:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Amount outstanding at December 31, 2009
		
		


		 
		
		


		$
		
		


		90,800
		
		


		 
		
		


		 
		
		


		$
		
		


		16,667
		
		


		 
	
	
		
		


		Weighted average interest rate thereon
		
		


		 
		
		


		 
		
		


		1.04
		
		


		%
		
		


		 
		
		


		 
		
		


		0.33
		
		


		%
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Maximum amount outstanding at any month-end
		
		


		 
		
		


		$
		
		


		212,300
		
		


		 
		
		


		 
		
		


		$
		
		


		85,432
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Average amount outstanding during the year
		
		


		 
		
		


		$
		
		


		107,383
		
		


		 
		
		


		 
		
		


		$
		
		


		53,110
		
		


		 
	
	
		
		


		Weighted average interest rate thereon
		
		


		 
		
		


		 
		
		


		0.99
		
		


		%
		
		


		 
		
		


		 
		
		


		1.07
		
		


		%
	
	
		
		


		Year Ended December 31, 2008:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Amount outstanding at December 31, 2008
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		 
		
		


		$
		
		


		16,987
		
		


		 
	
	
		
		


		Weighted average interest rate thereon
		
		


		 
		
		


		 
		
		


		-
		
		


		%
		
		


		 
		
		


		 
		
		


		0.52
		
		


		%
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Maximum amount outstanding at any month-end
		
		


		 
		
		


		$
		
		


		265,300
		
		


		 
		
		


		 
		
		


		$
		
		


		162,888
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Average amount outstanding during the year
		
		


		 
		
		


		$
		
		


		132,660
		
		


		 
		
		


		 
		
		


		$
		
		


		105,424
		
		


		 
	
	
		
		


		Weighted average interest rate thereon
		
		


		 
		
		


		 
		
		


		2.28
		
		


		%
		
		


		 
		
		


		 
		
		


		2.47
		
		


		%
	
	


56










Results of
Operations - Institutional Group



The
following table presents consolidated financial information for the
Institutional Group segment for the periods indicated (in thousands, except
percentages):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31,
		
		


		 
		
		


		Percentage



		Change  
		
		


		 
		
		


		 
		
		


		As a Percentage of



		Net Revenues



		for the Year Ended



		December 31,
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		2010 vs. 2009
		
		


		 
		
		


		2009 vs. 2008
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Revenues:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Principal transactions
		
		


		 
		
		


		$
		
		


		217,770
		
		


		 
		
		


		$
		
		


		263,804
		
		


		 
		
		


		$
		
		


		168,707
		
		


		 
		
		


		(17.5)
		
		


		%
		
		


		56.4
		
		


		%
		
		


		 
		
		


		40.2
		
		


		%
		
		


		53.3
		
		


		%
		
		


		43.2
		
		


		%
	
	
		
		


		Commissions
		
		


		 
		
		


		 
		
		


		123,719
		
		


		 
		
		


		 
		
		


		111,469
		
		


		 
		
		


		 
		
		


		149,547
		
		


		 
		
		


		11.0
		
		


		 
		
		


		(25.5
		
		


		)
		
		


		 
		
		


		22.8
		
		


		 
		
		


		22.6
		
		


		 
		
		


		38.3
		
		


		 
	
	
		
		


		Capital raising
		
		


		 
		
		


		 
		
		


		108,473
		
		


		 
		
		


		 
		
		


		61,657
		
		


		 
		
		


		 
		
		


		29,690
		
		


		 
		
		


		75.9
		
		


		 
		
		


		107.7
		
		


		 
		
		


		 
		
		


		20.0
		
		


		 
		
		


		12.5
		
		


		 
		
		


		7.6
		
		


		 
	
	
		
		


		Advisory
		
		


		 
		
		


		 
		
		


		83,425
		
		


		 
		
		


		 
		
		


		49,244
		
		


		 
		
		


		 
		
		


		38,506
		
		


		 
		
		


		69.4
		
		


		 
		
		


		27.9
		
		


		 
		
		


		 
		
		


		15.4
		
		


		 
		
		


		10.0
		
		


		 
		
		


		9.9
		
		


		 
	
	
		
		


		Investment banking
		
		


		 
		
		


		 
		
		


		191,898
		
		


		 
		
		


		 
		
		


		110,901
		
		


		 
		
		


		 
		
		


		68,196
		
		


		 
		
		


		73.0
		
		


		 
		
		


		62.6
		
		


		 
		
		


		 
		
		


		35.4
		
		


		 
		
		


		22.5
		
		


		 
		
		


		17.5
		
		


		 
	
	
		
		


		Interest
		
		


		 
		
		


		 
		
		


		8,315
		
		


		 
		
		


		 
		
		


		9,847
		
		


		 
		
		


		 
		
		


		9,068
		
		


		 
		
		


		(15.6
		
		


		)
		
		


		8.6
		
		


		 
		
		


		 
		
		


		1.5
		
		


		 
		
		


		2.0
		
		


		 
		
		


		2.3
		
		


		 
	
	
		
		


		Other income
		
		


		 
		
		


		 
		
		


		4,255
		
		


		 
		
		


		 
		
		


		1,331
		
		


		 
		
		


		 
		
		


		1,439
		
		


		 
		
		


		219.7
		
		


		 
		
		


		(7.6
		
		


		)
		
		


		 
		
		


		0.8
		
		


		 
		
		


		0.3
		
		


		 
		
		


		0.3
		
		


		 
	
	
		
		

		

		Total revenues
		
		


		 
		
		


		 
		
		


		545,957
		
		


		 
		
		


		 
		
		


		497,352
		
		


		 
		
		


		 
		
		


		396,957
		
		


		 
		
		


		9.9
		
		


		 
		
		


		25.3
		
		


		 
		
		


		 
		
		


		100.7
		
		


		 
		
		


		100.7
		
		


		 
		
		


		101.6
		
		


		 
	
	
		
		


		Interest expense
		
		


		 
		
		


		 
		
		


		4,118
		
		


		 
		
		


		 
		
		


		3,260
		
		


		 
		
		


		 
		
		


		6,231
		
		


		 
		
		


		26.4
		
		


		 
		
		


		(47.7
		
		


		)
		
		


		 
		
		


		0.7
		
		


		 
		
		


		0.7
		
		


		 
		
		


		1.6
		
		


		 
	
	
		
		

		

		Net revenues
		
		


		 
		
		


		 
		
		


		541,839
		
		


		 
		
		


		 
		
		


		494,092
		
		


		 
		
		


		 
		
		


		390,726
		
		


		 
		
		


		9.8
		
		


		 
		
		


		26.5
		
		


		 
		
		


		 
		
		


		100.0
		
		


		 
		
		


		100.0
		
		


		 
		
		


		100.0
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Non-interest expenses:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Compensation and benefits
		
		


		 
		
		


		 
		
		


		315,329
		
		


		 
		
		


		 
		
		


		287,835
		
		


		 
		
		


		 
		
		


		233,679
		
		


		 
		
		


		9.6
		
		


		 
		
		


		23.2
		
		


		 
		
		


		 
		
		


		58.2
		
		


		 
		
		


		58.3
		
		


		 
		
		


		59.8
		
		


		 
	
	
		
		


		Occupancy and equipment rental
		
		


		 
		
		


		 
		
		


		19,663
		
		


		 
		
		


		 
		
		


		16,249
		
		


		 
		
		


		 
		
		


		14,194
		
		


		 
		
		


		21.0
		
		


		 
		
		


		14.5
		
		


		 
		
		


		 
		
		


		3.6
		
		


		 
		
		


		3.3
		
		


		 
		
		


		3.6
		
		


		 
	
	
		
		


		Communication and office supplies
		
		


		 
		
		


		 
		
		


		23,725
		
		


		 
		
		


		 
		
		


		18,540
		
		


		 
		
		


		 
		
		


		19,087
		
		


		 
		
		


		28.0
		
		


		 
		
		


		(2.9
		
		


		)
		
		


		 
		
		


		4.4
		
		


		 
		
		


		3.7
		
		


		 
		
		


		4.9
		
		


		 
	
	
		
		


		Commissions and floor brokerage
		
		


		 
		
		


		 
		
		


		14,402
		
		


		 
		
		


		 
		
		


		15,716
		
		


		 
		
		


		 
		
		


		8,806
		
		


		 
		
		


		(8.4
		
		


		)
		
		


		78.5
		
		


		 
		
		


		 
		
		


		2.7
		
		


		 
		
		


		3.2
		
		


		 
		
		


		2.3
		
		


		 
	
	
		
		


		Other operating expenses
		
		


		 
		
		


		 
		
		


		39,185
		
		


		 
		
		


		 
		
		


		26,619
		
		


		 
		
		


		 
		
		


		23,068
		
		


		 
		
		


		47.2
		
		


		 
		
		


		15.4
		
		


		 
		
		


		 
		
		


		7.2
		
		


		 
		
		


		5.4
		
		


		 
		
		


		5.9
		
		


		 
	
	
		
		

		

		Total non-interest expenses
		
		


		 
		
		


		 
		
		


		412,304
		
		


		 
		
		


		 
		
		


		364,959
		
		


		 
		
		


		 
		
		


		298,834
		
		


		 
		
		


		13.0
		
		


		 
		
		


		22.1
		
		


		 
		
		


		 
		
		


		76.1
		
		


		 
		
		


		73.9
		
		


		 
		
		


		76.5
		
		


		 
	
	
		
		

		

		Income before income taxes
		
		


		 
		
		


		$
		
		


		129,535
		
		


		 
		
		


		$
		
		


		129,133
		
		


		 
		
		


		$
		
		


		91,892
		
		


		 
		
		


		0.3
		
		


		%
		
		


		40.5
		
		


		%
		
		


		 
		
		


		23.9
		
		


		%
		
		


		26.1
		
		


		%
		
		


		23.5
		
		


		%
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Year Ended
December 31, 2010 Compared With Year Ended December 31, 2009



NET
REVENUES



For the
year ended December 31, 2010, Institutional Group net revenues increased
9.8%
to $541.8
million from $494.1 million in 2009. The increase in net revenues is primarily
attributable to improved equity capital markets and our acquisition of TWPG on
July 1, 2010.






Principal transactions
- For the year ended December 31, 2010, principal transactions revenues
decreased 17.5%, to $217.8 million from $263.8 million in 2009. Principal
transactions revenues were negatively impacted by challenging fixed income
market conditions during 2010, which contributed to lower trading volumes and
the tightening of corporate bond spreads. Additionally, in the second half of
2010, investor concerns over credit risk continued, which led to wider credit
spreads and lower client activity in municipal products and reduced trading
performance.  The impact of the decline in our fixed income business was offset
by improved equity market conditions during the second half of 2010.





Commissions -  
For the
year ended December 31, 2010, commission revenues increased 11.0% to $123.7
million from $111.5 million in 2009. The increase is attributable to an increase
in trading volumes in equities over the prior year.



57











Investment banking -  
For the
year ended December 31, 2010, investment banking revenues increased 73.0% to
$191.9 million from $110.9 million in 2009. The increase is attributable to an
increase in equity financing revenues and advisory fee revenues from the prior
year and the acquisition of TWPG, which closed on July 1, 2010.  



For the
year ended December 31, 2010, capital-raising revenues increased 75.9% to $108.5
million from $61.7 million in 2009.



For the
year ended December 31, 2010, equity capital-raising revenues increased 96.0% to
$87.5 million from $44.6 million in 2009. The increase is primarily attributable
to an increase in the number of transactions in the current year. During the
year ended December 31, 2010, we were involved, as manager or co-manager, in 149
equity underwritings compared to 72 equity underwritings in 2009.  



For the
year ended December 31, 2010, fixed income capital-raising revenues increased
23.2%, to $21.0 million from $17.1 million in 2009. For the year ended December
31, 2010, we were involved, as manager or co-manager, in 564 tax-exempt issues
compared to 369 issues
in
2009.  



For the
year ended December 31, 2010, strategic advisory fees increased 69.4% to $83.4
million from $49.2 million in 2009. The increase is primarily attributable to an
increase in the number of completed equity transactions and the aggregate
transaction value from 2009.




Interest revenue -
For the year ended December 31, 2010, interest revenue decreased 15.6% to $8.3
million from $9.8 million in 2009. The decrease in interest revenues is
primarily attributable to decreased interest earned on our trading inventory
during 2010.  




Interest expense -  
For the
year ended December 31, 2010, interest expense increased 26.4% to $4.1 million
from $3.3 million in 2009.




NON-INTEREST EXPENSES 




For the
year ended December 31, 2010, Institutional Group non-interest expenses
increased
13.0%
to $412.3
million from $365.0 million in 2009.



Unless
specifically discussed below, the fluctuations in non-interest expenses were
primarily attributable to the continued growth of our Institutional Group
segment, primarily through the acquisition of TWPG on July 1, 2010. During the
year ended December 31, 2010, we added 403 revenue producers (investment
bankers, research, and traders) and support staff, including 219 from the TWPG
acquisition.




Compensation and benefits -  
For the
year ended December 31, 2010, compensation and benefits expense increased 9.6%
to $315.3 million from $287.8 million in 2009.
The
increase is principally due to increased compensation as a result of the
acquisition of TWPG on July 1, 2010, offset by the elimination of deferred
compensation expense as a result of the modification to our deferred
compensation plan, whereby we removed the service requirement, as previously
discussed.

Compensation and benefits expense as a percentage of net revenues decreased to
58.2% for the year ended December 31, 2010, compared to 58.3% in 2009. The change
in compensation and benefits expense as a percent of net revenues is primarily
attributable the increase in net revenues and profitability and, to a lesser
extent, the reduction in deferred compensation expense, offset by an increase in
compensation expense due to the acquisition of TWPG. 




Occupancy and equipment rental -  
For the
year ended December 31, 2010, occupancy and equipment rental expense increased
21.0% to $19.7 million from $16.2
million in 2009.




Communications and office supplies -  
For the
year ended December 31, 2010, communications and office supplies expense
increased 23.7% to $23.7 million from $18.5 million in 2009.




Commissions and floor brokerage -  
For the
year ended December 31, 2010, commissions and floor brokerage expense decreased
8.4% to $14.4 million from $15.7
million in 2009. The decrease is primarily attributable to
vendor
billing issues, resulting in higher than normal expense for the year ended
December 31, 2009.




 Other operating expenses -  
For the
year ended December 31, 2010, other operating expenses increased 47.2% to $39.2
million from $26.6
million in 2009. The increase is primarily attributable to merger-related costs
associated with the acquisition of TWPG, including approximately $3.0 million in
transaction costs.  

INCOME
BEFORE INCOME TAXES



For the
year ended December 31, 2010, income before
income taxes for the Institutional Group segment increased
0.3%,
to $129.5
million from $129.1 million in 2009.
Increased
non-interest expense resulting from the TWPG acquisition and decreased fixed
income institutional brokerage revenues and fixed income trading profits have
resulted in lower profit margins.



58










Year Ended
December 31, 2009 Compared With Year Ended December 31, 2008



NET
REVENUES



For the
year ended December 31, 2009, Institutional Group net revenues increased 26.5%
to $494.1 million from $390.7 million in 2008.



The
increase in net revenues for the year ended December 31, 2009, over the prior
year was primarily attributable to an increase in principal transactions,
investment banking, and net interest revenues, offset by a decrease in
commissions.




Principal transactions
- For the year ended December 31, 2009, principal transactions revenue increased
$95.1 million, or 56.4%, to $263.8 million from $168.7 million in 2008. The
increase was primarily attributable to increased principal transactions,
primarily in corporate debt, OTC equity, mortgage-backed bonds, and municipal
debt due to turbulent markets and institutional customers returning to
traditional fixed income products.  




Commissions -
For the year ended December 31, 2009, commission revenues decreased 25.5% to
$111.5 million from $149.5 million in 2008. The volatility in capital markets
resulted in a decrease in trading volumes, as customers have returned to
traditional fixed income products.  




Investment banking -
For the year ended December 31, 2009, investment banking revenues increased
62.6% to $110.9 million from $68.2 million in 2008.  



For the
year ended December 31, 2009, capital-raising revenues increased $32.0 million,
or 107.7%, to $61.7 million from $29.7 million in 2008.



For the
year ended December 31, 2009, equity capital-raising revenues increased $22.7
million to $44.6 million from $21.9 million in 2008. During the year ended
December 31, 2009, we were involved, as manager or co-manager, in 72 equity
underwritings, which raised a total of $21.4 billion, compared to 46 in 2008, an
increase of 56.5% in the number of underwritings from the prior year.



For the
year ended December 31, 2009, fixed income capital-raising revenues increased
$9.3 million to $17.1 million from $7.8 million in 2008.  



During the
second half of 2009, capital market conditions began to improve, and we
experienced an increase in the number of public finance underwritings. In
addition, our revenues were positively impacted by our investment in public
finance offices and professional staff during the second half of 2008. For the
year ended December 31, 2009, we were involved, as manager or co-manager, in 369
tax-exempt issues with a total par value of $21.6 billion compared to 108 issues
with a total par value of $6.4 billion in 2008.  



For the
year ended December 31, 2009, strategic advisory fees increased 27.9% to $49.2
million from $38.5 million in 2008. The increase was primarily due to an
increase in the number of completed equity transactions and the aggregate
transaction value from the prior year.  




Interest revenue -
For the year ended December 31, 2009, interest revenue increased 8.6% to $9.8
million from $9.1 million in 2008. The increase in interest revenues was
primarily attributable to increased interest earned on our trading inventory.




Interest expense -
For the year ended December 31, 2009, interest expense decreased 47.7%, or $2.9
million, to $3.3 million from $6.2 million in 2008. The decrease was due to
decreased interest rates charged by banks on lower levels of borrowings to
finance firm inventory.  


59











NON-INTEREST EXPENSES 




For the
year ended December 31, 2009, Institutional Group non-interest expenses
increased 22.1% to $365.0 million from $298.8 million in 2008.



Unless
specifically discussed below, the fluctuations in non-interest expenses were
primarily attributable to the continued growth of our Institutional Group
segment during the year ended December 31, 2009. During the year ended December
31, 2009, we added 63 revenue producers (15 equity sales and trading
professionals, 19 investment bankers, 19 fixed income sales and trading
professionals, and 10 public finance professionals) and 34 support staff.




Compensation and benefits -
For
the year ended December 31, 2009, compensation and benefits expense increased
23.2% to $287.8 million from $233.7 million in 2008.
The
increase was
primarily
due to increased fixed compensation and higher production-based variable
compensation due to higher production as compared to the prior year.




Compensation and benefits expense as a percentage of net revenues decreased to
58.3% for the year ended December 31, 2009, compared to 59.8% in 2008. The
decrease in compensation and benefits expense as a percent of net revenues was
primarily attributable to increased net revenues, offset by increased costs
associated with our continued expansion efforts during 2009.




Occupancy and equipment rental -
For the year ended December 31, 2009, occupancy and equipment rental expense
increased 14.5% to $16.2 million from $14.2 million in 2008.




Communications and office supplies -  
For the
year ended December 31, 2009, communications and office supplies expense
decreased 2.9% to $18.5 million from $19.1 million in 2008.




Commissions and floor brokerage -
For the year ended December 31, 2009, commissions and floor brokerage expense
increased $6.9 million to $15.7 million from $8.8 million in 2008.




 Other operating expenses -
For the year ended December 31, 2009, other operating expenses increased 15.4%
to $26.6 million from $23.1 million in 2008.  



INCOME
BEFORE INCOME TAXES



For the
year ended December 31, 2009, income before
income taxes for the Institutional Group segment increased $37.2 million, or
40.5%, to $129.1 million from $91.9 million in 2008. The increase was primarily
attributable to increased revenues and the scalability of increased production
as a result of our continued expansion of the Institutional Group segment during
2009.  



60











Results of Operations - Other Segment



The
following table presents consolidated financial information for the Other
segment for the periods presented (in thousands, except percentages):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		For the Year Ended December 31,
		
		


		 
		
		


		 
		
		


		As a Percentage of



		Net Revenues



		for the Year Ended



		December 31,
	
	
		
		

		

		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
		
		


		 
		
		


		2010 vs. 2009
		
		


		 
		
		


		2009 vs. 2008
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Net revenues
		
		


		 
		
		


		$
		
		


		(3,082
		
		


		)
		
		


		$
		
		


		570
		
		


		 
		
		


		$
		
		


		5,759
		
		


		 
		
		


		 
		
		


		*
		
		


		%
		
		


		(90.1
		
		


		) %
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Non-interest expenses:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Compensation and benefits
		
		


		 
		
		


		 
		
		


		237,417
		
		


		 
		
		


		 
		
		


		60,124
		
		


		 
		
		


		 
		
		


		59,892
		
		


		 
		
		


		 
		
		


		294.9
		
		


		 
		
		


		0.4
		
		


		 
	
	
		
		


		Other operating expenses
		
		


		 
		
		


		 
		
		


		83,288
		
		


		 
		
		


		 
		
		


		53,864
		
		


		 
		
		


		 
		
		


		46,934
		
		


		 
		
		


		 
		
		


		54.6
		
		


		 
		
		


		14.8
		
		


		 
	
	
		
		

		

		Total non-interest expenses
		
		


		 
		
		


		 
		
		


		320,705
		
		


		 
		
		


		 
		
		


		113,988
		
		


		 
		
		


		 
		
		


		106,826
		
		


		 
		
		


		 
		
		


		181.4
		
		


		 
		
		


		6.7
		
		


		 
	
	
		
		

		

		Loss before income taxes
		
		


		 
		
		


		$ 
		
		


		(323,787
		
		


		)
		
		


		$ 
		
		


		(113,418
		
		


		)
		
		


		$
		
		


		(101,067
		
		


		)
		
		


		 
		
		


		185.5
		
		


		% 
		
		


		12.2
		
		


		  %
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		* Percentage is not meaningful.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Year Ended
December 31, 2010 Compared With Year Ended December 31, 2009



Net
revenues -
For the year ended December 31, 2010, net revenues decreased $3.7 million from
the prior year. The decrease in net revenues for the year ended December 31,
2010, is primarily attributable
to an
increase in investment losses. In addition, we recorded an impairment charge of
$0.9
million on a held-to-maturity investment during 2010 due to an
other-than-temporary decline in value. The decrease in net revenues is offset by
the recognition of a $2.1 million gain on the conversion of our seat membership
on the Chicago Board Options Exchange to shares in conjunction with its initial
public offering during the second quarter of 2010.  




Compensation and benefits -  
For the
year ended December 31, 2010, compensation and benefits expense increased $177.3
million to $237.4 million from $60.1 million in 2009.
The
increase is primarily attributable to an increase in
deferred
compensation expense due to
the
modification of our deferred compensation plan. We accelerated all unvested
deferred compensation as a result of the plan modification resulting in a
non-cash, pre-tax charge of $179.5 million.




Other operating expenses -  
For the
year ended December 31, 2010, other operating expenses increased
14.8%
to $83.3
million from $53.9 million in 2009. The increase is primarily attributable to
the continued growth in all segments during 2010, which included merger-related
expenses of $19.0 million related to our acquisition of TWPG. In addition, the
growth of our company contributed to increased SIPC assessments, securities
processing fees, travel and promotion, and legal expenses. The increase in legal
expenses is attributable to an increase in the number of customer claims arising
from volatile market conditions. We are subject to various proceedings and
claims arising primarily from our securities business activities, including
lawsuits, arbitration claims, class actions, and regulatory matters.



61










Year Ended
December 31, 2009 Compared With Year Ended December 31, 2008



Net
revenues -
For the year ended December 31, 2009, net revenues decreased 90.1% to $0.6
million from $5.7 million in 2008. The decrease in net revenues was primarily
attributable to a $6.5 million decrease in net interest revenues to $0.8 million
in 2009 as a result of decreased interest charged for short-term borrowings,
offset by
the
reduction of investment losses during the year ended December 31, 2009.
In addition, we recorded
an
impairment charge of $1.9 million on a held-to-maturity investment during 2009
due to an other-than-temporary decline in value.




Compensation and benefits -
For the year ended December 31, 2009, compensation and benefits expense of $60.1
million remained consistent with the prior year.  



For the
year ended December 31, 2008, we incurred compensation charges of $25.6 million
related to the amortization of units awarded to LM Capital Markets associates,
which were fully amortized as of December 31, 2008. Excluding the impact of
these charges, the increase in compensation and benefits expense for the year
ended December 31, 2009, over the prior year was primarily attributable to an
increase in support personnel, as we continued our growth initiatives during
2009. During the year ended December 31, 2009, we have added 145 support
associates primarily in Information Technology and Operations.




Other operating expenses -
For the year ended December 31, 2009, other operating expenses increased 14.8%
to $53.9 million from $46.9 million in 2008.  



The
increase was primarily attributable to the continued growth in all segments
during 2009, which included increased SIPC assessments, securities processing
fees, travel and promotion, and legal expenses.  The increase in legal expenses
was attributable to an increase in litigation associated with the ongoing
investigations in connection with ARS and an increase in the number of claims
and litigation costs to defend industry recruitment claims.



62










Analysis
of Financial Condition



Our
company's consolidated statements of financial condition consist primarily of
cash and cash equivalents, receivables, trading inventory, bank loans,
investments, goodwill, loans and advances to financial advisors, bank deposits,
and payables. Total assets of $4.2 billion at December 31, 2010, were up 33.0%
over December 31, 2009. The increase is primarily attributable to increased
receivables, trading inventory, financial instruments, loans and advances to
financial advisors and the recognition of goodwill associated with our
acquisition of TWPG. Our broker-dealer subsidiary's gross assets and
liabilities, including trading inventory, stock loan/borrow, receivables and
payables from/to brokers, dealers, and clearing organizations and clients,
fluctuate with our business levels and overall market conditions. The increase
in assets is primarily attributable to the growth of our company, both
organically and through the acquisition of TWPG.



As of
December 31, 2010, our liabilities were comprised primarily of short-term
borrowings of $109.6 million, deposits of $1.6 billion at Stifel Bank, and
payables to customers, and brokers, dealers and clearing organizations of $212.6
million and $114.9 million, respectively, at our broker-dealer subsidiaries, as
well as accounts payable and accrued expenses, and accrued employee compensation
of $404.9 million. To meet our obligations to clients and operating needs, we
had $253.5 million in cash at December 31, 2010. We also had client brokerage
receivables of $477.5 million and $476.1 million in loans at Stifel Bank.



Liquidity
and Capital Resources



Management
of Our Liquidity



Liquidity
is essential to our business. We regularly evaluate cash requirements for
current operations, commitments, development activities, and capital
expenditures, and we may elect to raise additional funds for these purposes in
the future through the issuance of either debt or equity, under our universal
shelf registration filed with the SEC on March 30, 2009.



Management
assesses our liquidity position and potential sources of supplemental liquidity
in view of our operating performance, current economic and capital market
conditions, and other relevant circumstances.



Our
assets, consisting mainly of cash or assets readily convertible into cash, are
our principal source of liquidity. The liquid nature of these assets provides
for flexibility in managing and financing the projected operating needs of the
business. These assets are financed primarily by our equity capital, debentures
to trusts, client credit balances, short-term bank loans, proceeds from
securities lending, and other payables. We currently finance our client accounts
and firm trading positions through ordinary course borrowings at floating
interest rates from various banks on a demand basis and securities lending, with
company-owned and client securities pledged as collateral. Changes in securities
market volumes, related client borrowing demands, underwriting activity, and
levels of securities inventory affect the amount of our financing requirements.



Our bank
assets consist principally of available-for-sale securities, retained loans, and
cash and cash equivalents. Stifel Bank's current liquidity needs are generally
met through deposits from bank clients and equity capital. We monitor the
liquidity of Stifel Bank daily to ensure its ability to meet customer deposit
withdrawals, maintain reserve requirements, and support asset growth.



We rely
exclusively on financing activities and distributions from our subsidiaries for
funds to implement our business and growth strategies. Net capital rules,
restrictions under the borrowing arrangements of our subsidiaries, as well as
the earnings, financial condition, and cash requirements of our subsidiaries,
may each limit distributions to us from our subsidiaries.



We have an
ongoing authorization, as amended, from the Board of Directors to repurchase our
common stock in the open market or in negotiated transactions. On August 3,
2010, the Board authorized the repurchase of an additional 2,000,000 shares. The
share repurchase program will manage our equity capital relative to the growth
of our business and help to meet obligations under our employee benefit plans.

Under existing Board authorizations at December 31, 2010, we are permitted to
buy an additional 2,038,517

shares.
We
currently do not pay cash dividends on our common stock.



We believe
our existing assets, most of which are liquid in nature, together with the funds
from operations, available informal short-term credit arrangements, and our
ability to raise additional capital will provide sufficient resources to meet
our present and anticipated financing needs.



63










Cash Flow



Cash and
cash equivalents increased $91.7 million to $253.5 million at December 31, 2010,
from $161.8 million at December 31, 2009. Operating activities provided $142.2
million of cash primarily due to an increase in operating assets and liabilities
offset by the net effect of non-cash expenses. Investing activities used cash of
$568.0 million due to purchases of available-for-sale and held-to-maturity
securities as part of our investment strategy at Stifel Bank,  purchases of
eligible ARS from our customers as part of our voluntary repurchase plan, and
fixed asset purchases, offset by proceeds from the maturity of
available-for-sale securities, sale of investments, and bank customer loan
repayments. During the year ended December 31, 2010, we purchased $27.7 million
in fixed assets, consisting primarily of information technology equipment,
leasehold improvements, and furniture and fixtures. Financing activities
provided cash of $515.8 million principally due to the increase in affiliated
deposits as a result of organic growth and the acquisition of the UBS Acquired
Locations, and proceeds received from bank borrowings, offset by repurchases of
our common stock and the repayment of two senior notes held by TWPG after the
close of the merger.



Funding
Sources



We use a
variety of funding sources to obtain funds, which includes, but is not limited
to, gathering deposits, issuing equity securities, and securitizing assets.
Further liquidity is available to our company through uncommitted facilities,
FHLB advances, and federal funds agreements.




Cash and
Cash Equivalents



We held
$253.5 million of cash and cash equivalents at December 31, 2010, compared to
$161.8 million at December 31, 2009. Cash and cash equivalents provide immediate
sources of funds to meet our liquidity needs.



Securities
Available-for-Sale



We held
$1.0 billion in available-for-sale investment securities at December 31, 2010,
compared to $578.5 million at December 31, 2009. As of December 31, 2010, the
weighted average life of the investment securities portfolio was approximately
3.67 years. These investment securities provide increased liquidity and
flexibility to support our company's funding requirements.



We monitor
the available-for-sale investment portfolio for other-than-temporary impairment
based on a number of criteria, including the size of the unrealized loss
position, the duration for which the security has been in a loss position,
credit rating, the nature of the investments, and current market conditions. For
debt securities, we also consider any intent to sell the security and the
likelihood we will be required to sell the security before its anticipated
recovery. We continually monitor the ratings of our security holdings and
conduct regular reviews of our credit sensitive assets.



Deposits



Deposits
have become one of our largest funding sources. Deposits provide a stable,
low-cost source of funds that we utilize to fund loan and asset growth and to
diversify funding sources. We have continued to expand our deposit-gathering
efforts through our existing private client network and through expansion. These
channels offer a broad set of deposit products that include demand deposits,
money market deposits, and certificates of deposit ("CDs").



As of
December 31, 2010, we had $1.6 billion in deposits compared to $1.0 billion at
December 31, 2009. The growth in deposits is primarily attributable to the
increase in brokerage deposits held by the bank and the UBS Acquired Location
acquisition. Our core deposits are comprised of non-interest-bearing deposits,
money market deposit accounts, savings accounts, and CDs.  


Short-term borrowings



Our
short-term financing is generally obtained through the use of bank loans and
securities lending arrangements. We borrow from various banks on a demand basis
with company-owned and customer securities pledged as collateral. The value of
customer-owned securities is not reflected on our consolidated statements of
financial condition. We maintain available ongoing credit arrangements with
banks that provided a peak daily borrowing of $313.5 million during the year
ended December 31, 2010. There are no compensating balance requirements under
these arrangements. At December 31, 2010, short-term borrowings from banks were
$109.6 million at an average rate of 1.05%, which were collateralized by
company-owned securities valued at $162.6 million. At December 31, 2009,
short-term borrowings from banks were $90.8 million at an average rate of 1.04%,
which were collateralized by company-owned securities valued at $165.2 million.
The average bank borrowing was $108.8 million, $107.4 million, and $132.7
million during the years ended December 31, 2010, 2009, and 2008, respectively,
at weighted average daily interest rates of 1.01%, 0.99%, and 2.28%,
respectively.



64










At
December 31, 2010 and 2009, Stifel Nicolaus had a stock loan balance of $27.9
million and $16.7 million, respectively, at weighted average daily interest
rates of 0.26% and 0.33%, respectively. The average outstanding securities
lending arrangements utilized in financing activities were $69.5 million, $53.1
million, and $105.4 million during the years ended December 31, 2010, 2009, and
2008, respectively, at weighted average daily effective interest rates of 1.54%,
1.07%, and 2.47%, respectively. Customer-owned securities were utilized in these
arrangements.



The impact
of the tightened credit markets has resulted in decreased financing through
stock loan as our counterparties sought liquidity. As a result, bank loan
financing used to finance trading inventories increased.




Unsecured
short-term borrowings



On
September 8, 2010, we entered into an unsecured line of credit with two lenders
totaling $50.0 million. We can draw upon this line, as long as certain
restrictive covenants are maintained. At December 31, 2010, we had no advances
against this line of credit.



Federal
Home Loan Bank Advances and other secured financing



Stifel
Bank has borrowing capacity with the Federal Home Loan Bank of $156.1 million at
December 31, 2010, all of which was unused, and a $5.0 million federal funds
agreement for the purpose of purchasing short-term funds should additional
liquidity be needed. Stifel Bank receives overnight funds from excess cash held
in Stifel Nicolaus brokerage accounts, which are deposited into a money market
account. These balances totaled $1.6 billion at December 31, 2010.



Our
liquidity requirements may change in the event we need to raise more funds than
anticipated to increase inventory positions, support more rapid expansion,
develop new or enhanced services and products, acquire technologies, or respond
to other unanticipated liquidity requirements. We primarily rely on financing
activities and distributions from our subsidiaries for funds to implement our
business and growth strategies, and repurchase our shares. Net capital rules,
restrictions under our borrowing arrangements of our subsidiaries, as well as
the earnings, financial condition, and cash requirements of our subsidiaries,
may each limit distributions to us from our subsidiaries.



In the
event existing internal and external financial resources do not satisfy our
needs, we may have to seek additional outside financing. The availability of
outside financing will depend on a variety of factors, such as market
conditions, the general availability of credit, the volume of trading
activities, the overall availability of credit to the financial services
industry, credit ratings, and credit capacity, as well as the possibility that
lenders could develop a negative perception of our long-term or short-term
financial prospects if we incurred significant losses or if the level of our
business activity decreased due to a market downturn or otherwise. We currently
do not have a credit rating, which could adversely affect our liquidity and
competitive position by increasing our borrowing costs and limiting access to
sources of liquidity that require a credit rating as a condition to providing
funds.



Use of
Capital Resources



On
December 28, 2009, we announced that Stifel Nicolaus had reached an agreement
between the State of Missouri, the State of Indiana, the State of Colorado, and
with an association of other State securities regulatory authorities regarding
the repurchase of ARS from Eligible ARS investors. As part of the modified ARS
repurchase offer, we have accelerated the previously announced repurchase plan.
We have agreed to repurchase ARS from Eligible ARS investors in four phases
starting in January 2010 and ending on December 31, 2011. During 2010, we
repurchased $39.2 million of ARS at par. At December 31, 2010, we estimate that
our retail clients held $64.5 million of eligible ARS after issuer redemptions
of $38.4 million and Stifel repurchases of $81.7 million. See Item 3, "Legal
Proceedings," for further details regarding ARS claims.


65










We utilize
transition pay, principally in the form of upfront demand notes, to financial
advisors and certain key revenue producers as part of our overall growth
strategy. The initial value of the notes is determined primarily by the
financial advisors' trailing production and assets under management. These notes
are generally forgiven over a five- to ten-year period based on production.  The
future estimated amortization expense of the upfront notes, assuming current
year production levels and static growth for the years ended December 31, 2011,
2012, 2013, 2014, 2015, and thereafter are $51.3 million, $39.4 million, $29.7
million, $20.1 million, and $39.1 million, respectively. These estimates could
change if we continue to grow our business through expansion or experience
increased production levels.  



The
following table summarizes the activity related to our company's demand note
receivable from January 1, 2009 to December 31, 2010 (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31,
		

		
		

		2010
		
		


		 
		
		


		December 31,



		 2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Beginning balance
		
		


		 
		
		


		$ 
		
		


		185,123
		
		


		 
		
		


		$

		


		 
		
		


		105,767
		
		


		 
	
	
		
		


		Notes issued - organic growth
		
		


		 
		
		


		 
		
		


		39,777
		
		


		 
		
		


		 
		
		


		81,953
		
		


		 
	
	
		
		


		Notes issued - acquisitions  (1)
		
		


		 
		
		


		 
		
		


		4,681
		
		


		 
		
		


		 
		
		


		31,659
		
		


		 
	
	
		
		


		Amortization
		
		


		 
		
		


		 
		
		


		(50,162
		
		


		)
		
		


		 
		
		


		(33,407
		
		


		)
	
	
		
		


		Other  
		
		


		 
		
		


		 
		
		


		1,938
		
		


		 
		
		


		 
		
		


		(849
		
		


		)
	
	
		
		


		Ending balance
		
		


		 
		
		


		$
		
		


		181,357
		
		


		 
		
		


		$
		
		


		185,123
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(1) 
		
		

		Notes issued in conjunction with the acquisitions of TWPG in 2010 and
		the UBS Acquired Locations and Butler Wick in 2009, respectively.
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



We have
paid $44.5 million in the form of upfront notes to financial advisors for
transition pay during the year ended December 31, 2010. As we continue to take
advantage of the opportunities created by market displacement and as competition
for skilled professionals in the industry increases, we may decide to devote
more significant resources to attracting and retaining qualified personnel.





Net
Capital Requirements



We operate
in a highly regulated environment and are subject to net capital requirements,
which may limit distributions to our company from our broker-dealer
subsidiaries. Distributions from our broker-dealer subsidiaries are subject to
net capital rules. These subsidiaries have historically operated in excess of
minimum net capital requirements. However, if distributions were to be limited
in the future due to the failure of our subsidiaries to comply with the net
capital rules or a change in the net capital rules, it could have a material and
adverse effect to our company by limiting our operations that require intensive
use of capital, such as underwriting or trading activities, or limit our ability
to implement our business and growth strategies, pay interest on and repay the
principal of our debt, and/or repurchase our common stock. Our non-broker-dealer
subsidiary, Stifel Bank is also subject to various regulatory capital
requirements administered by the federal banking agencies.



At
December 31, 2010, Stifel Nicolaus had net capital of $180.5 million, which was
30.8% of its aggregate debit items and $168.8 million in excess of its minimum
required net capital.
At December 31, 2010, CSA's and TWP's net capital exceeded the minimum net
capital required under the SEC rule.
At
December 31, 2010, SN Ltd's and TWPIL's net capital and reserves were in excess
of the financial resources requirement under the rules of the FSA.
At
December 31, 2010, SN Canada's net capital and reserves was in excess of the
financial resources requirement under the rules of the IIROC.
At
December 31, 2010, Stifel Bank was considered well capitalized under the
regulatory framework for prompt corrective action. See Note 20 of the Notes to
Consolidated Financial Statements for details of our regulatory capital
requirements.


66










Critical
Accounting Policies and Estimates



In
preparing our consolidated financial statements in accordance with U.S.
generally accepted accounting principles and pursuant to the rules and
regulations of the SEC, we make assumptions, judgments, and estimates that
affect the reported amounts of assets, liabilities, revenues, and expenses, and
related disclosures of contingent assets and liabilities. We base our
assumptions, judgments, and estimates on historical experience and various other
factors that we believe to be reasonable under the circumstances. Actual results
could differ materially from these estimates under different assumptions or
conditions. On a regular basis, we evaluate our assumptions, judgments, and
estimates. We also discuss our critical accounting policies and estimates with
the Audit Committee of the Board of Directors.



We believe
that the assumptions, judgments, and estimates involved in the accounting
policies described below have the greatest potential impact on our consolidated
financial statements. These areas are key components of our results of
operations and are based on complex rules that require us to make assumptions,
judgments, and estimates, so we consider these to be our critical accounting
policies. Historically, our assumptions, judgments, and estimates relative to
our critical accounting policies and estimates have not differed materially from
actual results.



For a full
description of these and other accounting policies, see Note 2 of the Notes to
Consolidated Financial Statements.



Valuation
of Financial Instruments



We measure certain
financial assets and liabilities at fair value on a recurring basis, including
cash equivalents, trading securities owned, available-for-sale securities,
investments, trading securities sold, but not yet purchased, and derivatives.



Trading
securities owned and pledged and trading securities sold, but not yet purchased,
are carried at fair value on the consolidated statements of financial condition,
with unrealized gains and losses reflected on the consolidated statements of
operations.



The
fair value
of a financial instrument is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, or an exit price. The degree of
judgment used in measuring the fair value of financial instruments generally
correlates to the level of pricing observability. Financial instruments with
readily available active quoted prices or for which fair value can be measured
from actively quoted prices in active markets generally have more pricing
observability and less judgment used in measuring fair value. Conversely,
financial instruments rarely traded or not quoted have less pricing
observability and are measured at fair value using valuation models that require
more judgment. Pricing observability is impacted by a number of factors,
including the type of financial instrument, whether the financial instrument is
new to the market and not yet established, the characteristics specific to the
transaction, and overall market conditions generally.  



When
available, we use observable market prices, observable market parameters, or
broker or dealer quotes (bid and ask prices) to derive the fair value of
financial instruments. In the case of financial instruments transacted on
recognized exchanges, the observable market prices represent quotations for
completed transactions from the exchange on which the financial instrument is
principally traded.



A
substantial percentage of the fair value of our trading securities and other
investments owned, trading securities pledged as collateral, and trading
securities sold, but not yet purchased, are based on observable market prices,
observable market parameters, or derived from broker or dealer prices. The
availability of observable market prices and pricing parameters can vary from
product to product. Where available, observable market prices and pricing or
market parameters in a product may be used to derive a price without requiring
significant judgment. In certain markets, observable market prices or market
parameters are not available for all products, and fair value is determined
using techniques appropriate for each particular product. These techniques
involve some degree of judgment.  



For
investments in illiquid or privately held securities that do not have readily
determinable fair values, the determination of fair value requires us to
estimate the value of the securities using the best information available.

Among the factors we consider in determining the fair value of investments are
the cost of the investment, terms and liquidity, developments since the
acquisition of the investment, the sales price of recently issued securities,
the financial condition and operating results of the issuer, earnings trends and
consistency of operating cash flows, the long-term business potential of the
issuer, the quoted market price of securities with similar quality and yield
that are publicly traded, and other factors generally pertinent to the valuation
of investments.
In
instances where a security is subject to transfer restrictions, the value of the
security is based primarily on the quoted price of a similar security without
restriction but may be reduced by an amount estimated to reflect such
restrictions.
The fair
value of these investments is subject to a high degree of volatility and may be
susceptible to significant fluctuation in the near term, and the differences
could be material.



67










We have
categorized our financial instruments measured at fair value into a three-level
classification in accordance with ASC 820, "Fair Value Measurement and
Disclosures." Fair value measurements of financial instruments that use quoted
prices in active markets for identical assets or liabilities are generally
categorized as Level 1, and fair value measurements of financial instruments
that have no direct observable levels are generally categorized as Level 3. All
other fair value measurements of financial instruments that do not fall within
the Level 1 or Level 3 classification are considered Level 2. The lowest level
input that is significant to the fair value measurement of a financial
instrument is used to categorize the instrument and reflects the judgment of
management.



Level 3 financial
instruments have little to no pricing observability as of the report date. These
financial instruments do not have active two-way markets and are measured using
management's best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or
estimation. We have identified Level 3 financial instruments to include certain
asset-backed securities, consisting of collateral loan obligation securities,
that have experienced low volumes of executed transactions, certain corporate
bonds and equity securities where there was less frequent or nominal market
activity, investments in private equity funds, and auction rate securities for
which the market has been dislocated and largely ceased to function. Our Level 3
asset-backed securities are valued using cash flow models that utilize
unobservable inputs. Level 3 corporate bonds are valued using prices from
comparable securities. Equity securities with unobservable inputs are valued
using management's best estimate of fair value, where the inputs require
significant management judgment. Auction rate securities are valued based upon
our expectations of issuer redemptions and using internal models.



At
December 31, 2010, Level 3 assets for which we bear economic exposure were
$173.5 million, or 10.5% of the total assets measured at fair value. During the
year ended December 31, 2010, we recorded net purchases of $100.2 million of
Level 3 assets. Our valuation adjustments (realized and unrealized) increased
the value of our Level 3 assets by $7.8 million. During 2010, we continued
repurchasing eligible ARS from our customers as part of our voluntary repurchase
plan, which have been classified as Level 3 assets at December 31, 2010.



At
December 31, 2009, Level 3 assets for which we bear economic exposure were $65.4
million, or 5.7% of the total assets measured at fair value. During the year
ended December 31, 2009, we recorded net purchases of $31.3 million of Level 3
assets. Our valuation adjustments (realized and unrealized) reduced the value of
our Level 3 assets by $3.9 million. In June 2009, we began repurchasing eligible
ARS from our customers as part of our voluntary repurchase plan, which have been
classified as Level 3 assets at December 31, 2009.




At
December 31, 2010, Level 3 assets included the following: $94.8 million of
auction rate securities and $78.7 million of private equity and other fixed
income securities.




Investments in Partnerships




Investments in partnerships and other investments include our general and
limited partnership interests in investment partnerships and direct investments
in non-public companies. These interests are carried at estimated fair value.
The net assets of investment partnerships consist primarily of investments in
non-marketable securities. The underlying investments held by such partnerships
and direct investments in non-public companies are valued based on estimated
fair value ultimately determined by us in our capacity as general partner or
investor and, in the case of an investment in an unaffiliated investment
partnership, are based on financial statements prepared by an unaffiliated
general partner. Due to the inherent uncertainty of valuation, fair values of
these non-marketable investments may differ from the values that would have been
used had a ready market existed for these investments, and the differences could
be material. Increases and decreases in estimated fair value are recorded based
on underlying information of these non-public company investments, including
third-party transactions evidencing a change in value, market comparables,
operating cash flows and financial performance of the companies, trends within
sectors and/or regions, underlying business models, expected exit timing and
strategy, and specific rights or terms associated with the investment, such as
conversion features and liquidation preferences. In cases where an estimate of
fair value is determined based on financial statements prepared by an
unaffiliated general partner, such financial statements are generally unaudited
other than audited year-end financial statements. Upon receipt of audited
financial statements from an investment partnership, we adjust the fair value of
the investments to reflect the audited partnership results if they differ from
initial estimates. We also perform procedures to evaluate fair value estimates
provided by unaffiliated general partners. At December 31, 2010, we had
commitments to invest in affiliated and unaffiliated investment partnerships of
$4.6 million. These commitments are generally called as investment opportunities
are identified by the underlying partnerships. These commitments may be called
in full at any time.



68










The
investment partnerships in which we are general partner may allocate carried
interest and make carried interest distributions, which represent an additional
allocation of net realized and unrealized gains to the general partner if the
partnerships' investment performance reaches a threshold as defined in the
respective partnership agreements. These allocations are recognized in revenue
as realized and unrealized gains and losses on investments in partnerships. Our
recognition of allocations of carried interest gains and losses from the
investment partnerships in revenue is not adjusted to reflect expectations about
future performance of the partnerships.



As the
investment partnerships realize proceeds from the sale of their investments,
they may make cash distributions as provided for in the partnership agreements.
Distributions that result from carried interest may subsequently become subject
to claw back if the fair value of private equity partnership assets subsequently
decreases in fair value. To the extent these decreases in fair value and
allocated losses exceed our capital account balance, a liability is recorded by
us. These liabilities for claw back obligations are not required to be paid to
the investment partnerships until the dissolution of such partnerships, and are
only required to be paid if the cumulative amounts actually distributed exceed
the amount due based on the cumulative operating results of the partnerships.





We earn
fees from the investment partnerships that we manage or of which we are a
general partner. Such management fees are generally based on the net assets or
committed capital of the underlying partnerships. We have agreed, in certain
cases, to waive management fees, in lieu of making a cash contribution, in
satisfaction of our general partner investment commitments to the investment
partnerships. In these cases, we generally recognize our management fee revenues
at the time when we are allocated a special profit interest in realized gains
from these partnerships.




Contingencies



We are
involved in various pending and potential legal proceedings related to our
business, including litigation, arbitration, and regulatory proceedings. Some of
these matters involve claims for substantial amounts, including claims for
punitive damages. We have, after consultation with outside legal counsel and
consideration of facts currently known by management, recorded estimated losses
in accordance with ASC 450 ("ASC 450"), "Contingencies," to the extent that
claims are probable of loss and the amount of the loss can be reasonably
estimated. The determination of these reserve amounts requires us to use
significant judgment, and our final liabilities may ultimately be materially
different.
This
determination is inherently subjective, as it requires estimates that are
subject to potentially significant revision as more information becomes
available and due to subsequent events.
In making
these determinations, we consider many factors, including, but not limited to,
the loss and damages sought by the plaintiff or claimant, the basis and validity
of the claim, the likelihood of a successful defense against the claim, and the
potential for, and magnitude of, damages or settlements from such pending and
potential litigation and arbitration proceedings, and fines and penalties or
orders from regulatory agencies. See Item 3, "Legal Proceedings," in Part I of
this report for information on our legal, regulatory, and arbitration
proceedings.



Allowance
for Loan Losses



We
regularly review the loan portfolio of Stifel Bank and have established an
allowance for loan losses in accordance with ASC 450.  The allowance for loan
losses is established as losses are estimated to have occurred through a
provision for loan losses charged to income. In providing for the allowance for
loan losses, we consider historical loss experience, the nature and volume of
the loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral, and prevailing economic
conditions. This evaluation is inherently subjective, as it requires estimates
that are susceptible to significant revision as more information becomes
available. Large groups of smaller balance homogenous loans are collectively
evaluated for impairment. Accordingly, we do not separately identify individual
consumer and residential loans for impairment measurements.  



In
addition, impairment is measured on a loan-by-loan basis for non-homogeneous
loans and a specific allowance established for individual loans determined to be
impaired in accordance with ASC 310 "Receivables." Impairment is measured using
the present value of the impaired loan's expected cash flow discounted at the
loan's effective interest rate, the loan's observable market price, or the fair
value of the collateral if the loan is collateral dependent.  



A loan is
considered impaired when, based on current information and events, it is
probable that the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement will not be collectible. Factors
considered in determining impairment include payment status, collateral value,
and the probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. We determine the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower's
prior payment record, and the amount of the shortfall in relation to the
principal and interest owed.  



69










Once a
loan is determined to be impaired, usually when principal or interest becomes 90
days past due or when collection becomes uncertain, the accrual of interest and
amortization of deferred loan origination fees is discontinued ("non-accrual
status"), and any accrued and unpaid interest income is written off. Loans
placed on non-accrual status are returned to accrual status when all delinquent
principal and interest payments are collected and the collectibility of future
principal and interest payments is reasonably assured. Loan losses are charged
against the allowance when we believe the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance.




Derivative Instruments and Hedging Activities



Stifel
Bank utilizes certain derivative instruments to minimize significant unplanned
fluctuations in earnings caused by interest rate volatility. Our company's goal
is to manage sensitivity to changes in rates by offsetting the repricing or
maturity characteristics of certain assets and liabilities, thereby limiting the
impact on earnings. The use of derivative instruments does expose our company to
credit and market risk. We manage credit risk through strict counterparty credit
risk limits and/or collateralization agreements. At inception, we determine if a
derivative instrument meets the criteria for hedge accounting under ASC 815,
"Derivatives and Hedging." Ongoing effectiveness evaluations are made for
instruments that are designated and qualify as hedges. If the derivative does
not qualify for hedge accounting, no assessment of effectiveness is needed.



Income
Taxes



The
provision for income taxes and related tax reserves is based on our
consideration of known liabilities and tax contingencies for multiple taxing
authorities. Known liabilities are amounts that will appear on current tax
returns, amounts that have been agreed to in revenue agent revisions as the
result of examinations by the taxing authorities, and amounts that will follow
from such examinations but affect years other than those being examined. Tax
contingencies are liabilities that might arise from a successful challenge by
the taxing authorities taking a contrary position or interpretation regarding
the application of tax law to our tax return filings. Factors considered in
estimating our liability are results of tax audits, historical experience, and
consultation with tax attorneys and other experts.



Topic 740
("Topic 740"), "Income Taxes," clarifies the accounting for uncertainty
in income taxes recognized in an entity's financial statements and prescribed
recognition threshold and measurement attributes for financial statement
disclosure of tax positions taken or expected to be taken on a tax return. The
impact of an uncertain income tax position on the income tax return must be
recognized at the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority. An uncertain income tax position
will not be recognized if it has less than a 50% likelihood of being sustained.
Additionally, Topic 740 provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition.



Goodwill
and Intangible Assets



Under the
provisions of ASC 805, "Business Combinations," we record all assets and
liabilities acquired in purchase acquisitions, including goodwill and other
intangible assets, at fair value. Determining the fair value of assets and
liabilities requires certain estimates. At December 31, 2010, we had goodwill of
$301.9 million and intangible assets of $34.6 million.  



In
accordance with ASC 350, "Intangibles - Goodwill and Other," indefinite-life
intangible assets and goodwill are not amortized. Rather, they are subject to
impairment testing on an annual basis, or more often if events or circumstances
indicate there may be impairment. This test involves assigning tangible assets
and liabilities as well as identified intangible assets and goodwill to
reporting units and comparing the fair value of each reporting unit to its
carrying amount. If the fair value is less than the carrying amount, a further
test is required to measure the amount of the impairment. We have elected to
test for goodwill impairment in the third quarter of each calendar year. The
results of the impairment test performed as of July 31, 2010, our last annual
measurement date, did not indicate any impairment.



The
goodwill impairment test is a two-step process, which requires us to make
judgments in determining what assumptions to use in the calculation.
Assumptions, judgments, and estimates about future cash flows and discount rates
are complex and often subjective. They can be affected by a variety of factors,
including, among others, economic trends and market conditions, changes in
revenue growth trends or business strategies, unanticipated competition,
discount rates, technology, or government regulations. In assessing the fair
value of our reporting units, the volatile nature of the securities markets and
industry requires us to consider the business and market cycle and assess the
stage of the cycle in estimating the timing and extent of future cash flows. In
addition to discounted cash flows, we consider other information, such as public
market comparables and multiples of recent mergers and acquisitions of similar
businesses. Although we believe the assumptions, judgments, and estimates we
have made in the past have been reasonable and appropriate, different
assumptions, judgments, and estimates could materially affect our reported
financial results.




Identifiable intangible assets, which are amortized over their estimated useful
lives, are tested for potential impairment whenever events or changes in
circumstances suggest that the carrying value of an asset or asset group may not
be fully recoverable.



70










Recent
Accounting Pronouncements



See Note 2
of the Notes to Consolidated Financial Statements for information regarding the
effect of new accounting pronouncements on our consolidated financial
statements.




Off-Balance Sheet Arrangements




Information concerning our off-balance sheet arrangements is included in Note
23
of
the Notes to Consolidated Financial Statements. Such information is hereby
incorporated by reference.



Dilution



As of
December 31, 2010, there were 726,210 shares of our common stock issuable on
outstanding options, with an average weighted exercise price of $13.36, and
9,445,071 outstanding stock unit grants, with each unit representing the right
to receive shares of our common stock at a designated time in the future. The
restricted stock units vest on an annual basis over the next three to eight
years and are distributable, if vested, at future specified dates. Of the
outstanding restricted stock unit awards, 8,985,748 shares are currently vested
and 459,323 are unvested. Assuming vesting requirements are met, the Company
anticipates that 1,685,268 shares under these awards will be distributed in
2011, 1,665,106 will be distributed in 2012, 2,580,269 will be distributed in
2013, and the balance of 3,514,428 will be distributed thereafter.  



An
employee will realize income as a result of an award of stock units at the time
shares are distributed in an amount equal to the fair market value of such
shares at that time, and we are entitled to a corresponding tax deduction in the
year of such issuance. Unless an employee elects to satisfy such withholding in
another manner, such as by paying the amount in cash or by delivering shares of
Stifel Financial Corp. common stock already owned by such person and held by
such person for at least six months, we may satisfy tax withholding obligations
on income associated with such grants by reducing the number of shares otherwise
deliverable in connection with such awards, such reduction to be calculated
based on a current market price of our common stock. Based on current tax law,
we anticipate that the shares issued when the awards are paid to the employees
will be reduced by approximately 35% to satisfy such withholding obligations, so
that approximately 65% of the total restricted stock units that are
distributable in any particular year will be converted into issued and
outstanding shares.



71









Contractual Obligations



The
following table sets forth our contractual obligations to make future payments
as of December 31, 2010 (in thousands):


	
		
		


		 
		
		


		Total
		
		


		 
		
		


		2011
		
		


		 
		
		


		2012
		
		


		 
		
		


		2013
		
		


		 
		
		


		2014
		
		


		 
		
		


		2015
		
		


		 
		
		


		Thereafter
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Debenture to Stifel Financial Capital Trust II  
		(1)
		
		


		$
		
		


		35,000
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		35,000
	
	
		
		


		Interest on debenture  (1)
		
		


		 
		
		


		55,267
		
		


		 
		
		


		 
		
		


		2,233
		
		


		 
		
		


		 
		
		


		2,233
		
		


		 
		
		


		 
		
		


		2,233
		
		


		 
		
		


		 
		
		


		2,233
		
		


		 
		
		


		 
		
		


		2,233
		
		


		 
		
		


		 
		
		


		44,102
	
	
		
		


		Debenture to Stifel Financial Capital Trust III  
		(2)
		
		


		 
		
		


		35,000
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		35,000
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
	
	
		
		


		Interest on debenture  (2)
		
		


		 
		
		


		62,383
		
		


		 
		
		


		 
		
		


		2,377
		
		


		 
		
		


		 
		
		


		2,377
		
		


		 
		
		


		 
		
		


		2,377
		
		


		 
		
		


		 
		
		


		2,377
		
		


		 
		
		


		 
		
		


		2,377
		
		


		 
		
		


		 
		
		


		50,498
	
	
		
		


		Debenture to Stifel Financial Capital Trust IV  
		(3)
		
		


		 
		
		


		12,500
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		12,500
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
	
	
		
		


		Interest on debenture  (3)
		
		


		 
		
		


		22,876
		
		


		 
		
		


		 
		
		


		848
		
		


		 
		
		


		 
		
		


		848
		
		


		 
		
		


		 
		
		


		848
		
		


		 
		
		


		 
		
		


		848
		
		


		 
		
		


		 
		
		


		848
		
		


		 
		
		


		 
		
		


		18,636
	
	
		
		


		Operating leases
		
		


		 
		
		


		293,015
		
		


		 
		
		


		 
		
		


		58,420
		
		


		 
		
		


		 
		
		


		53,901
		
		


		 
		
		


		 
		
		


		44,640
		
		


		 
		
		


		 
		
		


		38,988
		
		


		 
		
		


		 
		
		


		34,145
		
		


		 
		
		


		 
		
		


		62,921
	
	
		
		


		Commitments to extend credit - Stifel Bank  
		(4)
		
		


		 
		
		


		213,747
		
		


		 
		
		


		 
		
		


		150,576
		
		


		 
		
		


		 
		
		


		7,771
		
		


		 
		
		


		 
		
		


		23,239
		
		


		 
		
		


		 
		
		


		21,984
		
		


		 
		
		


		 
		
		


		336
		
		


		 
		
		


		 
		
		


		9,841
	
	
		
		


		ARS repurchase plan  
		(5)
		
		


		 
		
		


		64,250
		
		


		 
		
		


		 
		
		


		64,250
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
	
	
		
		


		 
		
		


		$
		
		


		794,038
		
		


		 
		
		


		$
		
		


		278,704
		
		


		 
		
		


		$
		
		


		114,630
		
		


		 
		
		


		$
		
		


		73,337
		
		


		 
		
		


		$
		
		


		66,430
		
		


		 
		
		


		$
		
		


		39,939
		
		


		 
		
		


		$
		
		


		220,998
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1) 
Debenture
to Stifel Financial Capital Trust II is callable at par no later than September
30, 2035. The interest is payable at a floating interest rate equal to
three-month London Interbank Offered Rate ("LIBOR") plus 1.70% per annum.
Thereafter, interest rate assumes no increase.  



(2) 
Debenture
to Stifel Financial Capital Trust III is callable at par no earlier than June 6,
2012, but no later than June 6, 2037. The interest is payable, in arrears, at a
fixed interest rate equal to 6.79% per annum from the issue date to June 6,
2012, and then will be payable at a floating interest rate equal to three-month
LIBOR plus 1.85% per annum. Thereafter, interest rate assumes no increase.



(3) 
Debenture
to Stifel Financial Capital Trust IV is callable at par no earlier than
September 6, 2012, but no later than September 6, 2037. The interest is payable,
in arrears, at a fixed interest rate equal to 6.78% per annum from the issue
date to September 6, 2012, and then will be payable at a floating interest rate
equal to three-month LIBOR plus 1.85% per annum. Thereafter, interest rate
assumes no increase.



(4) 
Commitments to extend credit include commitments to originate loans, outstanding
standby letters of credit, and lines of credit which may expire without being
funded and, as such, do not represent estimates of future cash flow.



(5) 
Stifel
Nicolaus' modified ARS repurchase plan, wherein it will complete the repurchase
of auction rate securities, at par, from its retail clients who purchased ARS
through Stifel Nicolaus before the collapse of the ARS market in early 2008 no
later than December 31, 2011. The amounts estimated for repurchase assume no
issuer redemptions. Issuer redemptions have been at par, and we expect this to
continue.



The
contractual obligations table excludes uncertain tax position liabilities of
$3.1 million, because we cannot make a reliable estimate of the timing of cash
payments.



72










ITEM
7A.   

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Risk
Management



Risks are
an inherent part of our business and activities. Management of these risks is
critical to our soundness and profitability. Risk management at our company is a
multi-faceted process that requires communication, judgment, and knowledge of
financial products and markets. Our senior management group takes an active role
in the risk management process and requires specific administrative and business
functions to assist in the identification, assessment, monitoring, and control
of various risks. The principal risks involved in our business activities are:
market (interest rates and equity prices), credit, operational, and regulatory
and legal.
We have
adopted policies and procedures concerning risk management, and our Board of
Directors, in exercising its oversight of management's activities, conducts
periodic reviews and discussions with management regarding the guidelines and
policies governing the processes by which risk assessment and risk management
are handled.



Market
Risk



The
potential for changes in the value of financial instruments owned by our company
resulting from changes in interest rates and equity prices is referred to as
"market risk." Market risk is inherent to financial instruments, and
accordingly, the scope of our market risk management procedures includes all
market risk-sensitive financial instruments.



We trade
tax-exempt and taxable debt obligations, including U.S. treasury bills, notes,
and bonds; U.S. government agency and municipal notes and bonds; bank
certificates of deposit; mortgage-backed securities; and corporate obligations.
We are also an active market maker in over-the-counter equity securities. In
connection with these activities, we may maintain inventories in order to ensure
availability and to facilitate customer transactions.



Changes in
value of our financial instruments may result from fluctuations in interest
rates, credit ratings, equity prices, and the correlation among these factors,
along with the level of volatility.



We manage
our trading businesses by product and have established trading departments that
have responsibility for each product. The trading inventories are managed with a
view toward facilitating client transactions, considering the risk and
profitability of each inventory position. Position limits in trading inventory
accounts are established and monitored on a daily basis. We monitor inventory
levels and results of the trading departments, as well as inventory aging,
pricing, concentration, and securities ratings.  



We are
also exposed to market risk based on our other investing activities. These
investments consist of investments in private equity partnerships, start-up
companies, venture capital investments, and zero coupon U.S. government
securities and are included under the caption "Investments" on the consolidated
statements of financial condition.



Interest
Rate Risk



We are
exposed to interest rate risk as a result of maintaining inventories of interest
rate-sensitive financial instruments and from changes in the interest rates on
our interest-earning assets (including client loans, stock borrow activities,
investments, inventories, and resale agreements) and our funding sources
(including client cash balances, stock lending activities, bank borrowings, and
repurchase agreements), which finance these assets. The collateral underlying
financial instruments at the broker-dealer is repriced daily, thus requiring
collateral to be delivered as necessary. Interest rates on client balances and
stock borrow and lending produce a positive spread to our company, with the
rates generally fluctuating in parallel.



We manage
our inventory exposure to interest rate risk by setting and monitoring limits
and, where feasible, hedging with offsetting positions in securities with
similar interest rate risk characteristics. While a significant portion of our
securities inventories have contractual maturities in excess of five years,
these inventories, on average, turn over several times per year.




Additionally, we monitor, on a daily basis, the Value-at-Risk ("VaR") in our
trading portfolios using a ten-day horizon and report VaR at a 99% confidence
level. VaR is a statistical technique used to estimate the probability of
portfolio losses based on the statistical analysis of historical price trends
and volatility. This model assumes that historical changes in market conditions
are representative of future changes, and trading losses on any given day could
exceed the reported VaR by significant amounts in unusually volatile markets.
Further, the model involves a number of assumptions and inputs. While we believe
that the assumptions and inputs we use in our risk model are reasonable,
different assumptions and inputs could produce materially different VaR
estimates.  



73










The
following table sets forth the high, low, and daily average VaR for our trading
portfolios during the year ended December 31, 2010, and the daily VaR at
December 31, 2010 and 2009 (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31, 2010
		
		


		 
		
		


		VaR calculation at
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		High
		
		


		 
		
		


		Low
		
		


		 
		
		


		 
		
		


		Daily

		Average
		
		


		 
		
		


		December 31,
		

		2010
		
		


		 
		
		


		December 31,
		

		2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Daily VaR
		
		


		 
		
		


		$
		
		


		15,027
		
		


		 
		
		


		$
		
		


		1,894
		
		


		 
		
		


		$ 
		
		


		6,145
		
		


		 
		
		


		 
		
		


		$
		
		


		8,043
		
		


		 
		
		


		$
		
		


		3,277
		
		


		 
	



Stifel
Bank's interest rate risk is principally associated with changes in market
interest rates related to residential, consumer, and commercial lending
activities, as well as FDIC-insured deposit accounts to customers of our
broker-dealer subsidiaries and to the general public.  



Our
primary emphasis in interest rate risk management for Stifel Bank is the
matching of assets and liabilities of similar cash flow and repricing time
frames. This matching of assets and liabilities reduces exposure to interest
rate movements and aids in stabilizing positive interest spreads. Stifel Bank
has established limits for acceptable interest rate risk and acceptable
portfolio value risk. To ensure that Stifel Bank is within the limits
established for net interest margin, an analysis of net interest margin based on
various shifts in interest rates is prepared each quarter and presented to
Stifel Bank's Board of Directors. Stifel Bank utilizes a third-party vendor to
analyze the available data.  



The
following table illustrates the estimated change in net interest margin at
December 31, 2010, based on shifts in interest rates of up to positive 200 basis
points and negative 200 basis points:  



	
		
			
			

			

			Hypothetical change



			 in interest rates
			
			


			 
			
			


			Projected change in net interest margin
			
			


			 
		
		
			
			


			+200
			
			


			 
			
			


			57.8
			
			


			% 
		
		
			
			


			+100
			
			


			 
			
			


			29.3
			
			


			%
		
		
			
			


			0
			
			


			 
			
			


			0.00%
			
			


			 
		
		
			
			


			-100
			
			


			 
			
			


			n/a
			
			


			 
		
		
			
			


			-200
			
			


			 
			
			


			n/a
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
	




74










The
following GAP Analysis table indicates Stifel Bank's interest rate sensitivity
position at December 31, 2010 (in thousands):



	
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			Repricing Opportunities
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			0-6 Months
			
			


			 
			
			


			7-12 Months
			
			


			 
			
			


			1-5 Years
			
			


			 
			
			


			5+ Years
			
			


			 
		
		
			
			

			

			Interest-earning assets:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Loans
			
			


			 
			
			


			$
			
			


			438,830
			
			


			 
			
			


			$
			
			


			23,032
			
			


			 
			
			


			$
			
			


			31,990
			
			


			 
			
			


			$
			
			


			2,744
			
			


			 
		
		
			
			


			Securities
			
			


			 
			
			


			 
			
			


			286,851
			
			


			 
			
			


			 
			
			


			108,387
			
			


			 
			
			


			 
			
			


			444,656
			
			


			 
			
			


			 
			
			


			214,810
			
			


			 
		
		
			
			


			Interest-bearing cash
			
			


			 
			
			


			 
			
			


			198,053
			
			


			 
			
			


			 
			
			


			-
			
			


			 
			
			


			 
			
			


			-
			
			


			 
			
			


			 
			
			


			-
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			$ 
			
			


			923,734
			
			


			 
			
			


			$ 
			
			


			131,419
			
			


			 
			
			


			$
			
			


			476,646
			
			


			 
			
			


			$
			
			


			217,554
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Interest-bearing liabilities:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Transaction accounts and savings
			
			


			 
			
			


			$ 
			
			


			280,044
			
			


			 
			
			


			$
			
			


			252,375
			
			


			 
			
			


			$
			
			


			948,401
			
			


			 
			

			$
			
			


			143,758
			
			


			 
		
		
			
			


			Certificates of deposit
			
			


			 
			
			


			 
			
			


			294
			
			


			 
			
			


			 
			
			


			596
			
			


			 
			
			


			 
			
			


			1,788
			
			


			 
			
			


			 
			
			


			-
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			$
			
			


			280,338
			
			


			 
			
			


			$
			
			


			252,971
			
			


			 
			
			


			$
			
			


			950,189
			
			


			 
			
			


			$
			
			


			143,758
			
			


			 
		
		
			
			


			GAP
			
			


			 
			
			


			 
			
			


			643,396
			
			


			 
			
			


			 
			
			


			(121,552
			
			


			) 
			
			


			 
			
			


			(473,543
			
			


			)
			
			


			 
			
			


			73,796
			
			


			 
		
		
			
			


			Cumulative GAP
			
			


			 
			
			


			$
			
			


			643,396
			
			


			 
			
			


			$
			
			


			521,844
			
			


			 
			
			


			$
			
			


			48,301
			
			


			 
			
			


			$
			
			


			122,097
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
	





We maintain a risk management strategy that incorporates the use of derivative
instruments to minimize significant unplanned fluctuations in earnings caused by
interest rate volatility. Our goal is to manage sensitivity to changes in rates
by hedging the maturity characteristics of Fed funds-based affiliated deposits,
thereby limiting the impact on earnings. By using derivative instruments, we are
exposed to credit and market risk on those derivative positions. We manage the
market risk associated with interest rate contracts by establishing and
monitoring limits as to the types and degree of risk that may be undertaken.
Our
interest rate hedging strategies may not work in all market environments and, as
a result, may not be effective in mitigating interest rate risk.



Equity
Price Risk



We are
exposed to equity price risk as a consequence of making markets in equity
securities. We attempt to reduce the risk of loss inherent in our inventory of
equity securities by monitoring those security positions constantly throughout
each day.



Our equity
securities inventories are repriced on a regular basis, and there are no
unrecorded gains or losses. Our activities as a dealer are client-driven, with
the objective of meeting clients' needs while earning a positive spread.



75










Credit
Risk



We are
engaged in various trading and brokerage activities, with the counterparties
primarily being broker-dealers. In the event counterparties do not fulfill their
obligations, we may be exposed to risk. The risk of default depends on the
creditworthiness of the counterparty or issuer of the instrument. We manage this
risk by imposing and monitoring position limits for each counterparty,
monitoring trading counterparties, conducting regular credit reviews of
financial counterparties, reviewing security concentrations, holding and marking
to market collateral on certain transactions, and conducting business through
clearing organizations, which guarantee performance.



Our client
activities involve the execution, settlement, and financing of various
transactions on behalf of our clients. Client activities are transacted on
either a cash or margin basis. Credit exposure associated with our private
client business consists primarily of customer margin accounts, which are
monitored daily and are collateralized. We monitor exposure to industry sectors
and individual securities and perform analyses on a regular basis in connection
with our margin lending activities. We adjust our margin requirements if we
believe our risk exposure is not appropriate based on market conditions.



We have
accepted collateral in connection with resale agreements, securities borrowed
transactions, and customer margin loans. Under many agreements, we are permitted
to sell or repledge these securities held as collateral and use these securities
to enter into securities lending arrangements or to deliver to counterparties to
cover short positions. At December 31, 2010, the fair value of securities
accepted as collateral where we are permitted to sell or repledge the securities
was $864.7 million, and the fair value of the collateral that had been sold or
repledged was $109.6 million.




By using derivative instruments, we are exposed to credit and market risk on
those derivative positions. Credit risk is equal to the fair value gain in a
derivative, if the counterparty fails to perform. When the fair value of a
derivative contract is positive, this generally indicates that the counterparty
owes our company and, therefore, creates a repayment risk for our company. When
the fair value of a derivative contract is negative, we owe the counterparty
and, therefore, have no repayment risk. We minimize the credit (or repayment)
risk in derivative instruments by entering into transactions with high-quality
counterparties that are reviewed periodically by senior management.



Stifel
Bank extends credit to individual and commercial borrowers through a variety of
loan products, including residential and commercial mortgage loans, home equity
loans, construction loans, and non-real-estate commercial and consumer loans.
Bank loans are generally collateralized by real estate, real property, or other
assets of the borrower. Stifel Bank's loan policy includes criteria to
adequately underwrite, document, monitor, and manage credit risk. Underwriting
requires reviewing and documenting the fundamental characteristics of credit,
including character, capacity to service the debt, capital, conditions, and
collateral. Benchmark capital and coverage ratios are utilized, which include
liquidity, debt service coverage, credit, working capital, and capital to asset
ratios. Lending limits are established to include individual, collective,
committee, and board authority. Monitoring credit risk is accomplished through
defined loan review procedures, including frequency and scope.  



We are
subject to concentration risk if we hold large positions, extend large loans to,
or have large commitments with a single counterparty, borrower, or group of
similar counterparties or borrowers (i.e., in the same industry). Securities
purchased under agreements to resell consist of securities issued by the U.S.
government or its agencies. Receivables from and payables to clients and stock
borrow and lending activities, both with a large number of clients and
counterparties, and any potential concentration is carefully monitored. Stock
borrow and lending activities are executed under master netting agreements,
which gives our company right of offset in the event of counterparty default.
Inventory and investment positions taken and commitments made, including
underwritings, may involve exposure to individual issuers and businesses. We
seek to limit this risk through careful review of counterparties and borrowers
and the use of limits established by our senior management group, taking into
consideration factors including the financial strength of the counterparty, the
size of the position or commitment, the expected duration of the position or
commitment, and other positions or commitments outstanding.  



76











Operational Risk




Operational risk generally refers to the risk of loss resulting from our
operations, including, but not limited to, improper or unauthorized execution
and processing of transactions, deficiencies in our technology or financial
operating systems, and inadequacies or breaches in our control processes. We
operate different businesses in diverse markets and are reliant on the ability
of our employees and systems to process a large number of transactions. These
risks are less direct than credit and market risk, but managing them is
critical, particularly in a rapidly changing environment with increasing
transaction volumes. In the event of a breakdown or improper operation of
systems or improper action by employees, we could suffer financial loss,
regulatory sanctions, and damage to our reputation. In order to mitigate and
control operational risk, we have developed and continue to enhance specific
policies and procedures that are designed to identify and manage operational
risk at appropriate levels throughout the organization and within such
departments as Accounting, Operations, Information Technology, Legal,
Compliance, and Internal Audit. These control mechanisms attempt to ensure that
operational policies and procedures are being followed and that our various
businesses are operating within established corporate policies and limits.
Business continuity plans exist for critical systems, and redundancies are built
into the systems as deemed appropriate.



Regulatory
and Legal Risk



Legal risk
includes the risk of large numbers of private client group customer claims for
sales practice violations. While these claims may not be the result of any
wrongdoing, we do, at a minimum, incur costs associated with investigating and
defending against such claims. See further discussion on our legal reserves
policy under "Critical Accounting Policies and Estimates" in Item 7, Part II and
"Legal Proceedings" in Item 3, Part I of this report. In addition, we are
subject to potentially sizable adverse legal judgments or arbitration awards,
and fines, penalties, and other sanctions for non-compliance with applicable
legal and regulatory requirements. We are generally subject to extensive
regulation by the SEC, FINRA, and state securities regulators in the different
jurisdictions in which we conduct business.
As a bank
holding company, we are subject to regulation by the Federal Reserve. Stifel
Bank is subject to regulation by the FDIC. As a result, we are subject to a risk
of loss resulting from failure to comply with banking laws.
We have
comprehensive procedures addressing issues such as regulatory capital
requirements, sales and trading practices, use of and safekeeping of customer
funds, the extension of credit, including margin loans, collection activities,
money laundering, and record keeping. We act as an underwriter or selling group
member in both equity and fixed income product offerings. Particularly when
acting as lead or co-lead manager, we have potential legal exposure to claims
relating to these securities offerings. To manage this exposure, a committee of
senior executives review proposed underwriting commitments to assess the quality
of the offering and the adequacy of due diligence investigation.



Effects of
Inflation



Our assets
are primarily monetary, consisting of cash, securities inventory, and
receivables from customers and brokers and dealers. These monetary assets are
generally liquid and turn over rapidly and, consequently, are not significantly
affected by inflation. However, the rate of inflation affects various expenses
of our company, such as employee compensation and benefits, communications and
office supplies, and occupancy and equipment rental, which may not be readily
recoverable in the price of services we offer to our clients. Further, to the
extent inflation results in rising interest rates and has other adverse effects
upon the securities markets, it may adversely affect our financial position and
results of operations.



77










ITEM 8. 
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 



INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS


	
		
		


		Report of Independent Registered Public Accounting Firm
		
		

		79
	
	
		
		


		Consolidated Statements of Financial Condition  
		
		
80
	
	
		
		


		Consolidated Statements of Operations
		
		
82
	
	
		
		


		Consolidated Statements of Changes in Shareholders' Equity
		 
		
		
83
	
	
		
		


		Consolidated Statements of Cash Flows
		
		
85
	
	
		
		


		Notes to the Consolidated Financial Statements
		
		
 
	
	
		
		


		Note 1    Nature of Operation and Basis of Presentation
		
		
88
	
	
		
		


		Note 2    Summary of Significant Accounting Policies
		
		
89
	
	
		
		


		Note 3    Acquisitions
		
		
97
	
	
		
		


		Note 4    Sale of Bank Branch
		
		
99
	
	
		
		


		Note 5    Receivables From and Payables to Brokers, Dealers, and
		Clearing Organizations
		
		
99
	
	
		
		


		Note 6    Fair Value of Financial Instruments
		
		
100
	
	
		
		


		Note 7    Trading Securities Owned and Trading Securities Sold, But Not
		Yet Purchased
		
		
108
	
	
		
		


		Note 8    Available-for-Sale and Held-to-Maturity Securities
		
		
109
	
	
		
		


		Note 9    Bank Loans
		
		
112
	
	
		
		


		Note 10  Fixed Assets
		
		
113
	
	
		
		


		Note 11  Goodwill and Intangible Assets
		
		
114
	
	
		
		


		Note 12  Short-Term Borrowings
		
		
115
	
	
		
		


		Note 13  Bank Deposits
		
		
116
	
	
		
		


		Note 14  Federal Home Loan Bank Advances
		
		
117
	
	
		
		


		Note 15  Debentures to Stifel Financial Capital Trusts
		
		
117
	
	
		
		


		Note 16  Derivative Instruments and Hedging Activities
		
		
118
	
	
		
		


		Note 17  Liabilities Subordinated to Claims of General Creditors
		
		
121
	
	
		
		


		Note 18  Commitments, Guarantees, and Contingencies
		
		
121
	
	
		
		


		Note 19  Legal Proceedings
		
		
123
	
	
		
		


		Note 20  Regulatory Capital Requirements
		
		
124
	
	
		
		


		Note 21  Employee Incentive, Deferred Compensation, and Retirement Plans
		
		
126
	
	
		
		


		Note 22  Restructuring
		
		
129
	
	
		
		


		Note 23  Off-Balance Sheet Credit Risk
		
		
130
	
	
		
		


		Note 24  Income Taxes
		
		
132
	
	
		
		


		Note 25  Segment Reporting
		
		
135
	
	
		
		


		Note 26  Other Comprehensive Income
		
		
138
	
	
		
		


		Note 27  Earnings Per Share
		
		
138
	
	
		
		


		Note 28  Shareholders' Equity
		
		
139
	
	
		
		


		Note 29  Variable Interest Entities
		
		
140
	
	
		
		


		Note 30  Subsequent Events
		
		
141
	
	
		
		


		Note 31  Quarterly Financial Information (Unaudited)
		
		
142
	
	



78












 



Report
of Independent Registered Public Accounting Firm




               
 



The Board
of Directors and Shareholders of Stifel Financial Corp.



We have
audited the accompanying consolidated statements of financial condition of
Stifel Financial Corp. (the "Company") as of December 31, 2010 and 2009, and the
related consolidated statements of operations, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
2010. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.



We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.



In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Stifel Financial Corp.
at December 31, 2010 and 2009, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2010, in conformity with U.S. generally accepted accounting principles.





We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company's internal control over financial
reporting as of December 31, 2010, based on the criteria established in 
Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway
Commission, and our report dated February 28, 2011, expressed an unqualified
opinion thereon.



 



/s/ Ernst
& Young LLP



 



Chicago,
Illinois



February
28, 2011 



79










STIFEL
FINANCIAL CORP.




Consolidated Statements of Financial Condition




	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31,  
		
		


		 
	
	
		
		


		(in thousands)
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
	
	
		
		


		Assets
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash and cash equivalents
		
		


		 
		
		


		$
		
		


		253,529
		
		


		 
		
		


		$
		
		


		161,820
		
		


		 
	
	
		
		


		Restricted cash
		
		


		 
		
		


		 
		
		


		6,868
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Cash segregated for regulatory purposes
		
		


		 
		
		


		 
		
		


		6,023
		
		


		 
		
		


		 
		
		


		19
		
		


		 
	
	
		
		


		Receivables:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Brokerage clients, net  
		
		


		 
		
		


		 
		
		


		477,514
		
		


		 
		
		


		 
		
		


		383,222
		
		


		 
	
	
		
		


		Brokers, dealers, and clearing organizations
		
		


		 
		
		


		 
		
		


		247,707
		
		


		 
		
		


		 
		
		


		309,609
		
		


		 
	
	
		
		


		Securities purchased under agreements to resell
		
		


		 
		
		


		 
		
		


		123,617
		
		


		 
		
		


		 
		
		


		124,854
		
		


		 
	
	
		
		


		Trading securities owned, at fair value (includes securities pledged of
		$272,172 and $287,683, respectively)
		
		


		 
		
		


		 
		
		


		444,170
		
		


		 
		
		


		 
		
		


		454,891
		
		


		 
	
	
		
		


		Available-for-sale securities, at fair value
		
		


		 
		
		


		 
		
		


		1,012,714
		
		


		 
		
		


		 
		
		


		578,488
		
		


		 
	
	
		
		


		Held-to-maturity securities, at amortized cost
		
		


		 
		
		


		 
		
		


		52,640
		
		


		 
		
		


		 
		
		


		7,574
		
		


		 
	
	
		
		


		Loans held for sale
		
		


		 
		
		


		 
		
		


		86,344
		
		


		 
		
		


		 
		
		


		91,117
		
		


		 
	
	
		
		


		Bank loans, net
		
		


		 
		
		


		 
		
		


		389,742
		
		


		 
		
		


		 
		
		


		335,157
		
		


		 
	
	
		
		


		Bank foreclosed assets held for sale, net of estimated cost to sell
		
		


		 
		
		


		 
		
		


		1,577
		
		


		 
		
		


		 
		
		


		3,143
		
		


		 
	
	
		
		


		Investments
		
		


		 
		
		


		 
		
		


		178,936
		
		


		 
		
		


		 
		
		


		109,403
		
		


		 
	
	
		
		


		Fixed assets, net  
		
		


		 
		
		


		 
		
		
71,498
		
		


		 
		
		


		 
		
		


		62,115
		
		


		 
	
	
		
		


		Goodwill
		
		


		 
		
		


		 
		
		


		301,919
		
		


		 
		
		


		 
		
		


		166,725
		
		


		 
	
	
		
		


		Intangible assets, net
		
		


		 
		
		


		 
		
		


		34,595
		
		


		 
		
		


		 
		
		


		24,648
		
		


		 
	
	
		
		


		Loans and advances to financial advisors and other employees, net
		
		


		 
		
		


		 
		
		


		181,357
		
		


		 
		
		


		 
		
		


		185,123
		
		


		 
	
	
		
		


		Deferred tax assets, net
		
		


		 
		
		


		 
		
		


		197,139
		
		


		 
		
		


		 
		
		


		53,462
		
		


		 
	
	
		
		


		Other assets
		
		


		 
		
		


		 
		
		


		145,226
		
		


		 
		
		


		 
		
		


		115,986
		
		


		 
	
	
		
		


		Total Assets
		
		


		 
		
		


		$ 
		
		


		4,213,115
		
		


		 
		
		


		$
		
		


		3,167,356
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.



80








 

STIFEL
FINANCIAL CORP.




Consolidated Statements of Financial Condition (continued) 




	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31,
		
		


		 
	
	
		
		


		(in thousands, except share and per share amounts)
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
	
	
		
		


		Liabilities and Shareholders' Equity
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Short-term borrowings from banks
		
		


		 
		
		


		$
		
		


		109,600
		
		


		 
		
		


		$
		
		


		90,800
		
		


		 
	
	
		
		


		Payables:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Customers
		
		


		 
		
		


		 
		
		


		212,642
		
		


		 
		
		


		 
		
		


		214,883
		
		


		 
	
	
		
		


		Brokers, dealers, and clearing organizations
		
		


		 
		
		


		 
		
		


		114,869
		
		


		 
		
		


		 
		
		


		90,460
		
		


		 
	
	
		
		


		Drafts
		
		


		 
		
		


		 
		
		


		73,248
		
		


		 
		
		


		 
		
		


		66,964
		
		


		 
	
	
		
		


		Securities sold under agreements to repurchase
		
		


		 
		
		


		 
		
		


		109,595
		
		


		 
		
		


		 
		
		


		122,533
		
		


		 
	
	
		
		


		Bank deposits
		
		


		 
		
		


		 
		
		


		1,623,568
		
		


		 
		
		


		 
		
		


		1,047,211
		
		


		 
	
	
		
		


		Federal Home Loan Bank advances
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		2,000
		
		


		 
	
	
		
		


		Trading securities sold, but not yet purchased, at fair value
		
		


		 
		
		


		 
		
		


		200,140
		
		


		 
		
		


		 
		
		


		277,370
		
		


		 
	
	
		
		


		Accrued compensation
		
		


		 
		
		


		 
		
		


		234,512
		
		


		 
		
		


		 
		
		


		166,346
		
		


		 
	
	
		
		


		Accounts payable and accrued expenses
		
		


		 
		
		


		 
		
		


		170,382
		
		


		 
		
		


		 
		
		


		113,364
		
		


		 
	
	
		
		


		Debenture to Stifel Financial Capital Trust II
		
		


		 
		
		


		 
		
		


		35,000
		
		


		 
		
		


		 
		
		


		35,000
		
		


		 
	
	
		
		


		Debenture to Stifel Financial Capital Trust III
		
		


		 
		
		


		 
		
		


		35,000
		
		


		 
		
		


		 
		
		


		35,000
		
		


		 
	
	
		
		


		Debenture to Stifel Financial Capital Trust IV
		
		


		 
		
		


		 
		
		


		12,500
		
		


		 
		
		


		 
		
		


		12,500
		
		


		 
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		19,935
		
		


		 
		
		


		 
		
		


		9,398
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		2,950,991
		
		


		 
		
		


		 
		
		


		2,283,829
		
		


		 
	
	
		
		


		Liabilities subordinated to claims of general creditors
		
		


		 
		
		


		 
		
		


		8,241
		
		


		 
		
		


		 
		
		


		10,081
		
		


		 
	
	
		
		


		Shareholders' Equity:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Preferred stock - $1 par value; authorized 3,000,000 shares; none issued
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Exchangeable common stock - $0.15 par value; issued 598,412 and zero
		shares, respectively
		
		


		 
		
		


		 
		
		


		90
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Common stock - $0.15 par value; authorized 97,000,000 shares; issued
		35,214,952 and 30,388,270 shares, respectively
		
		


		 
		
		


		 
		
		


		5,282
		
		


		 
		
		


		 
		
		


		4,558
		
		


		 
	
	
		
		


		Additional paid-in-capital
		
		


		 
		
		


		 
		
		


		1,085,474
		
		


		 
		
		


		 
		
		


		623,943
		
		


		 
	
	
		
		


		Retained earnings
		
		


		 
		
		


		 
		
		


		232,415
		
		


		 
		
		


		 
		
		


		244,615
		
		


		 
	
	
		
		


		Accumulated other comprehensive income
		
		


		 
		
		


		 
		
		


		381
		
		


		 
		
		


		 
		
		


		1,302
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		
1,323,642
		
		


		 
		
		


		 
		
		


		874,418
		
		


		 
	
	
		
		


		Treasury stock, at cost, 1,490,315 and 4,221 shares, respectively
		
		


		 
		
		


		 
		
		


		(69,238
		
		


		)
		
		


		 
		
		


		(242
		
		


		)
	
	
		
		


		Unearned employee stock ownership plan shares, at cost, 81,349 and
		113,885 shares, respectively
		
		


		 
		
		


		 
		
		


		(521
		
		


		)
		
		


		 
		
		


		(730
		
		


		)
	
	
		
		


		 
		
		


		 
		
		


		 
		
		
1,253,883
		
		


		 
		
		


		 
		
		


		873,446
		
		


		 
	
	
		
		


		Total Liabilities and Shareholders' Equity
		
		


		 
		
		


		$
		
		
4,213,115
		
		


		 
		
		


		$
		
		


		3,167,356
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.



81








 

STIFEL
FINANCIAL CORP.




Consolidated Statements of Operations




	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Year ended December 31,
		
		


		 
	
	
		
		

		

		(in thousands, except per share amounts)
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Revenues:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Principal transactions
		
		


		 
		
		


		$
		
		


		453,533
		
		


		 
		
		


		$ 
		
		


		458,188
		
		


		 
		
		


		$ 
		
		


		293,285
		
		


		 
	
	
		
		


		Commissions
		
		


		 
		
		


		 
		
		


		445,260
		
		


		 
		
		


		 
		
		


		345,520
		
		


		 
		
		


		 
		
		


		341,090
		
		


		 
	
	
		
		


		Investment banking
		
		


		 
		
		


		 
		
		


		218,104
		
		


		 
		
		


		 
		
		


		125,807
		
		


		 
		
		


		 
		
		


		83,710
		
		


		 
	
	
		
		


		Asset management and service fees
		
		


		 
		
		


		 
		
		


		193,159
		
		


		 
		
		


		 
		
		


		117,357
		
		


		 
		
		


		 
		
		


		122,773
		
		


		 
	
	
		
		


		Interest
		
		


		 
		
		


		 
		
		


		65,326
		
		


		 
		
		


		 
		
		


		46,860
		
		


		 
		
		


		 
		
		


		50,148
		
		


		 
	
	
		
		


		Other income/(loss)
		
		


		 
		
		


		 
		
		


		19,855
		
		


		 
		
		


		 
		
		


		9,138
		
		


		 
		
		


		 
		
		


		(2,159
		
		


		)
	
	
		
		


		Total revenues
		
		


		 
		
		


		 
		
		


		1,395,237
		
		


		 
		
		


		 
		
		


		1,102,870
		
		


		 
		
		


		 
		
		


		888,847
		
		


		 
	
	
		
		


		Interest expense
		
		


		 
		
		


		 
		
		


		13,211
		
		


		 
		
		


		 
		
		


		12,234
		
		


		 
		
		


		 
		
		


		18,510
		
		


		 
	
	
		
		


		Net revenues
		
		


		 
		
		


		 
		
		


		1,382,026
		
		


		 
		
		


		 
		
		


		1,090,636
		
		


		 
		
		


		 
		
		


		870,337
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Non-interest expenses:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Compensation and benefits
		
		


		 
		
		


		 
		
		


		1,056,202
		
		


		 
		
		


		 
		
		


		718,115
		
		


		 
		
		


		 
		
		


		582,778
		
		


		 
	
	
		
		


		Occupancy and equipment rental
		
		


		 
		
		


		 
		
		


		115,742
		
		


		 
		
		


		 
		
		


		89,741
		
		


		 
		
		


		 
		
		


		67,984
		
		


		 
	
	
		
		


		Communications and office supplies
		
		


		 
		
		


		 
		
		


		69,929
		
		


		 
		
		


		 
		
		


		54,745
		
		


		 
		
		


		 
		
		


		45,621
		
		


		 
	
	
		
		


		Commissions and floor brokerage
		
		


		 
		
		


		 
		
		


		26,301
		
		


		 
		
		


		 
		
		


		23,416
		
		


		 
		
		


		 
		
		


		13,287
		
		


		 
	
	
		
		


		Other operating expenses
		
		


		 
		
		


		 
		
		


		114,081
		
		


		 
		
		


		 
		
		


		84,205
		
		


		 
		
		


		 
		
		


		68,898
		
		


		 
	
	
		
		


		Total non-interest expenses
		
		


		 
		
		


		 
		
		


		1,382,255
		
		


		 
		
		


		 
		
		


		970,222
		
		


		 
		
		


		 
		
		


		778,568
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Income/(loss) before income tax expense
		
		


		 
		
		


		 
		
		


		(229
		
		


		) 
		
		


		 
		
		


		120,414
		
		


		 
		
		


		 
		
		


		91,769
		
		


		 
	
	
		
		


		Provision for income taxes/(benefit)
		
		


		 
		
		


		 
		
		


		(2,136
		
		


		) 
		
		


		 
		
		


		44,616
		
		


		 
		
		


		 
		
		


		36,267
		
		


		 
	
	
		
		

		

		Net income
		
		


		 
		
		


		$
		
		


		1,907
		
		


		 
		
		


		$
		
		


		75,798
		
		


		 
		
		


		$
		
		


		55,502
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Earnings per common share:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Basic
		
		


		 
		
		


		$
		
		


		0.06
		
		


		 
		
		


		$
		
		


		2.68
		
		


		 
		
		


		$
		
		


		2.31
		
		


		 
	
	
		
		


		Diluted
		
		


		 
		
		


		$
		
		


		0.05
		
		


		 
		
		


		$
		
		


		2.35
		
		


		 
		
		


		$
		
		


		1.98
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Weighted average number of common shares outstanding:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Basic
		
		


		 
		
		


		 
		
		


		32,482
		
		


		 
		
		


		 
		
		


		28,297
		
		


		 
		
		


		 
		
		


		24,069
		
		


		 
	
	
		
		


		Diluted
		
		


		 
		
		


		 
		
		


		38,448
		
		


		 
		
		


		 
		
		


		32,294
		
		


		 
		
		


		 
		
		


		28,073
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.



82










 





STIFEL
FINANCIAL CORP.




Consolidated Statements of Changes in Shareholders' Equity 




	
		
		

		

		 
		
		


		 
		
		


		Common Stock
		
		


		 
		
		


		Additional Paid-In  
		
		


		 
		
		


		Retained
		
		


		 
		
		


		Accumulated Other Comprehensive
		
		


		 
		
		


		Treasury Stock, at
		
		


		 
		
		


		Unearned Employee Stock Ownership  
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Shares
		
		


		 
		
		


		Amount
		
		


		 
		
		


		Capital
		
		


		 
		
		


		Earnings
		
		


		 
		
		


		Income
		
		


		 
		
		


		cost
		
		


		 
		
		


		Plan
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		

		

		Balance at December 31, 2007
		
		


		 
		
		


		23,320
		
		


		 
		
		


		 
		
		


		3,498
		
		


		 
		
		


		 
		
		


		298,092
		
		


		 
		
		


		 
		
		


		125,303
		
		


		 
		
		


		 
		
		


		(660
		
		


		)
		
		


		 
		
		


		(450
		
		


		)
		
		


		 
		
		


		(1,146
		
		


		)
		
		


		 
		
		


		424,637
		
		


		 
	
	
		
		


		Comprehensive income:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		55,502
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		55,502
		
		


		 
	
	
		
		


		Net unrealized loss on securities, net of tax
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(6,634
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(6,634
		
		


		)
	
	
		
		


		Reclassification adjustment for losses included in net income, net of
		tax
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		999
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		999
		
		


		 
	
	
		
		


		Total

		comprehensive income
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		49,867
		
		


		 
	
	
		
		


		Purchase of treasury stock
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(12,141
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(12,141
		
		


		)
	
	
		
		


		Employee stock ownership plan purchases
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,004
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		208
		
		


		 
		
		


		 
		
		


		1,212
		
		


		 
	
	
		
		


		Issuance of stock for employee benefit plans
		
		


		 
		
		


		811
		
		


		 
		
		


		 
		
		


		122
		
		


		 
		
		


		 
		
		


		(21,480
		
		


		)
		
		


		 
		
		


		(9,951
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		9,874
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(21,435
		
		


		)
	
	
		
		


		Stock option exercises
		
		


		 
		
		


		243
		
		


		 
		
		


		 
		
		


		37
		
		


		 
		
		


		 
		
		


		1,062
		
		


		 
		
		


		 
		
		


		(1,861
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		2,657
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,895
		
		


		 
	
	
		
		


		Warrant exercises
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(4
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		4
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Unit amortization
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		52,593
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		52,593
		
		


		 
	
	
		
		


		Excess tax benefit from stock-based compensation
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		14,840
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		14,840
		
		


		 
	
	
		
		


		Ryan Beck contingent earn-out
		
		


		 
		
		


		289
		
		


		 
		
		


		 
		
		


		43
		
		


		 
		
		


		 
		
		


		11,277
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		56
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		11,376
		
		


		 
	
	
		
		


		Issuance of stock - public offering
		
		


		 
		
		


		1,495
		
		


		 
		
		


		 
		
		


		224
		
		


		 
		
		


		 
		
		


		64,145
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		64,369
		
		


		 
	
	
		
		


		Extinguishment of Stifel Financial Capital Trust IV
		
		


		 
		
		


		142
		
		


		 
		
		


		 
		
		


		21
		
		


		 
		
		


		 
		
		


		5,951
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		5,972
		
		


		 
	
	
		
		

		

		Balance at December 31, 2008
		
		


		 
		
		


		26,300
		
		


		 
		
		


		$
		
		


		3,945
		
		


		 
		
		


		$
		
		


		427,480
		
		


		 
		
		


		$
		
		


		168,993
		
		


		 
		
		


		$
		
		


		(6,295
		
		


		)
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		(938
		
		


		)
		
		


		$
		
		


		593,185
		
		


		 
	
	
		
		


		Comprehensive income:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		75,798
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		75,798
		
		


		 
	
	
		
		


		Unrealized gain on securities, net of tax
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		7,517
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		7,517
		
		


		 
	
	
		
		


		Unrealized loss on cash flow hedging activities, net of tax
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		80
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		80
		
		


		 
	
	
		
		


		Total comprehensive income
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		83,395
		
		


		 
	
	
		
		


		Purchase of treasury stock
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		572
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(572
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Employee stock ownership plan purchases
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,347
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		208
		
		


		 
		
		


		 
		
		


		1,555
		
		


		 
	
	
		
		


		Issuance of stock for employee benefit plans
		
		


		 
		
		


		738
		
		


		 
		
		


		 
		
		


		110
		
		


		 
		
		


		 
		
		


		(7,607
		
		


		)
		
		


		 
		
		


		(72
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		102
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(7,467
		
		


		)
	
	
		
		


		Stock option exercises
		
		


		 
		
		


		354
		
		


		 
		
		


		 
		
		


		53
		
		


		 
		
		


		 
		
		


		986
		
		


		 
		
		


		 
		
		


		(104
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		228
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,163
		
		


		 
	
	
		
		


		Unit amortization
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		42,502
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		42,502
		
		


		 
	
	
		
		


		Excess tax benefit from stock-based compensation
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		13,337
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		13,337
		
		


		 
	
	
		
		


		Ryan Beck contingent earn-out
		
		


		 
		
		


		271
		
		


		 
		
		


		 
		
		


		41
		
		


		 
		
		


		 
		
		


		9,260
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		9,301
		
		


		 
	
	
		
		


		Issuance of stock - at the market offering
		
		


		 
		
		


		1,000
		
		


		 
		
		


		 
		
		


		150
		
		


		 
		
		


		 
		
		


		44,544
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		44,694
		
		


		 
	
	
		
		


		Issuance of stock - public offering
		
		


		 
		
		


		1,725
		
		


		 
		
		


		 
		
		


		259
		
		


		 
		
		


		 
		
		


		91,511
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		91,770
		
		


		 
	
	
		
		


		Warrant exercises
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		11
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		11
		
		


		 
	
	
		
		

		

		Balance at December 31, 2009
		
		


		 
		
		


		30,388
		
		


		 
		
		


		$
		
		


		4,558
		
		


		 
		
		


		$
		
		


		623,943
		
		


		 
		
		


		$
		
		


		244,615
		
		


		 
		
		


		$
		
		


		1,302
		
		


		 
		
		


		$
		
		


		(242
		
		


		)
		
		


		$
		
		


		(730
		
		


		)
		
		


		$
		
		


		873,446
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.



83










STIFEL
FINANCIAL CORP.




Consolidated Statements of Changes in Shareholders' Equity (continued)




	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Common Stock
		
		


		 
		
		


		Additional Paid-In  
		
		


		 
		
		


		Retained
		
		


		 
		
		


		Accumulated Other Comprehensive
		
		


		 
		
		


		Treasury Stock, at
		
		


		 
		
		


		Unearned Employee Stock Ownership  
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Shares
		
		


		 
		
		


		Amount
		
		


		 
		
		


		Capital
		
		


		 
		
		


		Earnings
		
		


		 
		
		


		Income
		
		


		 
		
		


		cost
		
		


		 
		
		


		Plan
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		

		

		Balance at December 31, 2009
		
		


		 
		
		


		30,388
		
		


		 
		
		


		$
		
		


		4,558
		
		


		 
		
		


		$
		
		


		623,943
		
		


		 
		
		


		$
		
		


		244,615
		
		


		 
		
		


		$
		
		


		1,302
		
		


		 
		
		


		$
		
		


		(242
		
		


		)
		
		


		$
		
		


		(730
		
		


		)
		
		


		$
		
		


		873,446
		
		


		 
	
	
		
		


		Comprehensive income:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,907
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,907
		
		


		 
	
	
		
		


		Unrealized gain on securities, net of tax
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		3,132
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		3,132
		
		


		 
	
	
		
		


		Unrealized loss on cash flow hedging activities, net of tax
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(5,793
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(5,793
		
		


		)
	
	
		
		


		Foreign currency translation adjustment, net of tax
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,740
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,740
		
		


		 
	
	
		
		


		Total comprehensive income
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		986
		
		


		 
	
	
		
		


		Purchase of treasury stock
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(91,769
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(91,769
		
		


		)
	
	
		
		


		Employee stock ownership plan purchases
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,446
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		209
		
		


		 
		
		


		 
		
		


		1,655
		
		


		 
	
	
		
		


		Issuance of stock for employee benefit plans
		
		


		 
		
		


		490
		
		


		 
		
		


		 
		
		


		74
		
		


		 
		
		


		 
		
		


		(35,632
		
		


		)
		
		


		 
		
		


		(4,738
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		16,558
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		
(23,738
		
		


		)
	
	
		
		


		Stock option exercises
		
		


		 
		
		


		164
		
		


		 
		
		


		 
		
		


		25
		
		


		 
		
		


		 
		
		


		1,130
		
		


		 
		
		


		 
		
		


		(5,647
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		4,916
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		424
		
		


		 
	
	
		
		


		Unit amortization
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		204,096
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		204,096
		
		


		 
	
	
		
		


		Excess tax benefit from stock-based compensation
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		17,487
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		17,487
		
		


		 
	
	
		
		


		Purchase of TWPG
		
		


		 
		
		


		4,437
		
		


		 
		
		


		 
		
		


		665
		
		


		 
		
		


		 
		
		


		272,861
		
		


		 
		
		


		 
		
		


		33
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(2,274
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		271,285
		
		


		 
	
	
		
		


		Warrant exercises
		
		


		 
		
		


		334
		
		


		 
		
		


		 
		
		


		50
		
		


		 
		
		


		 
		
		


		143
		
		


		 
		
		


		 
		
		


		(3,755
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		3,573
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		11
		
		


		 
	
	
		
		

		

		Balance at December 31, 2010
		
		


		 
		
		


		35,813
		
		


		 
		
		


		$
		
		


		5,372
		
		


		 
		
		


		$
		
		


		1,085,474
		
		


		 
		
		


		$
		
		


		232,415
		
		


		 
		
		


		$
		
		


		381
		
		


		 
		
		


		$
		
		


		(69,238
		
		


		)
		
		


		$
		
		


		(521
		
		


		)
		
		


		$
		
		


		1,253,883
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.



84










STIFEL
FINANCIAL CORP.




Consolidated Statements of Cash Flows 




	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		(in thousands)
		
		


		 
		
		


		2010
		
		


		 
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Cash Flows from Operating Activities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		$
		
		


		1,907
		
		


		 
		
		


		 
		
		


		$
		
		


		75,798
		
		


		 
		
		


		$
		
		


		55,502
		
		


		 
	
	
		
		


		Adjustments to reconcile net income to net cash provided
		by/(used in) operating activities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Depreciation and amortization
		
		


		 
		
		


		 
		
		


		23,843
		
		


		 
		
		


		 
		
		


		 
		
		


		23,216
		
		


		 
		
		


		 
		
		
13,946
		
		


		 
	
	
		
		


		Amortization of loans and advances to financial advisors and other
		employees
		
		


		 
		
		


		 
		
		


		50,162
		
		


		 
		
		


		 
		
		


		 
		
		


		33,408
		
		


		 
		
		


		 
		
		


		15,203
		
		


		 
	
	
		
		


		Amortization of premium/(accretion of discount) on available-for-sale securities
		
		


		 
		
		


		 
		
		


		8,552
		
		


		 
		
		


		 
		
		


		 
		
		


		866
		
		


		 
		
		


		 
		
		


		(593
		
		


		)
	
	
		
		


		Provision for loan losses and allowance for loans and advances to
		financial advisors and other employees
		
		


		 
		
		


		 
		
		


		123
		
		


		 
		
		


		 
		
		


		 
		
		


		298
		
		


		 
		
		


		 
		
		


		1,801
		
		


		 
	
	
		
		


		Amortization of intangible assets
		
		 
		
		 
		
		


		5,518
		
		 
		
		 
		
		 
		
		


		2,762
		
		 
		
		 
		
		
3,081
		
		 
	
	
		
		


		Deferred income taxes
		
		


		 
		
		


		 
		
		


		(54,213
		
		


		) 
		
		


		 
		
		


		 
		
		


		(10,270
		
		


		)
		
		


		 
		
		


		(6,168
		
		


		)
	
	
		
		


		Excess tax benefits from stock-based compensation
		
		


		 
		
		


		 
		
		


		(17,487
		
		


		) 
		
		


		 
		
		


		 
		
		


		(13,337
		
		


		)
		
		


		 
		
		


		(14,840
		
		


		)
	
	
		
		


		Gain on extinguishment of debt
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(6,662
		
		


		)
	
	
		
		


		Stock-based compensation
		
		


		 
		
		


		 
		
		


		190,731
		
		


		 
		
		


		 
		
		


		 
		
		


		47,962
		
		


		 
		
		


		 
		
		


		54,356
		
		


		 
	
	
		
		


		(Gains)/losses on investments
		
		


		 
		
		


		 
		
		


		(5,431
		
		


		) 
		
		


		 
		
		


		 
		
		


		14,303
		
		


		 
		
		


		 
		
		


		10,843
		
		


		 
	
	
		
		


		Other, net
		
		


		 
		
		


		 
		
		


		4,366
		
		


		 
		
		


		 
		
		


		 
		
		


		2,455
		
		


		 
		
		


		 
		
		


		254
		
		


		 
	
	
		
		


		Decrease/(increase) in operating assets, net of assets acquired:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		Cash segregated for regulatory purposes and restricted
		cash
		
		 
		
		 
		
		


		(6,004
		
		)
		
		 
		
		 
		
		


		21
		
		 
		
		
 
		
		
(21
		
		)
	
	
		
		


		Receivables:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Brokerage clients
		
		


		 
		
		


		 
		
		


		(93,765
		
		


		) 
		
		


		 
		
		


		 
		
		


		(79,688
		
		


		)
		
		


		 
		
		


		215,146
		
		


		 
	
	
		
		


		Brokers, dealers and clearing organizations
		
		


		 
		
		


		 
		
		


		63,132
		
		


		 
		
		


		 
		
		


		 
		
		


		(198,034
		
		


		)
		
		


		 
		
		


		70,036
		
		


		 
	
	
		
		


		Securities purchased under agreements to resell
		
		


		 
		
		


		 
		
		


		1,237
		
		


		 
		
		


		 
		
		


		 
		
		


		(107,131
		
		


		)
		
		


		 
		
		


		(4,478
		
		


		)
	
	
		
		


		Loans originated as held for sale
		
		


		 
		
		


		 
		
		


		(1,130,528
		
		


		) 
		
		


		 
		
		


		 
		
		


		(874,786
		
		


		)
		
		


		 
		
		


		(322,809
		
		


		)
	
	
		
		


		Proceeds from mortgages held for sale
		
		


		 
		
		


		 
		
		


		1,104,317
		
		


		 
		
		


		 
		
		


		 
		
		


		848,045
		
		


		 
		
		


		 
		
		


		293,544
		
		


		 
	
	
		
		


		Trading securities owned, including those pledged
		
		


		 
		
		


		 
		
		


		25,316
		
		


		 
		
		


		 
		
		


		 
		
		


		(332,315
		
		


		)
		
		


		 
		
		


		4,624
		
		


		 
	
	
		
		


		Loans and advances to financial advisors and other employees
		
		


		 
		
		


		 
		
		


		(46,376
		
		


		) 
		
		


		 
		
		


		 
		
		


		(108,327
		
		


		)
		
		


		 
		
		


		(49,065
		
		


		)
	
	
		
		


		Other assets
		
		


		 
		
		


		 
		
		


		22,473
		
		


		 
		
		


		 
		
		


		 
		
		


		(14,136
		
		


		)
		
		


		 
		
		
6,496
		
		


		 
	
	
		
		


		Increase/(decrease) in operating liabilities, net of liabilities
		assumed:
		
		


		 
		
		


		 
		
		
 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Payables:
		
		


		 
		
		


		 
		
		
 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Customers
		
		


		 
		
		


		 
		
		


		(2,241
		
		


		) 
		
		


		 
		
		


		 
		
		


		58,388
		
		


		 
		
		


		 
		
		


		(3,245
		
		


		)
	
	
		
		


		Brokers, dealers and clearing organizations
		
		


		 
		
		


		 
		
		


		13,251
		
		


		 
		
		


		 
		
		


		 
		
		


		62,181
		
		


		 
		
		


		 
		
		


		(21,594
		
		


		)
	
	
		
		


		Drafts
		
		


		 
		
		


		 
		
		


		6,284
		
		


		 
		
		


		 
		
		


		 
		
		


		17,563
		
		


		 
		
		


		 
		
		


		(2,081
		
		


		)
	
	
		
		


		Trading securities sold, but not yet purchased
		
		


		 
		
		


		 
		
		


		(77,230
		
		


		) 
		
		


		 
		
		


		 
		
		


		178,436
		
		


		 
		
		


		 
		
		


		61,616
		
		


		 
	
	
		
		


		Other liabilities and accrued expenses
		
		


		 
		
		


		 
		
		


		54,295
		
		


		 
		
		


		 
		
		


		 
		
		


		25,072
		
		


		 
		
		


		 
		
		


		(24,599
		
		


		)
	
	
		
		


		Net cash provided by/(used in) operating activities
		
		


		 
		
		


		$ 
		
		


		142,232
		
		


		 
		
		


		 
		
		


		$
		
		


		(347,250
		
		


		)
		
		


		$
		
		


		350,293
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





 



See
accompanying Notes to Consolidated Financial Statements.



85








 

STIFEL
FINANCIAL CORP.




Consolidated Statements of Cash Flows (continued) 




	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		(in thousands)
		
		


		 
		
		


		2010
		
		


		 
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Cash Flows from Investing Activities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Proceeds from:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Maturities, calls, and principal paydowns on available-for-sale
		securities
		
		


		 
		
		


		$
		
		


		309,646
		
		


		 
		
		


		 
		
		


		$
		
		


		49,259
		
		


		 
		
		


		$
		
		


		43,950
		
		


		 
	
	
		
		


		Sale
		or maturity of investments
		
		


		 
		
		


		 
		
		


		105,703
		
		


		 
		
		


		 
		
		


		 
		
		


		57,515
		
		


		 
		
		


		 
		
		


		63,428
		
		


		 
	
	
		
		


		Sale
		of bank branch
		
		


		 
		
		


		 
		
		


		13,905
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Sale
		of bank foreclosed assets held for sale
		
		


		 
		
		


		 
		
		


		2,099
		
		


		 
		
		


		 
		
		


		 
		
		


		3,734
		
		


		 
		
		


		 
		
		


		1,340
		
		


		 
	
	
		
		


		Sale
		of property
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		766
		
		


		 
	
	
		
		


		Increase in bank loans, net
		
		


		 
		
		


		 
		
		


		(55,214
		
		


		)
		
		


		 
		
		


		 
		
		


		(2,626
		
		


		)
		
		


		 
		
		


		(60,314
		
		


		)
	
	
		
		


		Payments for:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Purchase of available-for-sale securities
		
		


		 
		
		


		 
		
		


		(747,376
		
		


		)
		
		


		 
		
		


		 
		
		


		(568,910
		
		


		)
		
		


		 
		
		


		(24,909
		
		


		)
	
	
		
		


		Purchase of held-to-maturity securities
		
		


		 
		
		


		 
		
		


		(45,963
		
		


		)
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Purchase of bank foreclosed loans held for sale
		
		


		 
		
		


		 
		
		


		(744
		
		


		)
		
		


		 
		
		


		 
		
		


		(4,966
		
		


		)
		
		


		 
		
		


		(2,093
		
		


		)
	
	
		
		


		Purchase of investments
		
		


		 
		
		


		 
		
		


		(121,885
		
		


		)
		
		


		 
		
		


		 
		
		


		(105,275
		
		


		)
		
		


		 
		
		


		(76,396
		
		


		)
	
	
		
		


		Purchase of fixed assets
		
		


		 
		
		


		 
		
		


		(27,736
		
		


		)
		
		


		 
		
		


		 
		
		


		(27,892
		
		


		)
		
		


		 
		
		


		(21,647
		
		


		)
	
	
		
		


		Acquisitions, net
		
		


		 
		
		


		 
		
		


		(483
		
		


		)
		
		


		 
		
		


		 
		
		


		(251,652
		
		


		)
		
		


		 
		
		


		(10,589
		
		


		)
	
	
		
		


		Net cash used in investing activities
		
		


		 
		
		


		 
		
		


		(568,048
		
		


		)
		
		


		 
		
		


		 
		
		


		(850,813
		
		


		)
		
		


		 
		
		


		(86,464
		
		


		)
	
	
		
		

		

		Cash Flows from Financing Activities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		

		

		 
	
	
		
		


		Net proceeds/(payments) for short-term borrowings from banks
		
		


		 
		
		


		 
		
		


		18,800
		
		


		 
		
		


		 
		
		


		 
		
		


		90,800
		
		


		 
		
		


		 
		
		


		(127,850
		
		


		)
	
	
		
		


		Securities sold under agreements to repurchase
		
		


		 
		
		


		 
		
		


		(12,938
		
		


		)
		
		


		 
		
		


		 
		
		


		120,317
		
		


		 
		
		


		 
		
		


		2,216
		
		


		 
	
	
		
		


		Increase in bank deposits, net
		
		


		 
		
		


		 
		
		


		593,977
		
		


		 
		
		


		 
		
		


		 
		
		


		762,413
		
		


		 
		
		


		 
		
		


		92,317
		
		


		 
	
	
		
		


		Increase/(decrease) in securities loaned
		
		


		 
		
		


		 
		
		


		11,158
		
		


		 
		
		


		 
		
		


		 
		
		


		(1,412
		
		


		)
		
		


		 
		
		


		(114,211
		
		


		)
	
	
		
		


		Excess tax benefits from stock-based compensation
		
		


		 
		
		


		 
		
		


		17,487
		
		


		 
		
		


		 
		
		


		 
		
		


		13,337
		
		


		 
		
		


		 
		
		


		14,840
		
		


		 
	
	
		
		


		Proceeds from offering of common stock, net
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		136,464
		
		


		 
		
		


		 
		
		


		64,369
		
		


		 
	
	
		
		


		Issuance of common stock  
		
		


		 
		
		


		 
		
		


		865
		
		


		 
		
		


		 
		
		


		 
		
		


		2,719
		
		


		 
		
		


		 
		
		


		2,580
		
		


		 
	
	
		
		


		Reissuance of treasury stock
		
		


		 
		
		


		 
		
		


		5,045
		
		


		 
		
		


		 
		
		


		 
		
		


		820
		
		


		 
		
		


		 
		
		


		727
		
		


		 
	
	
		
		


		Extinguishment of senior notes
		
		


		 
		
		


		 
		
		


		(23,000
		
		


		)
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		(Payments to)/proceeds from Federal Home Loan Bank advances
		
		


		 
		
		


		 
		
		


		(2,000
		
		


		)
		
		


		 
		
		


		 
		
		


		(4,000
		
		


		)
		
		


		 
		
		


		6,000
		
		


		 
	
	
		
		


		Extinguishment of subordinated debt
		
		


		 
		
		


		 
		
		


		(1,840
		
		


		)
		
		


		 
		
		


		 
		
		


		(1,300
		
		


		)
		
		


		 
		
		


		(914
		
		


		)
	
	
		
		


		Repurchase of stock for treasury
		
		


		 
		
		


		 
		
		


		(91,769
		
		


		)
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(12,141
		
		


		)
	
	
		
		


		Net cash provided by (used in) financing activities
		
		


		 
		
		


		 
		
		


		515,785
		
		


		 
		
		


		 
		
		


		 
		
		


		1,120,158
		
		


		 
		
		


		 
		
		


		(72,067
		
		


		)
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Effect of exchange rate changes on cash
		
		


		 
		
		


		 
		
		


		1,740
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Increase/(decrease) in cash and cash equivalents
		
		


		 
		
		


		 
		
		


		91,709
		
		


		 
		
		


		 
		
		


		 
		
		


		(77,905
		
		


		)
		
		


		 
		
		


		191,762
		
		


		 
	
	
		
		


		Cash and cash equivalents at beginning of year
		
		


		 
		
		


		 
		
		


		161,820
		
		


		 
		
		


		 
		
		


		 
		
		


		239,725
		
		


		 
		
		


		 
		
		


		47,963
		
		


		 
	
	
		
		


		Cash and cash equivalents at end of year
		
		


		 
		
		


		$
		
		


		253,529
		
		


		 
		
		


		 
		
		


		$
		
		


		161,820
		
		


		 
		
		


		$
		
		


		239,725
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.



86










STIFEL
FINANCIAL CORP.




Consolidated Statements of Cash Flows (continued) 




	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		(in thousands)
		
		


		 
		
		


		2010
		
		


		 
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Supplemental disclosure of cash flow information:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash paid for income taxes, net of refunds
		
		


		 
		
		


		$
		
		


		54,984
		
		


		 
		
		


		 
		
		


		$
		
		


		15,617
		
		


		 
		
		


		$
		
		


		31,966
		
		


		 
	
	
		
		


		Cash paid for interest
		
		


		 
		
		


		 
		
		


		13,104
		
		


		 
		
		


		 
		
		


		 
		
		


		12,066
		
		


		 
		
		


		 
		
		


		19,375
		
		


		 
	
	
		
		

		

		Noncash investing and financing activities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Issuance of common stock for acquisition of TWPG
		
		


		 
		
		


		$
		
		


		271,285
		
		


		 
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		Units, net of forfeitures
		
		


		 
		
		


		 
		
		


		157,546
		
		


		 
		
		


		 
		
		


		 
		
		


		89,633
		
		


		 
		
		


		 
		
		


		65,609
		
		


		 
	
	
		
		


		Payment of Ryan Beck contingent earn-out
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		9,301
		
		


		 
		
		


		 
		
		


		11,376
		
		


		 
	
	
		
		


		Liabilities subordinated to claims of general creditors
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		3,166
		
		


		 
		
		


		 
		
		


		4,050
		
		


		 
	
	
		
		


		Extinguishment of debenture to Stifel Financial Capital Trust IV
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		5,975
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	





See
accompanying Notes to Consolidated Financial Statements.





87














 STIFEL
FINANCIAL CORP.



Notes
to Consolidated Financial Statements



(in
thousands, except share and per share amounts) 



NOTE 1 -
Nature of Operations and Basis of Presentation



Nature of
Operations



Stifel
Financial Corp. (the "Parent"), through its wholly owned subsidiaries,
principally Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"), Thomas
Weisel Partners LLC ("TWP"), Century Securities Associates, Inc. ("CSA"), Stifel
Nicolaus Limited ("SN Ltd"), Stifel Nicolaus Canada, Inc. ("SN Canada"), Thomas
Weisel Partners International Limited ("TWPIL"), and Stifel Bank & Trust
("Stifel Bank"), is principally engaged in retail brokerage; securities trading;
investment banking; investment advisory; retail, consumer, and commercial
banking; and related financial services. Although we have offices throughout the
United States, two Canadian cities, and three European cities, our major
geographic area of concentration is in the Midwest and Mid-Atlantic regions,
with a growing presence in the Northeast, Southeast and Western United States.
Our company's principal customers are individual investors, corporations,
municipalities, and institutions.



On July 1,
2010, Stifel Financial Corp. acquired Thomas Weisel Partners Group, Inc.
("TWPG"), an investment bank focused principally on the growth sectors of the
economy, which generates revenues from three principal sources: investment
banking, brokerage, and asset management. The investment banking group is
comprised of two primary categories of services: corporate finance and strategic
advisory. The brokerage group provides equity sales and trading services to
institutional investors and offers brokerage and advisory services to
high-net-worth individuals and corporate clients. The asset management group
consists of: private investment funds, public equity investment products, and
distribution management. The employees of the investment banking, research, and
institutional brokerage businesses of Thomas Weisel Partners LLC ("TWP"), a
wholly owned subsidiary of TWPG, were transitioned into Stifel Nicolaus during
the third quarter of 2010. TWP will remain a wholly owned broker-dealer
subsidiary of the Parent.



Basis of
Presentation



The
consolidated financial statements include Stifel Financial Corp. and its wholly
owned subsidiaries, principally Stifel, Nicolaus & Company, Incorporated. All
material intercompany balances and transactions have been eliminated.
Unless otherwise indicated, the terms "we," "us,"
"our," or "our company" in this report refer to Stifel Financial Corp. and its
wholly owned subsidiaries.



The
accompanying consolidated financial statements have been prepared in conformity
with U.S. generally accepted accounting principles, which require management to
make certain estimates and assumptions that affect the reported amounts.
We
consider significant estimates, which are most susceptible to change and
impacted significantly by judgments, assumptions, and estimates, to be:
valuation of financial instruments and investments in partnerships; accrual for
contingencies; allowance for loan losses; derivative instruments and hedging
activities; fair value of goodwill and intangible assets; provision for income
taxes and related tax reserves; and estimation of forfeitures associated with
stock-based compensation. Actual results could differ from those estimates.



Certain
amounts from prior periods have been reclassified to conform to the current
period's presentation. The effect of these reclassifications on our company's
previously reported consolidated financial statements was not material.




Consolidation Policies



The
consolidated financial statements include the accounts of Stifel Financial Corp.
and its subsidiaries. We also have investments or interests in other entities
for which we must evaluate whether to consolidate by determining whether we have
a controlling financial interest or are considered to be the primary
beneficiary. In determining whether to consolidate these entities or not, we
determine whether the entity is a voting interest entity or a variable interest
entity ("VIE").




Voting Interest Entity.
Voting interest entities are entities that have (i) total equity investment at
risk sufficient to fund expected future operations independently, and (ii)
equity holders who have the obligation to absorb losses or receive residual
returns and the right to make decisions about the entity's activities. We
consolidate voting interest entities when we determine that there is a
controlling financial interest, usually ownership of all, or a majority of, the
voting interest.



88











Variable Interest Entity.
VIEs are entities that lack one or more of the characteristics of a voting
interest entity. We are required to consolidate VIEs in which we are deemed to
be the primary beneficiary. The primary beneficiary is defined as the entity
that has a variable interest, or a combination of variable interests, that
maintains control and provides benefits or will either: (i) absorb a majority of
the VIEs expected losses, (ii) receive a majority of the VIEs expected returns,
or (iii) both. 



We
determine whether we are the primary beneficiary of a VIE by first performing a
qualitative analysis of the VIE's control structure, expected losses and
expected residual returns. This analysis includes a review of, among other
factors, the VIE's capital structure, contractual terms, which interests create
or absorb variability, related party relationships, and the design of the VIE.
Where qualitative analysis is not conclusive, we perform a quantitative
analysis. We reassess our initial evaluation of an entity as a VIE and our
initial determination of whether we are the primary beneficiary of a VIE upon
the occurrence of certain reconsideration events. See
Note 29 for additional information on variable
interest entities.



NOTE 2 -
Summary of Significant Accounting Policies



Cash and
Cash Equivalents



We
consider all highly liquid investments with original maturities of three months
or less that are not restricted or segregated to be cash equivalents. Cash and
cash equivalents include money market mutual funds, deposits with banks,
certificates of deposit, and federal funds sold. Cash and cash equivalents also
include balances that Stifel Bank maintains at the Federal Reserve Bank.



Restricted
Cash



Restricted
cash consists of cash used as collateral for letters of credit related to
certain TWPG lease commitments.



Cash
Segregated for Regulatory Purposes



Our
broker-dealer subsidiaries are subject to Rule 15c3-3 under the Securities
Exchange Act of 1934, which requires our company to maintain cash or qualified
securities in a segregated reserve account for the exclusive benefit of its
clients. In accordance with Rule 15c3-3, our company has portions of its cash
segregated for the exclusive benefit of clients at December 31, 2010.



Brokerage
Client Receivables and Allowance for Doubtful Accounts



Brokerage
client receivables include receivables of our company's broker-dealer
subsidiaries, which represent amounts due on cash and margin transactions and
are generally collateralized by securities owned by clients. Brokerage client
receivables, primarily consisting of floating-rate loans collateralized by
customer-owned securities, are charged interest at rates similar to other such
loans made throughout the industry.  The receivables are reported at their
outstanding principal balance net of allowance for doubtful accounts. When a
brokerage client receivable is considered to be impaired, the amount of the
impairment is generally measured based on the fair value of the securities
acting as collateral, which is measured based on current prices from independent
sources such as listed market prices or broker-dealer price quotations.
Securities owned by customers, including those that collateralize margin or
other similar transactions, are not reflected in the consolidated statements of
financial condition.



Securities
Borrowed and Securities Loaned 



Securities
borrowed require our company to deliver cash to the lender in exchange for
securities and are included in receivables from brokers, dealers, and clearing
organizations in the consolidated statements of financial condition. For
securities loaned, we receive collateral in the form of cash in an amount at
least equal to the market value of securities loaned. Securities loaned are
included in payables to brokers, dealers, and clearing organizations in the
consolidated statements of financial condition. We monitor the market value of
securities borrowed and loaned on a daily basis, with additional collateral
obtained or refunded as necessary. Fees received or paid are recorded in
interest revenue or interest expense. 




Substantially all of these transactions are executed under master netting
agreements, which gives us right of offset in the event of counterparty default;
however, such receivables and payables with the same counterparty are not
set-off in the consolidated statements of financial condition.



89











Securities Purchased Under Agreements to Resell



Securities
purchased under agreements to resell ("resale agreements") are collateralized
investing transactions that are recorded at their contractual amounts plus
accrued interest. We obtain control of collateral with a market value equal to
or in excess of the principal amount loaned and accrued interest under resale
agreements. These agreements are short-term in nature, collateralized by U.S.
government agencies and with one counterparty. We value collateral on a daily basis, with additional collateral
obtained when necessary to minimize the risk associated with this activity.




Financial
Instruments



We measure certain
financial assets and liabilities at fair value on a recurring basis, including
cash equivalents, trading securities owned, available-for-sale securities,
investments, trading securities sold, but not yet purchased, and derivatives.
Other than those separately discussed in the notes to the consolidated financial
statements, the remaining financial instruments are generally short-term in
nature, and their carrying values approximate fair value. 



Fair Value
Hierarchy



The fair value of a financial instrument is
defined as the price that would be received to sell an asset or paid to transfer
a liability (i.e., "the exit price") in an orderly transaction between market
participants at the measurement date. We have categorized our financial
instruments measured at fair value into a three-level classification in
accordance with ASC 820 ("Topic 820"), "Fair Value Measurement and
Disclosures," which established a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are inputs that market participants would use in
pricing the asset or liability developed based on market data obtained from
independent sources.

Unobservable inputs reflect our assumptions that market participants would use
in pricing the asset or liability developed based on the best information
available in the circumstances. The hierarchy is broken down into three levels
based on the transparency of inputs as follows:



Level 1 -
Quoted prices (unadjusted) are available in active markets for identical assets
or liabilities as of the measurement date. A quoted price for an identical asset
or liability in an active market provides the most reliable fair value
measurement, because it is directly observable to the market. 



Level 2 -
Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly observable as of the measurement date. The nature of
these financial instruments include instruments for which quoted prices are
available but traded less frequently, derivative instruments whose fair value
have been derived using a model where inputs to the model are directly
observable in the market, or can be derived principally from or corroborated by
observable market data, and instruments that are fair valued using other
financial instruments, the parameters of which can be directly observed.




Level 3 -
Instruments that have little to no pricing observability as of the measurement
date. These financial instruments do not have two-way markets and are measured
using management's best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or
estimation. 



Valuation
of Financial Instruments



When
available, we use observable market prices, observable market parameters, or
broker-dealer quotations (bid and ask prices) to derive the fair value of
financial instruments. In the case of financial instruments transacted on
recognized exchanges, the observable market prices represent quotations for
completed transactions from the exchange on which the financial instrument is
principally traded.



A
substantial percentage of the fair value of our trading securities owned,
available-for-sale securities, investments, and trading securities sold, but not
yet purchased, are based on observable market prices, observable market
parameters, or derived from broker-dealer quotations. The availability of
observable market prices and pricing parameters can vary from product to
product. Where available, observable market prices and pricing or market
parameters in a product may be used to derive a price without requiring
significant judgment. In certain markets, observable market prices or market
parameters are not available for all products, and fair value is determined
using techniques appropriate for each particular product. These techniques
involve some degree of judgment. 



90










For
investments in illiquid or privately held securities that do not have readily
determinable fair values, the determination of fair value requires us to
estimate the value of the securities using the best information available.

Among the factors we consider in determining the fair value of investments are
the cost of the investment, terms and liquidity, developments since the
acquisition of the investment, the sales price of recently issued securities,
the financial condition and operating results of the issuer, earnings trends and
consistency of operating cash flows, the long-term business potential of the
issuer, the quoted market price of securities with similar quality and yield
that are publicly traded, and other factors generally pertinent to the valuation
of investments.
In
instances where a security is subject to transfer restrictions, the value of the
security is based primarily on the quoted price of a similar security without
restriction but may be reduced by an amount estimated to reflect such
restrictions.
The fair
value of these investments is subject to a high degree of volatility and may be
susceptible to significant fluctuation in the near term, and the differences
could be material.



The degree of judgment used
in measuring the fair value of financial instruments generally correlates to the
level of pricing observability. Pricing observability is impacted by a number of
factors, including the type of financial instrument, whether the financial
instrument is new to the market and not yet established, and the characteristics
specific to the transaction. Financial instruments with readily available active
quoted prices for which fair value can be measured from actively quoted prices
generally will have a higher degree of pricing observability and a lesser degree
of judgment used in measuring fair value. Conversely, financial instruments
rarely traded or not quoted will generally have less, or no, pricing
observability and a higher degree of judgment used in measuring fair value. See
Note 6 for additional information on how we value our financial instruments.




Available-for-Sale Securities



Securities
available for sale are recorded at fair value based on quoted prices for similar
securities in active markets and other observable market data. Securities
available for sale include U.S. agency notes; state and municipal securities;
U.S. agency, non-agency, and commercial mortgage-backed securities; corporate
debt securities; auction-rate securities ("ARS"); and asset-backed securities.
We evaluate these securities for other-than-temporary impairment on a quarterly
basis. If we determine other-than-temporary impairment exists, the cost basis of
the security is adjusted to the then-current fair value, with a corresponding
loss recognized in current earnings. Factors we consider in determining whether
an impairment is other-than-temporary are the length of time and extent of the
impairment, the credit rating of the securities and the issuer, whether the
issuer continues to make the contractual cash payments, whether we believe the
issuer will be able to continue to make the contractual payments until the value
recovers or the securities mature, and our company's ability and intent to hold
the investment until its value recovers or the securities mature. We may
determine that the decline in fair value of an investment is
other-than-temporary if our analysis of these factors indicates that we will not
recover our investment in the securities.



Unrealized
gains and losses are reported, net of taxes, in accumulated other comprehensive
income included in shareholders' equity.

Amortization of premiums and accretion of discounts are recorded as interest
income using the interest method.
Realized
gains and losses from sales of securities available for sale are determined on a
specific identification basis and are included in other revenue in the
consolidated statements of operations.




Held-to-Maturity Securities



Securities
held to maturity are recorded at amortized cost based on our company's positive
intent and ability to hold these securities to maturity. Securities held
to maturity include asset-backed securities, consisting of collateralized debt
obligation securities and ARS.
We evaluate these securities for other-than-temporary impairment on a quarterly
basis. If we determine other-than-temporary impairment exists, the cost basis of
the security is adjusted to the then-current fair value, with a corresponding
loss recognized in current earnings.




Loans Held for Sale



Loans held
for sale consist of fixed-rate and adjustable-rate residential real estate
mortgage loans intended for sale. Loans held for sale are stated at lower of
cost or market value. Declines in market value below cost and any gains or
losses on the sale of these assets are recognized in other revenues in the
consolidated statements of operations. Market value is determined based on
prevailing market prices for loans with similar characteristics or on sale
contract prices. Deferred fees and costs related to these loans are not
amortized but are recognized as part of the cost basis of the loan at the time
it is sold.



91










Bank Loans



Bank loans
consist of commercial and residential mortgage loans, home equity loans, stock
secured loans, construction loans, and commercial and industrial and consumer
loans originated by Stifel Bank. Bank loans that management has the intent and
ability to hold are recorded at outstanding principal adjusted for any
charge-offs, allowance for loan losses, and deferred origination fees and costs.
Loan origination costs, net of fees, are deferred and recognized over the
contractual life of the loan as an adjustment of yield using the interest
method. Bank loans are generally collateralized by real estate, real property,
marketable securities, or other assets of the borrower. Interest income is
recognized in the period using the effective interest rate method, which is
based upon the respective interest rates and the average daily asset balance.
Stifel Bank does not maintain any mortgage servicing rights on mortgages that
are sold. Stifel Bank does not engage in sub-prime lending.



The
allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to income. In providing for
the allowance for loan losses, management considers historical loss experience,
the nature and volume of the loan portfolio, adverse situations that may affect
the borrower's ability to repay, estimated value of any underlying collateral,
and prevailing economic conditions. This evaluation is inherently subjective, as
it requires estimates that are susceptible to significant revision as more
information becomes available. Large groups of smaller balance homogenous loans
are collectively evaluated for impairment.



In
addition, impairment is measured on a loan-by-loan basis for non-homogeneous
loans, and a specific allowance is established for individual loans determined
to be impaired. Impairment is measured using the present value of the impaired
loan's expected cash flow discounted at the loan's effective interest rate, the
loan's observable market price, or the fair value of the collateral if the loan
is collateral dependent. 



A loan is
considered impaired when, based on current information and events, it is
probable that the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement will not be collectible. Factors
considered in determining impairment include payment status, collateral value,
and the probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. We determine the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower's
prior payment record, and the amount of the shortfall in relation to the
principal and interest owed. 



Once a
loan is determined to be impaired, usually when principal or interest becomes 90
days past due or when collection becomes uncertain, the accrual of interest and
amortization of deferred loan origination fees is discontinued ("non-accrual
status"), and any accrued and unpaid interest income is written off. Loans
placed on non-accrual status are returned to accrual status when all delinquent
principal and interest payments are collected and the collectibility of future
principal and interest payments is reasonably assured. Loan losses are charged
against the allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance.



Bank
Foreclosed Assets Held for Sale



Assets
acquired through, or in lieu of, loan foreclosure by Stifel Bank are held for
sale and initially recorded at fair value, less estimated cost to sell, at the
date of foreclosure, establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed and the assets are carried at the lower of
carrying amount or fair value less cost to sell. These valuations are performed
by a third-party appraisal firm. Revenue and expense from operations and changes
in the valuation allowance are included in other income or other operating
expense in the consolidated statements of operations.




Investments




Investments in the consolidated statements of financial condition contain
investments in securities that are marketable and securities that are not
readily marketable. These investments are not included in our broker-dealer
trading inventory or available-for-sale or held-to-maturity portfolios and
represent the acquiring and disposing of debt or equity instruments for our
benefit.



Our
broker-dealer subsidiaries report changes in fair value of marketable and
non-marketable securities through current period earnings based on guidance
provided by the AICPA Audit and Accounting Guide, "Brokers and Dealers in
Securities." The fair value of marketable investments are generally based on
either quoted market or dealer prices. The fair value of non-marketable
securities is based on management's estimate using the best information
available, which consists of quoted market prices for similar securities and
internally developed discounted cash flow models.



92











Fixed Assets



Office
equipment is depreciated on an accelerated basis over the estimated useful life
of the asset of two to seven years. Leasehold improvements are amortized on a
straight-line basis over the lesser of the estimated useful life of the asset or
the term of the lease. Office equipment, leasehold improvements, and property
are stated at cost net of accumulated depreciation and amortization. Office
equipment is reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.



Goodwill
and Intangible Assets



Goodwill
represents the cost of acquired businesses in excess of the fair value of the
related net assets acquired. Goodwill is tested for impairment at least annually
or whenever indications of impairment exist. In testing for the potential
impairment of goodwill, we estimate the fair value of each of our company's
reporting units (generally defined as the businesses for which financial
information is available and reviewed regularly by management) and compare it to
their carrying value. If the estimated fair value of a reporting unit is less
than its carrying value, we are required to estimate the fair value of all
assets and liabilities of the reporting unit, including goodwill. If the
carrying value of the reporting unit's goodwill is greater than the estimated
fair value, an impairment charge is recognized for the excess. We have elected
July 31 as our annual impairment testing date. Identifiable intangible assets, which are amortized over their estimated useful
lives, are tested for potential impairment whenever events or changes in
circumstances suggest that the carrying value of an asset or asset group may not
be fully recoverable.



Loans and
Advances



We offer
transition pay, principally in the form of upfront loans, to financial advisors
and certain key revenue producers as part of our company's overall growth
strategy. These loans are generally forgiven by a charge to compensation and
benefits over a five- to ten-year period if the individual satisfies certain
conditions, usually based on continued employment and certain performance
standards. We monitor and compare individual financial advisor production to
each loan issued to ensure future recoverability. If the individual leaves
before the term of the loan expires or fails to meet certain performance
standards, the individual is required to repay the balance. In determining the
allowance for doubtful receivables from former employees, management considers
the facts and circumstances surrounding each receivable, including the amount of
the unforgiven balance, the reasons for the terminated employment relationship,
and the former employees' overall financial positions. The loan balance from
former employees at December 31, 2010 and 2009 was $2,853 and $2,492,
respectively, with associated loss allowances of $1,392 and $1,500,
respectively. 



Securities
Sold Under Agreements to Repurchase



Securities
sold under agreements to repurchase ("repurchase agreements") are collateralized
investing transactions that are recorded at their contractual amounts plus
accrued interest. We make delivery of securities sold under agreements to
repurchase and monitor the value of collateral on a daily basis. When necessary,
we will deliver additional collateral.




Derivative Instruments and Hedging Activities



Stifel
Bank recognizes all of its derivative instruments at fair value as either assets
or liabilities in the consolidated statements of financial condition. These
instruments are recorded in other assets or accounts payable and accrued
expenses in the consolidated
statements of financial condition
and in the operating section of the consolidated statements of cash flows as
increases or decreases of other assets and accounts payable and accrued
expenses. Our company's policy is not to offset fair value amounts recognized
for derivative instruments and fair value amounts recognized for the right to
reclaim cash collateral or the obligation to return cash collateral arising from
derivative instruments recognized at fair value executed with the same
counterparty under master netting arrangements. The accounting for changes in
the fair value (i.e., gains and losses) of a derivative instrument depends on
whether it has been designated and qualifies as part of a hedging relationship
and, further, on the type of hedging relationship. For those derivative
instruments that are designated and qualify as hedging instruments under ASC
815, "Derivatives and Hedging," we must also designate the hedging instrument or
transaction, based upon the exposure being hedged. 



For
derivative instruments that are designated and qualify as cash flow hedges
(i.e., hedging the exposure to variability in expected future cash flows that is
attributable to a particular risk), the effective portion of the gain or loss on
the derivative instrument is reported as a component of accumulated other
comprehensive income and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. The remaining gain
or loss on the derivative instrument in excess of the cumulative change in the
present value of future cash flows of the hedged item, if any, is recognized in
current earnings during the period of change. We do not use derivatives for
trading or speculative purposes and, at December 31, 2010, do not have any
derivatives that are not designated in qualifying cash flow hedging
relationships. See Note 16 for additional details.



93










Revenue
Recognition



Customer
security transactions are recorded on a settlement date basis, with related
commission revenues and expenses recorded on a trade date basis. Commission
revenues are recorded as the amount charged to the customer, which, in certain
cases, may include varying discounts. Principal securities transactions are
recorded on a trade date basis. We distribute our proprietary equity research
products to our client base of institutional
investors
at no charge. These proprietary equity research products are accounted for as a
cost of doing business. 



Investment
banking revenues, which include underwriting fees, management fees, advisory
fees, and
sales
credits earned in connection with the distribution of the underwritten
securities,
are recorded when services for the transactions are completed under the terms of
each engagement. Expenses associated with such transactions are deferred until
the related revenue is recognized or the engagement is otherwise concluded.
Investment banking revenues are presented net of related unreimbursed expenses.
Expenses related to investment banking deals not completed are recognized as
non-interest expenses in the consolidated statements of operations.
For the
periods presented, there were no significant expenses recognized for incomplete
transactions. We have not recognized any incentive income that is subject to
contingent repayments.



Asset
management and service fees are recorded when earned, based on the period-end
assets in the accounts, and consist of customer account service fees, per
account fees (such as IRA fees), and wrap fees on managed accounts.




We earn
fees from the investment partnerships that we manage or of which we are a
general partner. Such management fees are generally based on the net assets or
committed capital of the underlying partnerships. We have agreed, in certain
cases, to waive management fees, in lieu of making a cash contribution, in
satisfaction of our general partner investment commitments to the investment
partnerships. In these cases, we generally recognize our management fee revenues
at the time when we are allocated a special profit interest in realized gains
from these partnerships.



Leases



We lease
office space and equipment under operating leases. We recognize rent expense
related to these operating leases on a straight-line basis over the lease term.
The lease term commences on the earlier of the date when we become legally
obligated for the rent payments or the date on which we take possession of the
property. For tenant improvement allowances and rent holidays, we record a
deferred rent liability in accounts payable and accrued expenses in the
consolidated statements of financial condition and amortize the deferred rent
over the lease term as a reduction to occupancy and equipment rental expense in
the consolidated statements of operations.




Income Taxes



We compute
income taxes using the asset and liability method, under which deferred income
taxes are provided for the temporary differences between the financial statement
carrying amounts and the tax basis of our company's assets and liabilities. We
establish a valuation allowance for deferred tax assets if it is more likely
than not that these items will either expire before we are able to realize their
benefits, or that future deductibility is uncertain.



We
recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. We recognize interest and
penalties related to uncertain tax positions in provision for income
taxes/(benefit) in the consolidated statements of operations. See Note 24 for
further information regarding income taxes.



94











Foreign Currency Translation



We
consolidate our foreign subsidiaries, which have designated their local currency
as their functional currency. Assets and liabilities of these foreign
subsidiaries are translated at year-end rates of exchange, and revenues and
expenses are translated at an average rate for the period. In accordance with
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
Topic 830, "Foreign Currency Matters," gains or losses resulting from
translating foreign currency financial statements are reflected in accumulated
other comprehensive income, a separate component of shareholders' equity. Gains
or losses resulting from foreign currency transactions are included in net
income.



Recently
Adopted Accounting Guidance




Allowance for Credit Losses



In July
2010, the FASB issued Accounting Standards Update ("Update") No. 2010-20, "Disclosures About the Credit
Quality of Financing Receivables and the Allowance for Credit Losses," which
requires significant new disclosures about the allowance for credit losses and
the credit quality of financing receivables. The requirements are intended to
enhance transparency regarding credit losses and the credit quality of loan and
lease receivables. Under this guidance, allowance for credit losses and fair
value are to be disclosed by portfolio segment, while credit quality
information, impaired financing receivables, and nonaccrual status are to be
presented by class of financing receivable. Disclosure of the nature and extent,
the financial impact, and segment information of troubled debt restructurings
will also be required. The disclosures are to be presented at the level of
disaggregation that management uses when assessing and monitoring the
portfolio's risk and performance. This guidance is effective for interim and
annual reporting periods after December 15, 2010 (December 31, 2010 for our
company). In January 2011, the FASB issued Update 2011-01, Receivables (Topic
310): Deferral of the Elective Date of Disclosures About Troubled Debt
Restructurings in Update No. 2010-20," which temporarily delays the
effective date of the disclosures about trouble debt restructurings. Other than
requiring additional disclosures, the adoption of this new guidance did not have
a material impact on our consolidated financial statements. See Note 9 - Bank
Loans. 




Deterioration of Credit Quality for Acquired Loans



In April
2010, the FASB issued Update No. 2010-18, "Receivables (Topic 310): Effect of
a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a
Single Asset," which clarifies the accounting for acquired loans that have
evidence of a deterioration in credit quality since origination (referred to as
"Subtopic 310-30 Loans"). Under this guidance, an entity may not apply troubled
debt restructuring ("TDR") accounting guidance to individual Subtopic 310-30
Loans that are part of a pool, even if the modification of those loans would
otherwise be considered a troubled debt restructuring. Once a pool is
established, individual loans should not be removed from the pool unless the
entity sells, forecloses, or writes off the loan. Entities would continue to
consider whether the pool of loans is impaired if expected cash flows for the
pool change. Subtopic 310-30 Loans that are accounted for individually would
continue to be subject to TDR accounting guidance. A one-time election to
terminate accounting for loans as a pool, which may be made on a pool-by-pool
basis, is provided upon adoption of the guidance. This guidance is effective for
interim and annual reporting periods ending on or after July 15, 2010 (September
30, 2010 for our company). The adoption of this new guidance did not have a
material impact on our consolidated financial statements.




Consolidation



In
February 2010, the FASB issued Update No. 2010-10, "Consolidation (Topic
810): Amendments for Certain Investment Funds," which provides for a
deferral of the consolidation requirements of Topic 810 resulting from the
issuance of FASB Statement No. 167 ("Statement 167"), Amendments to FASB
Interpretation No. 46R," for a reporting entity's interest in an entity that
has all the attributes of an investment company or for which it is industry
practice to apply measurement principles for financial reporting purposes that
are consistent with those followed by investment companies (the "deferral"). The
deferral does not apply in situations in which a reporting entity has the
explicit or implicit obligation to fund losses of an entity that could
potentially be significant to the entity. The deferral also does not apply to
interests in securitization entities, asset-backed financing entities, or
entities formerly considered qualifying special purpose entities. An entity that
qualifies for the deferral will continue to be assessed under the overall
guidance on the consolidation of variable interest entities in Subtopic 810-10
(before the Statement 167 amendments) or other applicable consolidation
guidance, such as the guidance for the consolidation of partnerships in Subtopic
810-20. This guidance does not defer the disclosure requirements of Topic 810,
as amended. The amendments in this Update are effective as of the beginning of
the first annual reporting period that begins after November 15, 2009, and for
interim periods within the first annual reporting period (January 1, 2010 for
our company). The adoption of this guidance permits us to defer the
consolidation requirements of Topic 810 resulting from the issuance of Statement
167 for certain of these entities. See Note 29 - Variable Interest Entities.



95











Subsequent Events



In February 2010, the FASB issued Update No.
2010-09, "Subsequent Events (Topic 855): Amendments to Certain Recognition
and Disclosure Requirements," which amends certain provisions of the current
guidance, including the elimination of the requirement for disclosure of the
date through which an evaluation of subsequent events was performed in issued
and revised financial statements. This guidance was effective for the first
interim and annual reporting periods beginning after issuance (March 31, 2010
for our company). The adoption of this new guidance did not have a material
impact on our consolidated financial statements. See Note 30 - Subsequent
Events. 



Fair Value
of Financial Instruments



In January
2010, the FASB issued Update No. 2010-06, "Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures About Fair Value Measurements,"
which amends the disclosure requirements related to recurring and nonrecurring
fair value measurements. The guidance requires new disclosures on the transfers
of assets and liabilities between Level 1 (quoted prices in active market for
identical assets or liabilities) and Level 2 (significant other observable
inputs) of the fair value measurement hierarchy, including the reasons and the
timing of the transfers. Additionally, the guidance requires a rollforward of
activities on purchases, sales, issuance, and settlements of the assets and
liabilities measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance became effective for us with the reporting period
beginning January 1, 2010, except for the disclosure on the rollforward
activities for Level 3 fair value measurements, which will become effective for
us with the reporting period beginning January 1, 2011. Other than requiring
additional disclosures, the adoption of this new guidance did not have a
material impact on our consolidated financial statements. See Note 6 - Fair
Value of Financial Instruments. 



Accounting
for Transfers of Financial Assets



In June
2009, the FASB issued and subsequently codified guidance amending ASC 860,
"Transfers and Servicing," designed to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash
flows; and a transferor's continuing involvement, if any, in transferred
financial assets. Additionally, the new guidance eliminates the qualifying
special-purpose entity ("QSPE") concept. The guidance became effective for us
with the reporting period beginning January 1, 2010. The adoption of this new
guidance did not have a material impact on our consolidated financial
statements.



96










NOTE 3 -
Acquisitions



Thomas
Weisel Partners Group, Inc.



On July 1,
2010, we completed the purchase of all the outstanding shares of common stock of
TWPG, an investment banking firm based in San Francisco, California. The
purchase was completed pursuant to the merger agreement dated April 25, 2010. As
consideration, at the close of the merger, we issued approximately
3,719,000
shares, including approximately 780,000 exchangeable shares to the holders of
TWPG common stock and approximately 1,800,000 restricted stock units to
employees of TWPG, which resulted in purchase consideration of $271,285. The
fair value of the common stock and restricted stock units was determined using
the market price of our common stock on the date of the merger. The merger
furthers our company's mission of building the premier middle-market investment
bank with significantly enhanced investment banking, research, and wealth
management capabilities.



The
acquisition was accounted for under the acquisition method of accounting in
accordance with ASC 805 ("Topic 805"), "Business Combinations."
Accordingly, goodwill was measured as the excess of the acquisition-date fair
value of the consideration transferred over the amount of acquisition-date
identifiable assets acquired net of assumed liabilities. We recorded $132,323 of
goodwill as an asset in the consolidated statement of financial condition, which
has been allocated to our company's Global Wealth Management and Institutional
Group segments. In management's opinion, the goodwill represents the value
expected from the synergies created through the operational enhancement benefits
that will result from the integration of TWPG's business and the reputation and
expertise of TWPG in the investment banking business.
During the fourth quarter of 2010, we finalized
the analysis of the fair values of the acquired net assets and the purchase
price allocation; as a result, we recorded an increase to goodwill of $8,198.
The change was primarily related to the valuation of the identified intangible
assets by a third-party valuation firm and the completion of the purchase price
allocation.




Identifiable intangible assets purchased by our company consisted of customer
relationships, trade name and investment banking backlog with acquisition-date
fair values of $6,040, $7,880, and $2,230, respectively.
Under
Topic 805, merger-related transaction costs (such as advisory, legal, valuation,
and other professional fees) are not included as components of consideration
transferred but are accounted for as expenses in the periods in which the costs
are incurred. Transaction costs of $2,900 were incurred during the year ended
December 31, 2010, and are included in other operating expenses in the
consolidated statement of operations.



The
following table summarizes the fair value of assets acquired and liabilities
assumed at the date of the acquisition (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash and cash equivalents
		
		


		 
		
		


		$
		
		


		80,642
		
		


		 
	
	
		
		

		Trading securities owned
		
		


		 
		
		


		 
		
		


		14,595
		
		


		 
	
	
		
		


		Investments
		
		


		 
		
		


		 
		
		


		44,293
		
		


		 
	
	
		
		


		Fixed assets
		
		


		 
		
		


		 
		
		
8,195
		
		


		 
	
	
		
		


		Goodwill
		
		


		 
		
		


		 
		
		


		132,323
		
		


		 
	
	
		
		


		Intangible assets
		
		


		 
		
		


		 
		
		


		16,150
		
		


		 
	
	
		
		


		Deferred tax asset, net
		
		


		 
		
		


		 
		
		


		88,186
		
		


		 
	
	
		
		


		Other assets
		
		


		 
		
		


		 
		
		
39,630
		
		


		 
	
	
		
		

		

		Total assets acquired
		
		


		 
		
		


		 
		
		


		424,014
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Liabilities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Notes payable
		
		


		 
		
		


		 
		
		


		23,000
		
		


		 
	
	
		
		


		Accrued compensation
		
		


		 
		
		


		 
		
		


		47,396
		
		


		 
	
	
		
		


		Accounts payable and accrued expenses
		
		


		 
		
		


		 
		
		


		82,333
		
		


		 
	
	
		
		

		

		Total liabilities assumed
		
		


		 
		
		


		 
		
		


		152,729
		
		


		 
	
	
		
		

		

		Net assets acquired
		
		


		 
		
		


		$
		
		


		271,285
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	


97










TWPG's
results of operations have been included in our consolidated financial
statements prospectively from the date of acquisition. The investment banking,
research, and institutional brokerage businesses of TWPG were integrated with
Stifel Nicolaus immediately after the merger; therefore, the revenues, expenses,
and net income of the integrated businesses are not distinguishable within the results
of our company. The
following unaudited pro forma financial data assumes the acquisition had
occurred at the beginning of each period presented. Pro forma results have been
prepared by adjusting our historical results to include TWPG's results of
operations adjusted for the following changes: amortization expense adjusted as
a result of acquisition-date fair value adjustments to intangible assets;
interest expense adjusted for revised debt structures; and the income tax effect
of applying our statutory tax rates to TWPG's results. The unaudited pro forma
results presented do not necessarily reflect the results of operations that
would have resulted had the acquisition been completed at the beginning of the
applicable periods presented, nor does it indicate the results of operations in
future periods. Additionally, the unaudited pro forma results do not include the
impact of possible business model changes, nor does it consider any potential
impacts of current market conditions or revenues, reduction of expenses, asset
dispositions, or other factors. The impact of these items could alter the
following pro forma results:


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,  
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		(Unaudited)
		
		


		 
		
		


		(Unaudited)
		
		


		 
		
		


		(Unaudited)
		
		


		 
	
	
		
		


		Total net revenues
		
		


		 
		
		


		$
		
		


		1,472,905
		
		


		 
		
		


		$
		
		


		1,286,664
		
		


		 
		
		


		$
		
		


		1,060,534
		
		


		 
	
	
		
		


		Net income/(loss)
		
		


		 
		
		


		 
		
		


		(66,809
		
		


		)
		
		


		 
		
		


		39,770
		
		


		 
		
		


		 
		
		


		792
		
		


		 
	
	
		
		


		Earnings/(loss) per share:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Basic
		
		


		 
		
		


		 
		
		


		(2.06
		
		


		)
		
		


		 
		
		


		1.22
		
		


		 
		
		


		 
		
		


		0.02
		
		


		 
	
	
		
		


		Diluted
		
		


		 
		
		


		 
		
		


		(2.06
		
		


		)
		
		


		 
		
		


		1.03
		
		


		 
		
		


		 
		
		


		0.02
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



 UBS
Wealth Management Americas Branch Network



On March
23, 2009, we announced that Stifel Nicolaus had entered into a definitive
agreement with UBS Financial Services Inc. ("UBS") to acquire certain specified
branches from the UBS Wealth Management Americas branch network. As subsequently
amended, we agreed to acquire 56 branches (the "Acquired Locations") from UBS in
four separate closings pursuant to this agreement. We completed the closings on
the following dates: August 14, 2009, September 11, 2009, September 25, 2009,
and October 16, 2009. This acquisition further expands our private client
footprint. Pro forma information is not presented, because the acquisition is
not considered to be material, as defined by the Securities and Exchange
Commission (the "SEC"). The results of operations of the Acquired Locations have
been included in our results prospectively from the respective acquisition
dates. 



The
transaction was structured as an asset purchase for cash at a premium over
certain balance sheet items, subject to adjustment. In addition, a contingent
earn-out payment is payable over the two-year period following the closing based
on the performance of the UBS financial advisors who joined Stifel Nicolaus. We
have recognized a liability of $11,200 for estimated earn-out payments over the
two-year period. The liability is included in accounts payable and accrued
expenses in the consolidated statements of financial condition at December 31,
2010.



Butler,
Wick & Co., Inc. 



On
December 31, 2008, we closed on the acquisition of Butler, Wick & Co., Inc.
("Butler Wick"), a privately held broker-dealer that provides financial advice
to individuals, municipalities, and corporate clients. We acquired 100% of the
voting interests of Butler Wick from United Community Financial Corp. This
acquisition extends our company's geographic reach in the Ohio Valley region.
The purchase price of $12,000 was funded from cash generated from operations.
Under the purchase method of accounting, the assets and liabilities of Butler
Wick are recorded as of the acquisition date, at their respective fair values,
and consolidated in our company's financial statements. Pro forma information is
not presented, because the acquisition is not considered to be material. Butler
Wick's results of operations have been included in our results prospectively
from January 1, 2009.



Ryan
Beck & Company, Inc. Earn-Out



On
February 28, 2007, we completed the acquisition of Ryan Beck & Company, Inc.
("Ryan Beck"), a full-service brokerage and investment banking firm and wholly
owned subsidiary of BankAtlantic Bancorp, Inc. Pursuant to the stock purchase
agreement, an additional earn-out payment was payable based on the achievement
of defined revenues over the two-year period following the closing. We paid the
final earn-out payment of $9,301 related to the two-year private client
contingent earn-out in 271,353 shares of our company's common stock at an
average price of $34.30 per share in the first quarter of 2009, with partial
shares paid in cash.



98










NOTE 4
-Sale of Bank Branch



On April 30, 2010, Stifel Bank completed the
sale of certain assets and the transfer of certain liabilities of Stifel Bank's
branch office, which resulted in a pre-tax loss of $401.
As a result of the transaction, we sold $31,429
of loans as well as certain other assets, including the building and office
equipment of $661, and
the buyer assumed $17,621 of deposits.



The assets and liabilities associated with the
branch office were reflected in loans held for sale, other assets, and deposits
in the consolidated statements of financial condition as of December 31, 2009,
respectively, at the lower of their carrying value or fair value less costs to
sell. The branch sale was not classified as discontinued operations, as Stifel
Bank has ongoing banking operations in this market.

NOTE 5 -
Receivables From and Payables to Brokers, Dealers and Clearing Organizations



Amounts
receivable from brokers, dealers, and clearing organizations at December 31,
2010 and 2009, included (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31
		

		
		

		 2010
		
		


		 
		
		


		December 31,
		



		 2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Deposits paid for securities borrowed
		
		


		 
		
		


		$
		
		


		94,709
		
		


		 
		
		


		$
		
		


		147,325
		
		


		 
	
	
		
		


		Receivable from clearing organizations
		
		


		 
		
		


		 
		
		


		78,269
		
		


		 
		
		


		 
		
		


		97,658
		
		


		 
	
	
		
		


		Securities failed to deliver
		
		


		 
		
		


		 
		
		


		74,729
		
		


		 
		
		


		 
		
		


		64,626
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$ 
		
		


		247,707
		
		


		 
		
		


		$
		
		


		309,609
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Amounts
payable to brokers, dealers, and clearing organizations at December 31, 2010 and
2009, included (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31
		

		
		

		 2010
		
		


		 
		
		


		December 31,
		



		 2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Securities failed to receive
		
		


		 
		
		


		$
		
		


		78,499
		
		


		 
		
		


		$
		
		


		73,793
		
		


		 
	
	
		
		


		Deposits received from securities loaned
		
		


		 
		
		


		 
		
		


		27,907
		
		


		 
		
		


		 
		
		


		16,667
		
		


		 
	
	
		
		


		Payable to clearing organizations
		
		


		 
		
		


		 
		
		


		8,463
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$ 
		
		


		114,869
		
		


		 
		
		


		$
		
		


		90,460
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



Deposits
paid for securities borrowed approximate the market value of the securities.
Securities failed to deliver and receive represent the contract value of
securities that have not been delivered or received on settlement date.




99










NOTE 6 -
Fair Value of Financial Instruments



We measure certain
financial assets and liabilities at fair value on a recurring basis, including
cash equivalents, trading securities owned, available-for-sale securities,
investments, trading securities sold, but not yet purchased, and derivatives.



The degree of judgment used
in measuring the fair value of financial instruments generally correlates to the
level of pricing observability. Pricing observability is impacted by a number of
factors, including the type of financial instrument, whether the financial
instrument is new to the market and not yet established, and the characteristics
specific to the transaction. Financial instruments with readily available active
quoted prices for which fair value can be measured from actively quoted prices
generally will have a higher degree of pricing observability and a lesser degree
of judgment used in measuring fair value. Conversely, financial instruments
rarely traded or not quoted will generally have less, or no, pricing
observability and a higher degree of judgment used in measuring fair value.



The following is a
description of the valuation techniques used to measure fair value.



Cash Equivalents 



Cash equivalents include
highly liquid investments with original maturities of three months or less.
Actively traded money market funds are measured at their net asset value, which
approximates fair value, and classified as Level 1.



Financial Instruments (Trading securities and available-for-sale securities)



When available, the fair
value of financial instruments are based on quoted prices in active markets and
reported in Level 1. Level 1 financial instruments include highly liquid
instruments with quoted prices, such as equities listed in active markets,
certain corporate obligations, and certain U.S. Treasury bonds and other
government obligations.



If quoted prices are not
available, fair values are obtained from pricing services, broker quotes, or
other model-based valuation techniques with observable inputs, such as the
present value of estimated cash flows and reported as Level 2. The nature of
these financial instruments include instruments for which quoted prices are
available but traded less frequently, instruments whose fair value have been
derived using a model where inputs to the model are directly observable in the
market, or can be derived principally from or corroborated by observable market
data, and instruments that are fair valued using other financial instruments,
the parameters of which can be directly observed. Level 2 financial instruments
generally include certain equity securities not actively traded, corporate
obligations infrequently traded, certain government and municipal obligations,
and certain mortgage-backed and asset-backed securities.



Level 3 financial
instruments have little to no pricing observability as of the report date. These
financial instruments do not have active two-way markets and are measured using
management's best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or
estimation. We have identified Level 3 financial instruments to include ARS for
which the market has been dislocated and largely ceased to function, equity
securities with unobservable inputs, certain corporate obligations with
unobservable pricing inputs, certain airplane trust certificates, limited
partnerships, and other investments. Level 3 corporate bonds are valued using
prices from comparable securities. ARS are valued based upon our expectations of
issuer redemptions and using internal discounted cash flow models.



Investments



Investments in public
companies are valued based on quoted prices in active markets and reported in
Level 1. Investments in certain private equity securities and partnerships with
unobservable inputs and ARS for which the market has been dislocated and largely
ceased to function are reported as Level 3 assets. Investments in certain equity
securities with unobservable inputs are valued using management's best estimate
of fair value, where the inputs require significant management judgment. ARS are
valued based upon our expectations of issuer redemptions and using internal
discounted cash flow models.



Investments in partnerships
and other investments include our general and limited partnership interests in
investment partnerships and direct investments in non-public companies. These
interests are carried at estimated fair value. The net assets of investment
partnerships consist primarily of investments in non-marketable securities. The
underlying investments held by such partnerships and direct investments in
non-public companies are valued based on the estimated fair value ultimately
determined by us in our capacity as general partner or investor and, in the case
of an investment in an unaffiliated investment partnership, are based on
financial statements prepared by an unaffiliated general partner.



100










The valuation of these
investments requires significant management judgment due to the absence of
quoted market prices, inherent lack of liquidity, and long-term nature of these
assets. As a result, these values cannot be determined with precision and the
calculated fair value estimates may not be realizable in a current sale or
immediate settlement of the instrument.



Derivatives 



Derivatives are valued
using quoted market prices when available or pricing models based on the net
present value of estimated future cash flows. The valuation models used require
market observable inputs, including contractual terms, market prices, yield
curves, credit curves, and measures of volatility. These measurements are
classified as Level 2 within the fair value hierarchy and are used to value
interest rate swaps.



101










The following table
summarizes the valuation of our financial instruments by pricing observability
levels as of December 31, 2010 and 2009 (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Total
		
		


		 
		
		


		Level 1
		
		


		 
		
		


		Level 2
		
		


		 
		
		


		Level 3
		
		


		 
	
	
		
		

		

		Assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash equivalents
		
		


		 
		
		


		$
		
		


		15,675
		
		


		 
		
		


		$ 
		
		


		15,675
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$ 
		
		


		-
		
		


		 
	
	
		
		

		

		Trading securities owned:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		 
		
		


		86,882
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		86,882
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		 
		
		


		9,038
		
		


		 
		
		


		 
		
		


		9,038
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		

		 
		
		


		-
		
		


		 
	
	
		
		


		Corporate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		

		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed income securities
		
		


		 
		
		


		 
		
		


		221,145
		
		


		 
		
		


		 
		
		


		47,001
		
		


		 
		
		


		 
		
		


		133,901
		
		


		 
		

		 
		
		


		40,243
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		46,877
		
		


		 
		
		


		 
		
		


		46,395
		
		


		 
		
		


		 
		
		


		482
		
		


		 
		

		 
		
		


		-
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		80,228
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		80,228
		
		


		 
		

		 
		
		


		-
		
		


		 
	
	
		
		


		Total trading securities owned
		
		


		 
		
		


		 
		
		


		444,170
		
		


		 
		
		


		 
		
		


		102,434
		
		


		 
		
		


		 
		
		


		301,493
		
		


		 
		
		


		 
		
		


		40,243
		
		


		 
	
	
		
		


		Available-for-sale securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		 
		
		


		25,030
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		25,030
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		26,343
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		14,907
		
		


		 
		
		


		 
		
		


		11,436
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		697,163
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		697,163
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		29,273
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		29,273
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		67,996
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		67,996
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		154,901
		
		


		 
		
		


		 
		
		


		34,897
		
		


		 
		
		


		 
		
		


		120,004
		
		


		 
		
		


		 
		
		

		

		-
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		12,008
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		12,008
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Total available-for-sale securities
		
		


		 
		
		


		 
		
		


		1,012,714
		
		


		 
		
		


		 
		
		


		34,897
		
		


		 
		
		


		 
		
		


		966,381
		
		


		 
		
		


		 
		
		


		11,436
		
		


		 
	
	
		
		

		

		Investments:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Corporate equity securities
		
		


		 
		
		


		 
		
		


		3,335
		
		


		 
		
		


		 
		
		


		3,335
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Mutual funds
		
		


		 
		
		


		 
		
		


		32,193
		
		


		 
		
		


		 
		
		


		32,193
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		 
		
		


		8,751
		
		


		 
		
		


		 
		
		

		

		8,751
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Auction rate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		76,826
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		76,826
		
		


		 
	
	
		
		


		Municipal securities
		
		


		 
		
		


		 
		
		


		6,533
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		6,533
		
		


		 
	
	
		
		


		Other  
		
		


		 
		
		


		 
		
		


		51,298
		
		


		 
		
		


		 
		
		


		10,489
		
		


		 
		
		


		 
		
		


		2,307
		
		


		 
		
		


		 
		
		


		38,502
		
		


		 
	
	
		
		


		Total investments
		
		


		 
		
		


		 
		
		


		178,936
		
		


		 
		
		


		 
		
		


		54,768
		
		


		 
		
		


		 
		
		


		2,307
		
		


		 
		
		


		 
		
		


		121,861
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		1,651,495
		
		


		 
		
		


		$ 
		
		


		207,774
		
		


		 
		
		


		$
		
		


		1,270,181
		
		


		 
		
		


		 $
		
		


		173,540
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Liabilities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Trading securities sold, but not yet purchased:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		$
		
		


		664
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		664
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		 
		
		


		131,561
		
		


		 
		
		


		 
		
		


		131,561
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Corporate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed income securities
		
		


		 
		
		


		 
		
		


		61,026
		
		


		 
		
		


		 
		
		


		18,815
		
		


		 
		
		


		 
		
		


		37,526
		
		


		 
		
		


		 
		
		


		4,685
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		6,800
		
		


		 
		
		


		 
		
		


		6,780
		
		


		 
		
		


		 
		
		


		20
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		89
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		89
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Total trading securities sold, but not yet purchased
		
		


		 
		
		


		200,140
		
		


		 
		
		


		 
		
		


		157,156
		
		


		 
		
		


		 
		
		


		38,299
		
		


		 
		
		


		 
		
		


		4,685
		
		


		 
	
	
		
		


		Securities sold, but not yet purchased  
		(1)
		
		


		 
		
		


		 
		
		


		19,935
		
		


		 
		
		


		 
		
		


		19,935
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Derivative contracts  (2)
		
		


		 
		
		


		 
		
		


		9,259
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		9,259
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		229,334
		
		


		 
		
		


		$
		
		


		177,091
		
		


		 
		
		


		$
		
		


		47,558
		
		


		 
		
		


		$
		
		


		4,685
		
		


		 
	
	
		
		


		(1)
		Included in other liabilities in the consolidated statements of
		financial condition.
		
		


		 
		
		


		 
	
	
		
		


		(2)
		Included in accounts payable and accrued expenses in the consolidated
		statements of financial condition.
		
		


		 
		
		


		 
	




102









	
		
		

		

		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Total
		
		


		 
		
		


		Level 1
		
		


		 
		
		


		Level 2
		
		


		 
		
		


		Level 3
		
		


		 
	
	
		
		

		

		Assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash equivalents
		
		


		 
		
		


		$
		
		


		3,824
		
		


		 
		
		


		$ 
		
		


		3,824
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$ 
		
		


		-
		
		


		 
	
	
		
		

		

		Trading securities owned:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		 
		
		


		158,724
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		158,724
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		 
		
		


		20,254
		
		


		 
		
		


		 
		
		


		20,254
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		

		 
		
		


		-
		
		


		 
	
	
		
		


		Corporate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		

		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed income securities
		
		


		 
		
		


		 
		
		


		209,950
		
		


		 
		
		


		 
		
		


		36,541
		
		


		 
		
		


		 
		
		


		172,166
		
		


		 
		

		 
		
		


		1,243
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		18,505
		
		


		 
		
		


		 
		
		


		18,505
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		

		 
		
		


		-
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		47,458
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		47,458
		
		


		 
		

		 
		
		


		-
		
		


		 
	
	
		
		


		Total trading securities owned
		
		


		 
		
		


		 
		
		


		454,891
		
		


		 
		
		


		 
		
		


		75,300
		
		


		 
		
		


		 
		
		


		378,348
		
		


		 
		
		


		 
		
		


		1,243
		
		


		 
	
	
		
		


		Available-for-sale securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		 
		
		


		1,011
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,011
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		992
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		992
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		433,019
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		433,019
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		38,466
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		38,466
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		47,640
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		47,640
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		42,890
		
		


		 
		
		


		 
		
		


		32,204
		
		


		 
		
		


		 
		
		


		10,686
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		14,470
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		11,777
		
		


		 
		
		


		 
		
		


		2,693
		
		


		 
	
	
		
		


		Total available-for-sale securities
		
		


		 
		
		


		 
		
		


		578,488
		
		


		 
		
		


		 
		
		


		32,204
		
		


		 
		
		


		 
		
		


		543,591
		
		


		 
		
		


		 
		
		


		2,693
		
		


		 
	
	
		
		

		

		Investments:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Corporate equity securities
		
		


		 
		
		


		 
		
		


		2,671
		
		


		 
		
		


		 
		
		


		2,671
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Mutual funds
		
		


		 
		
		


		 
		
		


		28,597
		
		


		 
		
		


		 
		
		


		28,597
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		 
		
		


		7,266
		
		


		 
		
		


		 
		
		


		7,266
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Auction rate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		46,297
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		46,297
		
		


		 
	
	
		
		


		Municipal securities
		
		


		 
		
		


		 
		
		


		9,706
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		9,706
		
		


		 
	
	
		
		


		Other  
		
		


		 
		
		


		 
		
		


		6,536
		
		


		 
		
		


		 
		
		


		672
		
		


		 
		
		


		 
		
		


		438
		
		


		 
		
		


		 
		
		


		5,426
		
		


		 
	
	
		
		


		Total investments
		
		


		 
		
		


		 
		
		


		101,073
		
		


		 
		
		


		 
		
		


		39,206
		
		


		 
		
		


		 
		
		


		438
		
		


		 
		
		


		 
		
		


		61,429
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		1,138,276
		
		


		 
		
		


		$ 
		
		


		150,534
		
		


		 
		
		


		$
		
		


		922,377
		
		


		 
		
		


		 $
		
		


		65,365
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Liabilities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Trading securities sold, but not yet purchased:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		$
		
		


		127,953
		
		


		 
		
		


		$
		
		


		127,953
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		 
		
		


		1,537
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		1,537
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Corporate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed income securities
		
		


		 
		
		


		 
		
		


		122,491
		
		


		 
		
		


		 
		
		


		11,744
		
		


		 
		
		


		 
		
		


		110,747
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		25,057
		
		


		 
		
		


		 
		
		


		25,057
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		332
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		332
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Total trading securities sold, but not yet purchased
		
		


		 
		
		


		 
		
		


		277,370
		
		


		 
		
		


		 
		
		


		164,754
		
		


		 
		
		


		 
		
		


		112,616
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Derivative contracts  (1)
		
		


		 
		
		


		 
		
		


		78
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		78
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		277,448
		
		


		 
		
		


		$
		
		


		164,754
		
		


		 
		
		


		$
		
		


		112,694
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		(1)
		 Included in accounts payable and accrued expenses in the consolidated
		statements of financial condition.
		
		


		 
		
		


		 
	



Our company's investment in
a U.S. government security used to fund our venture capital activities in
qualified Missouri businesses is classified as held-to-maturity and is not
subject to fair value accounting; therefore, it is not included in the above
analysis of fair value at December 31, 2009. This investment is included in
investments in the consolidated statements of financial condition at December
31, 2009.



103










The following table summarizes the changes in fair value carrying values
associated with Level 3 financial instruments during the year ended December
31, 2010 (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		Year Ended December 31, 2010
		
		


		 
	
	
		
		

		

		 
		
		


		Financial Assets
		
		


		 
		
		


		Financial Liabilities
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		Available-for-sale
		
		


		 
		
		


		Investments
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		Corporate Fixed Income Securities  

		(1)
		
		


		 
		
		


		Auction Rate Securities - Municipal
		
		


		 
		
		


		Asset-backed Securities
		
		


		 
		
		


		Auction Rate Securities - Equity
		
		


		 
		
		


		Auction Rate Securities - Municipal
		
		


		 
		
		


		Other
		
		


		 
		
		


		Corporate Fixed Income Securities  

		(2)
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Balance at December 31, 2009
		
		


		$ 
		
		


		1,243
		
		


		 
		
		


		$ 
		
		


		-
		
		


		 
		
		


		$ 
		
		


		2,693
		
		


		 
		
		


		$ 
		
		


		46,297
		
		


		 
		
		


		 $
		
		


		9,706
		
		


		 
		
		


		$ 
		
		


		5,426
		
		


		 
		
		


		$ 
		
		


		-
		
		


		 
	
	
		
		


		Unrealized gains/(losses):
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Included in changes in net assets (3)
		
		


		 
		
		


		509
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(1,671
		
		


		)
		
		


		 
		
		


		938
		
		


		 
		
		


		 
		
		


		1,534
		
		


		 
		
		


		 
		
		


		50
		
		


		 
	
	
		
		


		Included in OCI  (4)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		998
		
		


		 
		
		


		 
		
		


		887
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Realized
		gains/(losses)  (3)  
		
		


		 
		
		


		2,056
		
		


		 
		
		


		 
		
		


		219
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(629
		
		


		)
		
		


		 
		
		


		2,165
		
		


		 
		
		


		 
		
		


		68
		
		


		 
	
	
		
		


		Purchases,

		issuances, settlements, net
		
		


		 
		
		


		36,337
		
		


		 
		
		


		 
		
		


		10,219
		
		


		 
		
		


		 
		
		


		(3,580
		
		


		)
		
		


		 
		
		


		32,200
		
		


		 
		
		


		 
		
		


		(3,482
		
		


		)
		
		


		 
		
		


		29,377
		
		


		 
		
		


		 
		
		


		3,677
		
		


		 
	
	
		
		


		Transfers:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Into Level 3
		
		


		 
		
		


		156
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		890
		
		


		 
	
	
		
		


		Out of Level 3
		
		


		 
		
		


		(58
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Net change
		
		


		 
		
		


		39,000
		
		


		 
		
		


		 
		
		


		11,436
		
		


		 
		
		


		 
		
		


		(2,693
		
		


		)
		
		


		 
		
		


		30,529
		
		


		 
		
		


		 
		
		


		(3,173
		
		


		)
		
		


		 
		
		


		33,076
		
		


		 
		
		


		 
		
		


		4,685
		
		


		 
	
	
		
		

		

		Balance at December 31, 2010
		
		


		$
		
		


		40,243
		
		


		 
		
		


		$
		
		


		11,436
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		76,826
		
		


		 
		
		


		$
		
		


		6,533
		
		


		 
		
		


		$
		
		


		38,502
		
		


		 
		
		


		$
		
		


		4,685
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(1)
		Included in trading securities owned in the consolidated statements of
		financial condition.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(2)
		Included in trading securities sold, but not yet purchased in the
		consolidated statements of financial condition.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(3)
		Realized and unrealized gains/(losses) related to trading securities and
		investments are reported in other income in the consolidated statements
		of operations.
		
		


		 
	
	
		
		


		(4)
		Unrealized gains/(losses) related to available-for-sale securities are
		reported in accumulated other comprehensive income.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



The
results included in the table above are only a component of the overall trading
strategies of our company. The table above does not present Level 1 or Level 2
valued assets or liabilities. The changes to our company's Level 3 classified
instruments were principally a result of: purchases of ARS from our customers,
principal pay-downs of our available-for-sale securities, realized and
unrealized gains and losses, redemptions of ARS at par, and the addition of
partnership interests as a result of the merger with TWPG during the year ended
December 31, 2010. There were no changes in unrealized gains/(losses) recorded
in earnings for the year ended December 31, 2010 relating to Level 3 assets
still held at December 31, 2010. Investment gains and losses of our investments
are included in our consolidated statements of operations as a component of
other income.



Transfers Within the Fair Value Hierarchy



We assess
our financial instruments on a quarterly basis to determine the appropriate
classification within the fair value hierarchy, as defined by Topic 820.
Transfers between fair value classifications occur when there are changes in
pricing observability levels. Transfers of financial instruments among the
levels are deemed to occur at the end of the reporting period. There were no
material transfers between our Level 1 and Level 2 classified instruments during
the year ended December 31, 2010. 



104










The following table summarizes the changes in fair value carrying values
associated with Level 3 financial instruments during the year ended December
31, 2009 (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		Year Ended December 31, 2009
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		Investments
		
		


		 
	
	
		
		

		

		 
		
		


		Corporate Fixed Income Securities  

		(1)
		
		


		 
		
		


		Asset-backed Securities  

		(2)
		
		


		 
		
		


		Auction Rate Securities - Equity
		
		


		 
		
		


		Auction Rate Securities - Municipal
		
		


		 
		
		


		Other
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Balance at December 31, 2008
		
		


		$ 
		
		


		4,161
		
		


		 
		
		


		$ 
		
		


		10,423
		
		


		 
		
		


		$ 
		
		


		11,470
		
		


		 
		
		


		 $
		
		


		7,039
		
		


		 
		
		


		$ 
		
		


		5,169
		
		


		 
	
	
		
		


		Unrealized gains/(losses):
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Included in changes in net assets (3)
		
		


		 
		
		


		(582
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(1,863
		
		


		)
		
		


		 
		
		


		(58
		
		


		)
		
		


		 
		
		


		410
		
		


		 
	
	
		
		


		Included in OCI  (4)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(3,280
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Realized
		gains  (3)  
		
		


		 
		
		


		1,448
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Purchases,

		issuances, settlements, net
		
		


		 
		
		


		(4,020
		
		


		)
		
		


		 
		
		


		(4,450
		
		


		)
		
		


		 
		
		


		36,690
		
		


		 
		
		


		 
		
		


		2,725
		
		


		 
		
		


		 
		
		


		350
		
		


		 
	
	
		
		


		Transfers in/(out) of Level 3
		
		


		 
		
		


		236
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(503
		
		


		)
	
	
		
		


		Net change
		
		


		 
		
		


		(2,918
		
		


		)
		
		


		 
		
		


		(7,730
		
		


		)
		
		


		 
		
		


		34,827
		
		


		 
		
		


		 
		
		


		2,667
		
		


		 
		
		


		 
		
		


		257
		
		


		 
	
	
		
		

		

		Balance at December 31, 2009
		
		


		$
		
		


		1,243
		
		


		 
		
		


		$
		
		


		2,693
		
		


		 
		
		


		$
		
		


		46,297
		
		


		 
		
		


		$
		
		


		9,706
		
		


		 
		
		


		$
		
		


		5,426
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(1)
		Included in trading securities owned in the consolidated statements of
		financial condition.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(2)
		Included in available-for-sale securities in the consolidated statements
		of financial condition.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(3)
		Realized and unrealized gains/(losses) related to trading securities and
		investments are reported in other income in the consolidated statements
		of operations.
		
		


		 
	
	
		
		


		(4)
		Unrealized gains/(losses) related to available-for-sale securities are
		reported in accumulated other comprehensive income.
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



105










Fair Value
of Financial Instruments



The
following reflects the fair value of financial instruments, as of December 31,
2010 and 2009, whether or not recognized in the consolidated statements of
financial condition at fair value (in thousands).


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Carrying value
		
		


		 
		
		


		Estimated  

		

		

		
		

		fair value
		
		


		 
		
		


		Carrying
		

		



		value
		
		


		 
		
		


		Estimated

		



		fair value
		
		


		 
	
	
		
		

		

		Financial assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash and cash equivalents
		
		


		 
		
		


		$
		
		


		253,529
		
		


		 
		
		


		$
		
		


		253,529
		
		


		 
		
		


		$
		
		


		161,820
		
		


		 
		
		


		$ 
		
		


		161,820
		
		


		 
	
	
		
		


		Restricted cash
		
		


		 
		
		


		 
		
		


		6,868
		
		


		 
		
		


		 
		
		


		6,868
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Cash segregated for regulatory purposes
		
		


		 
		
		


		 
		
		


		6,023
		
		


		 
		
		


		 
		
		


		6,023
		
		


		 
		
		


		 
		
		


		19
		
		


		 
		
		


		 
		
		


		19
		
		


		 
	
	
		
		


		Securities purchased under agreements to resell  
		(1)
		
		


		 
		
		


		 
		
		


		123,617
		
		


		 
		
		


		 
		
		


		123,617
		
		


		 
		
		


		 
		
		


		124,854
		
		


		 
		
		


		 
		
		


		124,854
		
		


		 
	
	
		
		


		Trading securities owned
		
		


		 
		
		


		 
		
		


		444,170
		
		


		 
		
		


		 
		
		


		444,170
		
		


		 
		
		


		 
		
		


		454,891
		
		


		 
		
		


		 
		
		


		454,891
		
		


		 
	
	
		
		


		Available-for-sale securities
		
		


		 
		
		


		 
		
		


		1,012,714
		
		


		 
		
		


		 
		
		


		1,012,714
		
		


		 
		
		


		 
		
		


		578,488
		
		


		 
		
		


		 
		
		


		578,488
		
		


		 
	
	
		
		


		Held-to-maturity securities
		
		


		 
		
		


		 
		
		


		52,640
		
		


		 
		
		


		 
		
		


		52,984
		
		


		 
		
		


		 
		
		


		7,574
		
		


		 
		
		


		 
		
		


		4,276
		
		


		 
	
	
		
		


		Loans held for sale  (1)
		
		


		 
		
		


		 
		
		


		86,344
		
		


		 
		
		


		 
		
		


		86,344
		
		


		 
		
		


		 
		
		


		91,117
		
		


		 
		
		


		 
		
		


		91,117
		
		


		 
	
	
		
		


		Bank loans
		
		


		 
		
		


		 
		
		


		389,742
		
		


		 
		
		


		 
		
		


		376,176
		
		


		 
		
		


		 
		
		


		335,157
		
		


		 
		
		


		 
		
		


		332,437
		
		


		 
	
	
		
		


		Investments
		
		


		 
		
		


		 
		
		


		178,936
		
		


		 
		
		


		 
		
		


		178,936
		
		


		 
		
		


		 
		
		


		109,403
		
		


		 
		
		


		 
		
		


		109,403
		
		


		 
	
	
		
		

		

		Financial liabilities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Securities sold under agreements to repurchase  
		(1)
		
		


		 
		
		


		$
		
		


		109,595
		
		


		 
		
		


		$
		
		


		109,595
		
		


		 
		
		


		$
		
		


		122,533
		
		


		 
		
		


		$
		
		


		122,533
		
		


		 
	
	
		
		


		Non-interest-bearing deposits
		
		


		 
		
		


		 
		
		


		8,197
		
		


		 
		
		


		 
		
		


		7,980
		
		


		 
		
		


		 
		
		


		19,521
		
		


		 
		
		


		 
		
		


		19,013
		
		


		 
	
	
		
		


		Interest-bearing deposits
		
		


		 
		
		


		 
		
		


		1,615,371
		
		


		 
		
		


		 
		
		


		1,565,199
		
		


		 
		
		


		 
		
		


		1,027,690
		
		


		 
		
		


		 
		
		


		1,027,403
		
		


		 
	
	
		
		


		Federal Home Loan Bank advances  
		(1)
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		2,000
		
		


		 
		
		


		 
		
		


		2,000
		
		


		 
	
	
		
		


		Trading securities sold, but not yet purchased
		
		


		 
		
		


		 
		
		


		200,140
		
		


		 
		
		


		 
		
		


		200,140
		
		


		 
		
		


		 
		
		


		277,370
		
		


		 
		
		


		 
		
		


		277,370
		
		


		 
	
	
		
		


		Securities sold, but not yet purchased  
		(2)
		
		


		 
		
		


		 
		
		


		19,935
		
		


		 
		
		


		 
		
		


		19,935
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Derivative contracts  (3)
		
		


		 
		
		


		 
		
		


		9,259
		
		


		 
		
		


		 
		
		


		9,259
		
		


		 
		
		


		 
		
		


		78
		
		


		 
		
		


		 
		
		


		78
		
		


		 
	
	
		
		


		Liabilities subordinated to the claims of general creditors
		
		


		 
		
		


		 
		
		


		8,241
		
		


		 
		
		


		 
		
		


		7,739
		
		


		 
		
		


		 
		
		


		10,081
		
		


		 
		
		


		 
		
		


		9,299
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		(1)
		Carrying value approximates fair value. 

		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(2)
		Included in other liabilities in the consolidated statements of
		financial condition.
		
		


		 
		
		


		 
	
	
		
		


		(3)
		Included in accounts payable and accrued expenses in the consolidated statements of
		financial condition.
		
		 
		
		 
	



The
following, as supplemented by the discussion above, describes the valuation
techniques used in estimating the fair value of our financial instruments as of
December 31, 2010 and 2009. 



Financial
Assets



Securities
Purchased Under Agreements to Resell



Securities
purchased under agreements to resell are collateralized financing transactions
that are recorded at their contractual amounts plus accrued interest. The
carrying values at December 31, 2010 and 2009 approximate fair value.



106











Held-to-Maturity Securities



Securities
held to maturity are recorded at amortized cost based on our company's positive
intent and ability to hold these securities to maturity. Securities held to
maturity include asset-backed securities, consisting of collateralized debt
obligation securities and ARS.
The fair value is determined using several factors; however, primary weight is
given to discounted cash flow modeling techniques that incorporated an estimated
discount rate based upon recent observable debt security issuances with similar
characteristics. 



The
decrease in fair value below the carrying amount of our asset-backed security at
December 31, 2010 and 2009 is primarily due to unrealized losses that were
caused by: illiquid markets for collateralized debt obligations, global
disruptions in the credit markets, increased supply of collateralized debt
obligation secondary market securities from distressed sellers, and difficult
times in the banking sector, which has lead to a significant amount of bank
failures. The decrease in fair value below the carrying amount of our
asset-backed security as of December 31, 2010 was offset by ARS unrealized
gains.



Loans Held
for Sale



Loans held
for sale consist of fixed-rate and adjustable-rate residential real estate
mortgage loans intended for sale. Loans held for sale are stated at lower of
cost or fair value. Fair value is determined based on prevailing market prices
for loans with similar characteristics or on sale contract prices. The carrying
value as of December 31, 2010 and 2009 approximate fair value.



Bank Loans



The fair
values of mortgage loans and commercial loans were estimated using a discounted
cash flow method, a form of the income approach. Discount rates were determined
considering rates at which similar portfolios of loans would be made under
current conditions and considering liquidity spreads applicable to each loan
portfolio based on the secondary market.



Financial
Liabilities



Securities
Sold Under Agreements to Repurchase



Securities
sold under agreements to repurchase are collateralized financing transactions
that are recorded at their contractual amounts plus accrued interest. The
carrying values at December 31, 2010 and 2009 approximate fair value.




Non-Interest-Bearing Deposits



The fair
value of non-interest-bearing deposits was estimated using a discounted cash
flow method. 




Interest-Bearing Deposits



The fair
values of money market and savings accounts were the amounts payable on demand
at December 31, 2010 and 2009, and therefore carrying value approximates fair
value. The fair value of other interest-bearing deposits, including certificates
of deposit, was calculated by discounting the future cash flows using discount
rates based on the expected current market rates for similar products with
similar remaining terms.




Liabilities Subordinated to Claims of General Creditors



The fair
value of subordinated debt was measured using the interest rates commensurate
with borrowings of similar terms. 



These fair
value disclosures represent our best estimates based on relevant market
information and information about the financial instruments. Fair value
estimates are based on judgments regarding future expected losses, current
economic conditions, risk characteristics of the various instruments, and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in the above methodologies and assumptions could
significantly affect the estimates.



107










NOTE 7
- Trading Securities Owned and Trading Securities Sold, But Not Yet Purchased



The
components of trading securities owned and trading securities sold, but not yet
purchased, at December 31, 2010 and 2009, are as follows (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31,

		
		

		2010
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		


		Trading securities owned:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government agency securities
		
		


		 
		
		


		$
		
		


		86,882
		
		


		 
		
		


		$
		
		


		158,724
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		 
		
		


		9,038
		
		


		 
		
		


		 
		
		


		20,254
		
		


		 
	
	
		
		


		Corporate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed income securities
		
		


		 
		
		


		 
		
		


		221,145
		
		


		 
		
		


		 
		
		


		209,950
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		46,877
		
		


		 
		
		


		 
		
		


		18,505
		
		


		 
	
	
		
		


		State and

		municipal securities
		
		


		 
		
		


		 
		
		


		80,228
		
		


		 
		
		


		 
		
		


		47,458
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		444,170
		
		


		 
		
		


		$
		
		


		454,891
		
		


		 
	
	
		
		


		Trading securities sold, but not yet purchased:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S.
		government securities
		
		


		 
		
		


		$
		
		


		664
		
		


		 
		
		


		$
		
		


		127,953
		
		


		 
	
	
		
		


		U.S.
		government agency securities
		
		


		 
		
		


		 
		
		


		131,561
		
		


		 
		
		


		 
		
		


		1,537
		
		


		 
	
	
		
		


		Corporate securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Fixed income securities
		
		


		 
		
		


		 
		
		


		61,026
		
		


		 
		
		


		 
		
		


		122,491
		
		


		 
	
	
		
		


		Equity securities
		
		


		 
		
		


		 
		
		


		6,800
		
		


		 
		
		


		 
		
		


		25,057
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		89
		
		


		 
		
		


		 
		
		


		332
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		200,140
		
		


		 
		
		


		$
		
		


		277,370
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



At
December 31, 2010 and 2009, trading securities owned in the amount of $272,172
and $287,683, respectively, were pledged as collateral for our repurchase
agreements and short-term borrowings.



Trading
securities sold, but not yet purchased, represent obligations of our company to
deliver the specified security at the contracted price, thereby creating a
liability to purchase the security in the market at prevailing prices. We are
obligated to acquire the securities sold short at prevailing market prices,
which may exceed the amount reflected in the consolidated statements of
financial condition.


108










NOTE 8 -
Available-for-Sale and Held-to-Maturity Securities



The
following tables provide a summary of the amortized cost and fair values of the
available-for-sale securities and held-to-maturity securities at December 31,
2010 and 2009 (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Gross unrealized
		

		
		

		gains  

		(1)
		
		


		 
		
		


		Gross unrealized losses  

		(1)
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
	
	
		
		

		

		Available-for-sale
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government securities
		
		


		 
		
		


		$
		
		


		24,972
		
		


		 
		
		


		$
		
		


		58
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		25,030
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		26,678
		
		


		 
		
		


		 
		
		


		727
		
		


		 
		
		


		 
		
		


		(1,062
		
		


		)
		
		


		 
		
		


		26,343
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		692,922
		
		


		 
		
		


		 
		
		


		6,938
		
		


		 
		
		


		 
		
		


		(2,697
		
		


		)
		
		


		 
		
		


		697,163
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		29,319
		
		


		 
		
		


		 
		
		


		744
		
		


		 
		
		


		 
		
		


		(790
		
		


		)
		
		


		 
		
		


		29,273
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		66,912
		
		


		 
		
		


		 
		
		


		1,212
		
		


		 
		
		


		 
		
		


		(128
		
		


		)
		
		


		 
		
		


		67,996
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		153,523
		
		


		 
		
		


		 
		
		


		1,705
		
		


		 
		
		


		 
		
		


		(327
		
		


		)
		
		


		 
		
		


		154,901
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		11,331
		
		


		 
		
		


		 
		
		


		677
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		12,008
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		1,005,657
		
		


		 
		
		


		$
		
		


		12,061
		
		


		 
		
		


		$
		
		


		(5,004
		
		


		)
		
		


		$
		
		


		1,012,714
		
		


		 
	
	
		
		

		

		Held-to-maturity  

		(2)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Municipal auction rate securities
		
		


		 
		
		


		$
		
		


		43,719
		
		


		 
		
		


		$
		
		


		3,803
		
		


		 
		
		


		$
		
		


		(171
		
		


		)
		
		


		$
		
		


		47,351
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		8,921
		
		


		 
		
		


		 
		
		


		198
		
		


		 
		
		


		 
		
		


		(3,486
		
		


		)
		
		


		 
		
		


		5,633
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		52,640
		
		


		 
		
		


		$
		
		


		4,001
		
		


		 
		
		


		$
		
		


		(3,657
		
		


		)
		
		


		$
		
		


		52,984
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Gross unrealized
		

		
		

		gains  

		(1)
		
		


		 
		
		


		Gross unrealized losses  

		(1)
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
	
	
		
		

		

		Available-for-sale
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		U.S. government securities
		
		


		 
		
		


		$
		
		


		998
		
		


		 
		
		


		$
		
		


		13
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		1,011
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		 
		
		


		960
		
		


		 
		
		


		 
		
		


		32
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		992
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		432,820
		
		


		 
		
		


		 
		
		


		1,880
		
		


		 
		
		


		 
		
		


		(1,681
		
		


		)
		
		


		 
		
		


		433,019
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		39,905
		
		


		 
		
		


		 
		
		


		683
		
		


		 
		
		


		 
		
		


		(2,122
		
		


		)
		
		


		 
		
		


		38,466
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		47,274
		
		


		 
		
		


		 
		
		


		683
		
		


		 
		
		


		 
		
		


		(317
		
		


		)
		
		


		 
		
		


		47,640
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		40,788
		
		


		 
		
		


		 
		
		


		2,102
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		42,890
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		 
		
		


		13,235
		
		


		 
		
		


		 
		
		


		1,235
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		14,470
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		575,980
		
		


		 
		
		


		$
		
		


		6,628
		
		


		 
		
		


		$
		
		


		(4,120
		
		


		)
		
		


		$
		
		


		578,488
		
		


		 
	
	
		
		

		

		Held-to-maturity  

		(2)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Asset-backed securities
		
		


		 
		
		


		$
		
		


		7,574
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(3,298
		
		


		)
		
		


		$
		
		


		4,276
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1) 


Unrealized
gains/(losses) related to available-for-sale securities are reported in
accumulated other comprehensive income.



(2) 



Held-to-maturity securities are carried in the consolidated statements of
financial condition at amortized cost, and the changes in the value of these
securities, other than impairment charges, are not reported on the consolidated
financial statements.



109










During the
year ended December 31, 2010, available-for-sale securities with an aggregate
par value of $154,212 were called by the issuing agencies or matured, resulting
in no gains or losses recorded through the consolidated statement of operations.
Additionally, during the year ended December 31, 2010, Stifel Bank received
principal payments on mortgage-backed securities of $154,740. During the years
ended December 31, 2010 and 2009, unrealized gains, net of deferred taxes, of
$3,301 and $6,244, respectively, were recorded in accumulated other
comprehensive income in the consolidated statements of financial condition.


The table
below summarizes the amortized cost and fair values of debt securities, by
contractual maturity (in thousands). Expected maturities may differ
significantly from contractual maturities, as issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Available-for-sale
		
		


		 
		
		


		Held-to-maturity
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
		
		


		Amortized

		
		

		cost
		
		


		 
		
		


		Estimated

		
		

		fair value
		
		


		 
	
	
		
		

		

		Debt securities
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Within one year
		
		


		 
		
		


		$
		
		


		14,017
		
		


		 
		
		


		$
		
		


		14,067
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		After one year through three years
		
		


		 
		
		


		 
		
		


		101,513
		
		


		 
		
		


		 
		
		


		102,433
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		After three years through five years
		
		


		 
		
		


		 
		
		


		71,794
		
		


		 
		
		


		 
		
		


		72,262
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		After five years through ten years
		
		


		 
		
		


		 
		
		


		5,446
		
		


		 
		
		


		 
		
		


		6,115
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		After ten years
		
		


		 
		
		


		 
		
		


		23,734
		
		


		 
		
		


		 
		
		


		23,405
		
		


		 
		
		


		 
		
		


		52,640
		
		


		 
		
		


		 
		
		


		52,984
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Mortgage-backed securities
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		After three years through five years
		
		


		 
		
		


		 
		
		


		9,813
		
		


		 
		
		


		 
		
		


		10,119
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		After five years through ten years
		
		


		 
		
		


		 
		
		


		71,238
		
		


		 
		
		


		 
		
		


		71,006
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		After ten years
		
		


		 
		
		


		 
		
		


		708,102
		
		


		 
		
		


		 
		
		


		713,307
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		1,005,657
		
		


		 
		
		


		$
		
		


		1,012,714
		
		


		 
		
		


		$
		
		


		52,640
		
		


		 
		
		


		$
		
		


		52,984
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



The
carrying value of securities pledged as collateral to secure public deposits and
other purposes was $111,626 and $76,502 at December 31, 2010 and 2009,
respectively. 



Certain
investments in the available-for-sale portfolio at December 31, 2010, are
reported in the consolidated statements of financial condition at an amount less
than their amortized cost. The total fair value of these investments at December
31, 2010, was $484,622,
which was 47.9% of our available-for-sale investment portfolio. The amortized
cost basis of these investments was $489,626 at December 31, 2010. The declines
in the available-for-sale portfolio primarily resulted from changes in interest
rates and liquidity issues that have had a pervasive impact on the market.



Our
investment in a held-to-maturity asset-backed security consists of pools of
trust preferred securities related to banks. Unrealized losses in our
asset-backed security was caused primarily by: 1) illiquid markets for
collateralized debt obligations, 2) global disruptions in the credit markets, 3)
increased supply of collateralized debt obligation secondary market securities
from distressed sellers, and 4) difficult times in the banking sector, which has
led to a significant amount of bank failures.



110









The
following table is a summary of the amount of gross unrealized losses and the
estimated fair value by length of time that the securities have been in an
unrealized loss position at December 31, 2010 (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		Less than 12 months
		
		


		 
		
		


		12 months or more
		
		


		 
		
		


		Total
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		Gross unrealized losses
		
		


		 
		
		


		Estimated fair value
		
		


		 
		
		


		Gross unrealized losses
		
		


		 
		
		


		Estimated fair value
		
		


		 
		
		


		Gross unrealized losses
		
		


		 
		
		


		Estimated fair value
		
		


		 
	
	
		
		

		

		Available-for-sale
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		State and municipal securities
		
		


		 
		
		


		$
		
		


		(1,062
		
		


		)
		
		


		$
		
		


		13,923
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		


		(1,062
		
		


		)
		
		


		$
		
		


		13,923
		
		


		 
	
	
		
		


		Mortgage-backed securities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Agency
		
		


		 
		
		


		 
		
		


		(2,697
		
		


		)
		
		


		 
		
		


		391,156
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(2,697
		
		


		)
		
		


		 
		
		


		391,156
		
		


		 
	
	
		
		


		Non-agency
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(790
		
		


		)
		
		


		 
		
		


		10,024
		
		


		 
		
		


		 
		
		


		(790
		
		


		)
		
		


		 
		
		


		10,024
		
		


		 
	
	
		
		


		Commercial
		
		


		 
		
		


		 
		
		


		(128
		
		


		)
		
		


		 
		
		


		23,047
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(128
		
		


		)
		
		


		 
		
		


		23,047
		
		


		 
	
	
		
		


		Corporate fixed income securities
		
		


		 
		
		


		 
		
		


		(327
		
		


		)
		
		


		 
		
		


		46,472
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(327
		
		


		)
		
		


		 
		
		


		46,472
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		(4,214
		
		


		)
		
		


		$
		
		


		474,598
		
		


		 
		
		


		$
		
		


		(790
		
		


		)
		
		


		$
		
		


		10,024
		
		


		 
		
		


		$
		
		


		(5,004
		
		


		)
		
		


		$
		
		


		484,622
		
		


		 
	
	


 Other-Than-Temporary Impairment



We
evaluate our investment securities portfolio on a quarterly basis for
other-than-temporary impairment ("OTTI"). We assess whether OTTI has occurred
when the fair value of a debt security is less than the amortized cost basis at
the balance sheet date. Under these circumstances, OTTI is considered to have
occurred: (1) if we intend to sell the security, (2) if it is more likely than
not we will be required to sell the security before recovery of its amortized
cost basis, or (3) the present value of the expected cash flows is not
sufficient to recover the entire amortized cost basis. For securities that we do
not expect to sell, or will not be required to sell, credit-related OTTI,
represented by the expected loss in principal, is recognized in earnings, while
non-credit-related OTTI is recognized in accumulated other comprehensive income.
For securities which we expect to sell, all OTTI is recognized in earnings.




Non-credit-related OTTI results from several factors, including increased
liquidity spreads and extension of the security. Presentation of OTTI is made in
the income statement on a gross basis with a reduction for the amount of OTTI
recognized in accumulated other comprehensive income. We applied the related
OTTI guidance on the debt security types described below.



Pooled
trust preferred securities represent collateralized debt obligations ("CDO")
backed by a pool of debt securities issued by financial institutions. The
collateral generally consisted of trust preferred securities and subordinated
debt securities issued by banks, bank holding companies, and insurance
companies. A full cash flow analysis was used to estimate fair values and assess
impairment for each security within this portfolio. We utilized an internal
resource with industry experience in pooled trust preferred securities
valuations to provide assistance in estimating the fair value and expected cash
flows for each security in this portfolio. Relying on cash flows was necessary
because there was a lack of observable transactions in the market and many of
the original sponsors or dealers for these securities were no longer able to
provide a fair value that was compliant with Topic 820.



Based on
the evaluation, we recognized a credit-related other-than-temporary impairment
of $897
through earnings for the year ended December 31, 2010. During the year ended
December 31, 2010, the remaining balance of other comprehensive loss related to
the CDO was written off and, consequently, we reduced the amortized cost of the
security. If certain loss thresholds are exceeded, this bond would experience an
event of default that would allow the senior class to liquidate the collateral
securing this investment, which could adversely impact our valuation.



As of
December 31, 2010, management has evaluated all other investment securities with
unrealized losses and all non-marketable securities for impairment. The
unrealized losses were primarily the result of wider liquidity spreads on
asset-backed securities and, additionally, increased market volatility on
non-agency mortgage and asset-backed securities that are backed by certain
mortgage loans. The fair values of these assets have been impacted by various
market conditions. In addition, the expected average lives of the asset-backed
securities backed by trust preferred securities have been extended, due to
changes in the expectations of when the underlying securities would be repaid.
The contractual terms and/or cash flows of the investments do not permit the
issuer to settle the securities at a price less than the amortized cost. We have
reviewed our asset-backed portfolio and do not believe there is additional OTTI
from these securities other than what has already been recorded. 



As the
decline in fair value of the securities is not attributable to credit quality
but rather to changes in interest rates and the liquidity issues that have had a
pervasive impact on the market and because we do not have the intent to sell
these securities and it is not likely we would be required to sell these
securities until a fair value recovery or maturity, we do not consider these
securities to be other-than-temporarily impaired as of December 31, 2010.


111










NOTE 9
- Bank Loans



The
following table presents the balance and associated percentage of each major
loan category in Stifel Bank's loan portfolio at December 31, 2010 and 2009 
(in thousands, except percentages):


	
		
		


		 
		
		


		 
		
		


		December 31, 2010
		
		


		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Balance
		
		


		 
		
		


		Percent
		
		


		 
		
		


		 
		
		


		Balance
		
		


		 
		
		


		Percent
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Consumer  (1)
		
		


		 
		
		


		$
		
		


		266,806
		
		


		 
		
		


		 
		
		


		68.2
		
		


		%
		
		


		 
		
		


		$
		
		


		227,436
		
		


		 
		
		


		 
		
		


		67.8
		
		


		%
	
	
		
		


		Residential real estate
		
		


		 
		
		


		 
		
		


		49,550
		
		


		 
		
		


		 
		
		


		12.7
		
		


		 
		
		


		 
		
		


		 
		
		


		52,086
		
		


		 
		
		


		 
		
		


		15.5
		
		


		 
	
	
		
		


		Commercial  
		
		


		 
		
		


		 
		
		


		41,965
		
		


		 
		
		


		 
		
		


		10.7
		
		


		 
		
		


		 
		
		


		 
		
		


		11,294
		
		


		 
		

		 
		
		


		3.4
		
		


		 
	
	
		
		


		Home equity lines of credit
		
		


		 
		
		


		 
		
		


		30,966
		
		


		 
		
		


		 
		
		


		7.9
		
		


		 
		
		


		 
		
		


		 
		
		


		33,369
		
		


		 
		
		


		 
		
		


		10.0
		
		


		 
	
	
		
		


		Commercial real estate
		
		


		 
		
		


		 
		
		


		1,637
		
		


		 
		
		


		 
		
		


		0.4
		
		


		 
		
		


		 
		
		


		 
		
		


		10,152
		
		


		 
		
		


		 
		
		


		3.0
		
		


		 
	
	
		
		


		Construction and land
		
		


		 
		
		


		 
		
		


		524
		
		


		 
		
		


		 
		
		


		0.1
		
		


		 
		
		


		 
		
		


		 
		
		


		952
		
		


		 
		
		


		 
		
		


		0.3
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		391,448
		
		


		 
		
		


		 
		
		


		100.0
		
		


		%
		
		


		 
		
		


		 
		
		


		335,289
		
		


		 
		
		


		 
		
		


		100.0
		
		


		%
	
	
		
		


		Unamortized loan origination costs, net of loan fees

		
		


		 
		
		


		392
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		1,556
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Loans in process
		
		


		 
		
		


		 
		
		


		233
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		14
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Allowance for loan losses
		
		


		 
		
		


		 
		
		


		(2,331
		
		


		)
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		(1,702
		
		


		)
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		389,742
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		335,157
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1) 


Includes
stock-secured loans of $266,133 and $226,527 at December 31, 2010 and 2009,
respectively.



Changes in
the allowance for loan losses at Stifel Bank were as follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Allowance for loan losses, beginning of period
		
		


		 
		
		


		$
		
		


		1,702
		
		


		 
		
		


		$ 
		
		


		2,448
		
		


		 
		
		


		$
		
		


		1,685
		
		


		 
	
	
		
		


		Provision for loan losses
		
		


		 
		
		


		 
		
		


		460
		
		


		 
		
		


		 
		
		


		604
		
		


		 
		
		


		 
		
		


		1,923
		
		


		 
	
	
		
		


		Charge-offs:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Real estate construction loans
		
		


		 
		
		


		 
		
		


		(216
		
		


		)
		
		


		 
		
		


		(213
		
		


		)
		
		


		 
		
		


		(414
		
		


		)
	
	
		
		


		Construction and land
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(859
		
		


		)
		
		


		 
		
		


		(493
		
		


		)
	
	
		
		


		Commercial real estate
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(294
		
		


		)
		
		


		 
		
		


		(253
		
		


		)
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		(2
		
		


		)
		
		


		 
		
		


		(25
		
		


		)
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Total charge-offs
		
		


		 
		
		


		 
		
		


		(218
		
		


		)
		
		


		 
		
		


		(1,391
		
		


		)
		
		


		 
		
		


		(1,160
		
		


		)
	
	
		
		


		Recoveries
		
		


		 
		
		


		 
		
		


		387
		
		


		 
		
		


		 
		
		


		41
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Allowance for loan losses, end of period
		
		


		 
		
		


		$
		
		


		2,331
		
		


		 
		
		


		$
		
		


		1,702
		
		


		 
		
		


		$
		
		


		2,448
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



At
December 31, 2010 and 2009, Stifel Bank had mortgage loans held for sale of
$86,344 and $91,117, respectively. Included in loans held for sale at December
31, 2009, were loans expected to be assumed as part of the sale of Stifel Bank's
branch office of $33,129. See Note 4 for further discussion. For the years ended
December 31, 2010, 2009, and 2008, Stifel Bank recognized a gain of $8,263,
$4,138, and $2,089, respectively, from the sale of loans originated for sale,
net of fees and costs to originate these loans.


112










A loan is
impaired when it is probable that interest and principal payments will not be
made in accordance with the contractual terms of the loan agreement.

At
December 31, 2010, Stifel Bank had $1,132 of nonaccrual loans that were more
than 90 days past due, for which there was a specific allowance of $165.
Further, Stifel Bank had $388 in troubled debt restructurings at December 31,
2010.  At December 31, 2009, Stifel Bank had $1,368 of nonaccrual loans that
were more than 90 days past due, for which there was a specific reserve of $47.
In addition, there were $533 in troubled debt restructurings at December 31,
2009.
The gross
interest income related to impaired loans, which would have been recorded had
these loans been current in accordance with their original terms, and the
interest income recognized on these loans during the year, were insignificant to
the consolidated financial statements.



At
December 31, 2010 and 2009, Stifel Bank had loans outstanding to its executive
officers, directors, and their affiliates in the amount of $857 and $590,
respectively, and loans outstanding to other Stifel Financial Corp. executive
officers, directors, and their affiliates in the amount of $3,484
and $994, respectively. Such loans and other extensions of credit were made in
the ordinary course of business and were made on substantially the same terms
(including interest rates and collateral requirements) as those prevailing at
the time for comparable transactions with other persons.



NOTE 10
- Fixed Assets



The
following is a summary of fixed assets as of December 31, 2010 and 2009 (in
thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31
		

		
		

		 2010
		
		


		 
		
		


		December 31,
		



		 2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Furniture and equipment
		
		


		 
		
		


		$
		
		
116,650
		
		


		 
		
		


		$
		
		


		92,126
		
		


		 
	
	
		
		


		Building and leasehold improvements
		
		


		 
		
		


		 
		
		


		51,046
		
		


		 
		
		


		 
		
		


		41,434
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		
167,696
		
		


		 
		
		


		 
		
		


		133,560
		
		


		 
	
	
		
		


		Less accumulated depreciation and amortization
		
		


		 
		
		
 
		
		


		(96,198
		
		


		)
		
		


		 
		
		


		(71,445
		
		


		)
	
	
		
		


		 
		
		


		 
		
		


		$
		
		
71,498
		
		


		 
		
		


		$
		
		


		62,115
		
		


		 
	




For the
years ended December 31, 2010, 2009, and 2008, depreciation and amortization of
owned furniture and
equipment, and leasehold improvements totaled $21,749, $17,605, and $12,948,
respectively, and are included
in occupancy and equipment rental in the consolidated statements of operations.


113










NOTE 11
- Goodwill and Intangible Assets



Goodwill
impairment is tested at the reporting unit level, which is an operating segment
or one level below an operating segment on an annual basis. Our reporting units
are Private Client Group, Fixed Income Capital Markets, Equity Capital Markets,
and Stifel Bank. The goodwill impairment analysis is a two-step test. The first
step, used to identify potential impairment, involves comparing each reporting
unit's fair value to its carrying value, including goodwill. If the fair value
of a reporting unit exceeds its carrying value, applicable goodwill is
considered not to be impaired. If the carrying value exceeds fair value, there
is an indication of impairment and the second step is performed to measure the
amount of impairment. No indicators of impairment were identified during our
annual impairment testing as of July 31, 2010. 



The
carrying amount of goodwill and intangible assets attributable to each of our
reporting units is presented in the following table (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
		
		


		Net additions
		
		


		 
		
		


		Impairment losses
		
		


		 
		
		


		December 31, 2010
		
		


		 
	
	
		
		

		

		Goodwill
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Global Wealth Management
		
		


		 
		
		


		$
		
		


		112,420
		
		


		 
		
		


		$
		
		
16,104
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		
128,524
		
		


		 
	
	
		
		


		Institutional Group
		
		


		 
		
		


		 
		
		


		54,305
		
		


		 
		
		


		 
		
		
119,090
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		
173,395
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		166,725
		
		


		 
		
		


		$
		
		
135,194
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		$
		
		
301,919
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



 


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		December 31, 2009
		
		


		 
		
		


		Net additions
		
		


		 
		
		


		Net deductions
		
		


		 
		
		


		Amortization
		
		


		 
		
		


		December 31, 2010
		
		


		 
	
	
		
		

		

		Intangible assets
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Global Wealth Management
		
		


		 
		
		


		$
		
		


		21,356
		
		


		 
		
		


		$
		
		


		4,150
		
		


		 
		
		


		$
		
		


		(1,060
		
		


		)
		
		


		$
		
		


		(2,983
		
		


		)
		
		


		$
		
		


		21,463
		
		


		 
	
	
		
		


		Institutional Group
		
		


		 
		
		


		 
		
		


		3,292
		
		


		 
		
		


		 
		
		


		12,375
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(2,535
		
		


		)
		
		


		 
		
		


		13,132
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		24,648
		
		


		 
		
		


		$
		
		


		16,525
		
		


		 
		
		


		$
		
		


		(1,060
		
		


		)
		
		


		$
		
		


		(5,518
		
		


		)
		
		


		$
		
		


		34,595
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



The
additions to goodwill and intangible assets during the year ended December 31,
2010 are primarily attributable to the acquisition of TWPG. In connection with
the merger with TWPG, we recorded $16,150 of intangible assets, consisting of
customer relationships ($6,040), trade name ($7,880), and investment banking
backlog ($2,230). The customer relationships and trade name will be amortized
over a weighted average life of 9 years and 15 years, respectively. The
investment banking backlog will be amortized over their estimated lives, which
we expect to be within the next 6 months. See Note 3 for additional information
regarding our merger with TWPG.



114











Amortizable intangible assets consist of acquired customer relationships, trade
name, non-compete agreements, and investment banking backlog that are amortized
to expense over their contractual or determined useful lives. Intangible assets
subject to amortization as of December 31, 2010 and 2009 were as follows (in
thousands):



	
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			December 31, 2010
			
			


			 
			
			


			December 31, 2009
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			Gross carrying value
			
			


			 
			
			


			Accumulated Amortization
			
			


			 
			
			


			Gross carrying value
			
			


			 
			
			


			Accumulated Amortization
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Customer relationships
			
			


			 
			
			


			$
			
			


			37,068
			
			


			 
			
			


			$
			
			


			11,015
			
			


			 
			
			


			$
			
			


			30,754
			
			


			 
			
			


			$
			
			


			7,584
			
			


			 
		
		
			
			


			Trade name
			
			


			 
			
			


			 
			
			


			7,981
			
			


			 
			
			


			 
			
			


			364
			
			


			 
			
			


			 
			
			

			

			-
			
			


			 
			
			


			 
			
			


			-
			
			


			 
		
		
			
			


			Non-compete agreement
			
			


			 
			
			


			 
			
			


			2,441
			
			


			 
			
			


			 
			
			


			2,238
			
			


			 
			
			


			 
			
			


			2,441
			
			


			 
			
			


			 
			
			


			2,023
			
			


			 
		
		
			
			


			Investment banking backlog
			
			


			 
			
			


			 
			
			


			2,230
			
			


			 
			
			


			 
			
			


			1,508
			
			


			 
			
			


			 
			
			


			-
			
			


			 
			
			


			 
			
			


			-
			
			


			 
		
		
			
			


			Core deposits  (1)
			
			


			 
			
			


			 
			
			


			-
			
			


			 
			
			


			 
			
			


			-
			
			


			 
			
			


			 
			
			


			2,157
			
			


			 
			
			


			 
			
			


			1,097
			
			


			 
		
		
			
			


			 
			
			


			 
			
			


			$
			
			


			49,720
			
			


			 
			
			


			$
			
			


			15,125
			
			


			 
			
			


			$
			
			


			35,352
			
			


			 
			
			


			$
			
			


			10,704
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
	




(1)
The gross carrying amount and accumulated amortization for core deposit
intangibles at December 31, 2010, have been reduced by $2,157 and $1,097,
respectively, related to the sale of certain assets and the transfer of certain
liabilities of Stifel Bank's branch office as described in Note 4 in the notes
to our consolidated financial statements.




Amortization expense related to intangible assets was $5,518, $2,762, and $3,081
for the years ended December 31, 2010, 2009, and 2008, respectively. 



The
weighted-average remaining lives of the following intangible assets at December
31, 2010 are: customer relationships, 7.7 years; trade name, 14.5 years; and
non-compete agreements, 0.9 years. The investment banking backlog will be
amortized over their estimated lives, which we expect to be within the next 6
months. As of December 31, 2010, we expect amortization expense in future
periods to be as follows (in thousands):


	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Fiscal year
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		2011
		
		


		 
		
		


		$
		
		


		5,219
		
		


		 
	
	
		
		


		2012
		
		


		 
		
		


		 
		
		


		3,909
		
		


		 
	
	
		
		


		2013
		
		


		 
		
		


		 
		
		


		3,482
		
		


		 
	
	
		
		


		2014
		
		


		 
		
		


		 
		
		


		3,185
		
		


		 
	
	
		
		


		2015
		
		


		 
		
		


		 
		
		


		2,853
		
		


		 
	
	
		
		


		Thereafter
		
		


		 
		
		


		 
		
		


		15,947
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		$
		
		


		34,595
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



NOTE 12
- Short-Term Borrowings



Our
short-term financing is generally obtained through the use of bank loans and
securities lending arrangements. We borrow from various banks on a demand basis
with company-owned and customer securities pledged as collateral. The value of
customer-owned securities used as collateral is not reflected in the
consolidated statements of financial condition. We maintain available ongoing
credit arrangements with banks that provided a peak daily borrowing of $313,500
during the year ended December 31, 2010. There are no compensating balance
requirements under these arrangements. At December 31, 2010, short-term
borrowings from banks were $109,600
at an average rate of
1.05%,
which were collateralized by company-owned securities valued at $162,577.
At December 31, 2009, short-term borrowings from banks were $90,800 at an
average rate of 1.04%, which were collateralized by company-owned securities
valued at $165,150. The average bank borrowing was $108,784,

$107,383, and $132,660 for the years ended December 31, 2010, 2009, and 2008,
respectively, at weighted average daily interest rates of
1.01%,

0.99%, and 2.28%, respectively. 



At
December 31, 2010 and 2009, Stifel Nicolaus had a stock loan balance of $27,907
and
$16,667,
respectively, at weighted average daily interest rates of
0.26% and

0.33%, respectively. The average outstanding securities lending arrangements
utilized in financing activities were $69,507,

$53,110, and $105,424 during the years ended December 31, 2010, 2009, and 2008,
respectively, at weighted average daily effective interest rates of
1.54%,

1.07%, and 2.47%, respectively. Customer-owned securities were utilized in these
arrangements.



115










NOTE 13
- Bank Deposits



Deposits
consist of money market and savings accounts, certificates of deposit, and
demand deposits. Deposits at December 31, 2010 and 2009 were as follows (in
thousands):


	
		
		


		 
		
		


		 
		
		


		December 31,
		



		2010
		
		


		 
		
		


		December 31,
		



		2009
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Money market and savings accounts
		
		


		 
		
		


		$ 
		
		


		1,590,663
		
		


		 
		
		


		$
		
		


		993,264
		
		


		 
	
	
		
		


		Demand deposits (interest-bearing)
		
		


		 
		
		


		 
		
		


		22,031
		
		


		 
		
		


		 
		
		


		16,181
		
		


		 
	
	
		
		


		Demand deposits (non-interest-bearing)
		
		


		 
		
		


		 
		
		


		8,197
		
		


		 
		
		


		 
		
		


		19,521
		
		


		 
	
	
		
		


		Certificates of deposit
		
		


		 
		
		


		 
		
		


		2,677
		
		


		 
		
		


		 
		
		


		18,245
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$ 
		
		


		1,623,568
		
		


		 
		
		


		$
		
		


		1,047,211
		
		


		 
	



The
weighted average interest rate on deposits was 0.2% and 0.5% at December 31,
2010 and 2009, respectively.



Scheduled
maturities of certificates of deposit at December 31, 2010 and 2009 were as
follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31,
		

		
		

		2010
		
		


		 
		
		


		December 31,
		



		2009
		
		


		 
	
	
		
		


		Certificates of deposit, less than $100:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Within one year
		
		


		 
		
		


		$
		
		


		198
		
		


		 
		
		


		$
		
		


		9,775
		
		


		 
	
	
		
		


		One to three years
		
		


		 
		
		


		 
		
		


		577
		
		


		 
		
		


		 
		
		


		514
		
		


		 
	
	
		
		


		Over three years
		
		


		 
		
		


		 
		
		


		190
		
		


		 
		
		


		 
		
		


		250
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		965
		
		


		 
		
		


		$
		
		


		10,539
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Certificates of deposit, $100 and greater:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Within one year
		
		


		 
		
		


		$ 
		
		


		692
		
		


		 
		
		


		$
		
		


		5,936
		
		


		 
	
	
		
		


		One to three years
		
		


		 
		
		


		 
		
		


		1,020
		
		


		 
		
		


		 
		
		


		1,217
		
		


		 
	
	
		
		


		Over three years
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		553
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		1,712
		
		


		 
		
		


		$
		
		


		7,706
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		2,677
		
		


		 
		
		


		$
		
		


		18,245
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



At
December 31, 2010 and 2009, the amount of deposits includes deposits of related
parties, including $1,609,724 and $1,008,593, respectively, of brokerage
customers' deposits from Stifel Nicolaus, and interest-bearing and time deposits
of executive officers, directors, and their affiliates of $405 and $391,
respectively. Such deposits were made in the ordinary course of business and
were made on substantially the same terms (including interest rates) as those
prevailing at the time for comparable transactions with other persons.



116










NOTE 14 -
Federal Home Loan Bank Advances



At
December 31, 2009, Stifel Bank had $2,000 of credit extended from the Federal
Home Loan Bank ("FHLB"), consisting of advances. The FHLB advance matured on
April 30, 2010. The average FHLB advances outstanding were $652, $3,304, and
$10,739 during the years ended December 31, 2010, 2009, and 2008, respectively,
at weighted average daily interest rates of 3.22%, 3.12%, and 2.56%,
respectively. 

NOTE 15
- Debentures to Stifel Financial Capital Trusts 



On August
12, 2005, we completed a private placement of $35,000 of 6.38% Cumulative Trust
Preferred Securities. The trust preferred securities were offered by Stifel
Financial Capital Trust II (the "Trust II"), a non-consolidated wholly owned
subsidiary of our company. The trust preferred securities mature on September
30, 2035, but may be redeemed by our company, and in turn, the Trust II would
call the debenture beginning September 30, 2010. The Trust II requires quarterly
distributions of interest to the holders of the trust preferred securities.
Distributions will be payable at a fixed interest rate equal to 6.38% per annum
from the issue date to September 30, 2010, and then will be payable at a
floating interest rate equal to three-month London Interbank Offered Rate
("LIBOR") plus 1.70% per annum. The trust preferred securities represent an
indirect interest in a junior subordinated debenture purchased from our company
by the Trust II. The debenture bears the same terms as the trust preferred
securities and is presented as Debenture to Stifel Financial Capital Trust II in
the consolidated statements of financial condition.



On March
30, 2007, we completed a private placement of $35,000 of 6.79% Cumulative Trust
Preferred Securities. The trust preferred securities were offered by Stifel
Financial Capital Trust III (the "Trust III"), a non-consolidated wholly owned
subsidiary of our company. The trust preferred securities mature on June 6,
2037, but may be redeemed by our company, and in turn, Trust III would call the
debenture beginning June 6, 2012. Trust III requires quarterly distributions of
interest to the holders of the trust preferred securities. Distributions will be
payable quarterly in arrears at a fixed interest rate equal to 6.79% per annum
from the issue date to June 6, 2012, and then will be payable at a floating
interest rate equal to three-month LIBOR plus 1.85% per annum. The trust
preferred securities represent an indirect interest in a junior subordinated
debenture purchased from our company by Trust III. The debenture bears the same
terms as the trust preferred securities and is presented as Debenture to Stifel
Financial Capital Trust III in the consolidated statements of financial
condition. The net proceeds from the sale of the Junior Subordinated Debentures
to Trust III were utilized to fund the acquisition of Stifel Bank.



On June
28, 2007, we completed a private placement of $35,000 of 6.78% Cumulative Trust
Preferred Securities. The trust preferred securities were offered by Stifel
Financial Capital Trust IV (the "Trust IV"), a non-consolidated wholly owned
subsidiary of our company. The trust preferred securities mature on September 6,
2037, but may be redeemed by our company, and in turn, Trust IV would call the
debenture beginning September 6, 2012. Trust IV requires quarterly distributions
of interest to the holders of the trust preferred securities. Distributions will
be payable quarterly in arrears at a fixed interest rate equal to 6.78% per
annum from the issue date to September 6, 2012, and then will be payable at a
floating interest rate equal to three-month LIBOR plus 1.85% per annum. The
trust preferred securities represent an indirect interest in a junior
subordinated debenture purchased from our company by Trust IV. The debenture
bears the same terms as the trust preferred securities and is presented as
Debenture to Stifel Financial Capital Trust IV in the consolidated statements of
financial condition. The net proceeds from the sale of the Junior Subordinated
Debentures to Trust IV were used to call, on July 13, 2007, our $34,500 9%
Cumulative Trust Preferred Securities, issued through Stifel Financial Capital
Trust I on April 25, 2002 and callable June 30, 2007. 



On
November 4, 2008, we issued 142,196 shares of our common stock in exchange for
$12,500 par value of 6.78% Cumulative Trust Preferred Securities, originally
offered and sold by Stifel Financial Capital Trust IV. As a result, we
extinguished $12,500 of our debenture to Stifel Financial Capital Trust IV in
2008 and recorded an approximate $6,700 gain before certain expenses and taxes
reflected in other revenues in the consolidated statements of operations.


117










NOTE 16
- Derivative Instruments and Hedging Activities




Stifel Bank uses interest rate swaps as part of its interest rate risk
management strategy. Interest rate swaps generally involve the exchange of fixed
and variable rate interest payments between two parties, based on a common
notional principal amount and maturity date with no exchange of underlying
principal amounts. Interest rate swaps designated as cash flow hedges involve
the receipt of variable amounts from a counterparty in exchange for our company
making fixed payments.
Our policy is not to offset fair value amounts recognized for derivative
instruments and fair value amounts recognized for the right to reclaim cash
collateral or the obligation to return cash collateral arising from derivative
instruments recognized at fair value executed with the same counterparty under
master netting arrangements.


The following table provides the notional values and fair values of Stifel
Bank's derivative instruments as of December 31, 2010 and 2009 (in thousands):



	
		
			
			

			

			 
			
			


			December 31, 2010
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			Asset derivatives
			
			


			 
			
			


			Liability derivatives
			
			


			 
		
		
			
			

			

			 
			
			


			Notional Value
			
			


			 
			
			


			Balance sheet location
			
			


			 
			
			


			Positive fair value
			
			


			 
			
			


			Balance sheet location
			
			


			 
			
			


			Negative fair value
			
			


			 
		
		
			
			

			

			Derivatives designated as hedging instruments under Topic 815:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Cash flow interest rate contracts
			
			


			$
			
			


			491,807
			
			


			 
			
			


			Other assets
			
			


			$
			
			


			-
			
			


			 
			
			


			Accounts payable and accrued expenses
			
			


			$
			
			


			(9,259
			
			


			)
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			 
			
			


			December 31, 2009
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			Asset derivatives
			
			


			 
			
			


			Liability derivatives
			
			


			 
		
		
			
			

			

			 
			
			


			Notional Value
			
			


			 
			
			


			Balance sheet location
			
			


			 
			
			


			Positive fair value
			
			


			 
			
			


			Balance sheet location
			
			


			 
			
			


			Negative fair value
			
			


			 
		
		
			
			

			

			Derivatives designated as hedging instruments under Topic 815:
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			


			Cash flow interest rate contracts
			
			


			$
			
			


			403,503
			
			


			 
			
			


			Other assets
			
			


			$
			
			


			157
			
			


			 
			
			


			Accounts payable and accrued expenses
			
			


			$
			
			


			(78
			
			


			)
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
	




118











Cash Flow Hedges




Stifel Bank has entered into interest rate swap agreements that effectively
modify its exposure to interest rate risk by converting floating rate debt to a
fixed rate debt over the next ten years. The agreements involve the receipt of
floating rate amounts in exchange for fixed rate interest payments over the life
of the agreement without an exchange of underlying principal amounts.




Any unrealized gains or losses related to cash flow hedging instruments are
reclassified from accumulated other comprehensive income into earnings in the
same period or periods during which the hedged forecasted transaction affects
earnings and are recorded in interest expense on the accompanying consolidated
statements of operations. Adjustments related to the ineffective portion of the
cash flow hedging instruments are recorded in other income or other operating
expense. There was no ineffectiveness recognized during the year ended December
31, 2010. 




Amounts reported in accumulated other comprehensive income related to
derivatives will be reclassified to interest expense as interest payments are
made on our variable rate deposits. During the next twelve months, the Company
estimates that $7,444 will be reclassified as an increase to interest expense. 



The following table shows the effect of our company's derivative instruments in
the consolidated statements of operations for the years ended December 31, 2010
and 2009 (in thousands):



	
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			 
			
			


			Year Ended December 31, 2010
			
			


			 
		
		
			
			

			

			 
			
			


			Loss recognized in OCI (effectiveness)
			
			


			 
			
			


			Location of loss reclassified from OCI into income
			
			


			 
			
			


			Loss reclassified from OCI into income
			
			


			 
			
			


			Location of loss recognized in OCI (ineffectiveness)
			
			


			 
			
			


			Loss recognized due to ineffectiveness
			
			


			 
		
		
			
			


			Cash flow interest rate contracts
			
			


			$
			
			


			12,411
			
			


			 
			
			


			Interest expense
			
			


			$
			
			


			3,073
			
			


			 
			
			


			None
			
			


			$
			
			


			-
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			

			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
		
			
			

			

			 
			
			


			Year Ended December 31, 2009
			
			


			 
		
		
			
			

			

			 
			
			


			Loss recognized in OCI (effectiveness)
			
			


			 
			
			


			Location of loss reclassified from OCI into income
			
			


			 
			
			


			Loss reclassified from OCI into income
			
			


			 
			
			


			Location of loss recognized in OCI (ineffectiveness)
			
			


			 
			
			


			Loss recognized due to ineffectiveness
			
			


			 
		
		
			
			


			Cash flow interest rate contracts
			
			


			$
			
			


			1,540
			
			


			 
			
			


			Interest expense
			
			


			$
			
			


			1,619
			
			


			 
			
			


			None
			
			


			$
			
			


			-
			
			


			 
		
		
			
			

			

			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
			
			


			 
		
	





We maintain a risk management strategy that incorporates the use of derivative
instruments to minimize significant unplanned fluctuations in earnings caused by
interest rate volatility. Our goal is to manage sensitivity to changes in rates
by hedging the maturity characteristics of Fed-funds-based affiliated deposits,
thereby limiting the impact on earnings. By using derivative instruments, we are
exposed to credit and market risk on those derivative positions. We manage the
market risk associated with interest rate contracts by establishing and
monitoring limits as to the types and degree of risk that may be undertaken.
Credit risk is equal to the extent of the fair value gain in a derivative if the
counterparty fails to perform. When the fair value of a derivative contract is
positive, this generally indicates that the counterparty owes our company and,
therefore, creates a repayment risk for our company. When the fair value of a
derivative contract is negative, we owe the counterparty and, therefore, have no
repayment risk.
See Note 6
in the notes to our consolidated financial statements for further discussion on
how we determine the fair value of our financial instruments.
We minimize the credit (or repayment) risk in derivative instruments by entering
into transactions with high-quality counterparties that are reviewed
periodically by senior management.



119










Credit
Risk-Related Contingency Features



We have
agreements with our derivative counterparties containing provisions where if we
default on any of our indebtedness, including default where repayment of the
indebtedness has not been accelerated by the lender, then we could also be
declared in default on our derivative obligations.



We have
agreements with certain of our derivative counterparties that contain provisions
where if our shareholders' equity declines below a specified threshold or if we
fail to maintain a specified minimum shareholders' equity, then we could be
declared in default on our derivative obligations.



Certain of
our agreements with our derivative counterparties contain provisions where if a
specified event or condition occurs that materially changes our creditworthiness
in an adverse manner, we may be required to fully collateralize our obligations
under the derivative instrument.




Regulatory Capital-Related Contingency Features




Certain of Stifel Bank's derivative instruments contain provisions that require
it to maintain its capital adequacy requirements. If Stifel Bank were to lose
its status as "adequately capitalized," it would be in violation of those
provisions, and the counterparties of the derivative instruments could request
immediate payment or demand immediate and ongoing full overnight
collateralization on derivative instruments in net liability positions.




As of
December 31, 2010, the fair value of derivatives in a net liability position,
which includes accrued interest but excludes any adjustment for nonperformance
risk, related to these agreements was $10,194. We have minimum collateral
posting thresholds with certain of our derivative counterparties and have posted
collateral of $16,694 against our obligations under these agreements. If we had
breached any of these provisions at December 31, 2010, we would have been
required to settle our obligations under the agreements at the termination
value.




Counterparty Risk




In the event of counterparty default, our economic loss may be higher than the
uncollateralized exposure of our derivatives if we were not able to replace the
defaulted derivatives in a timely fashion. We monitor the risk that our
uncollateralized exposure to each of our counterparties for interest rate swaps
will increase under certain adverse market conditions by performing periodic
market stress tests. These tests evaluate the potential additional
uncollateralized exposure we would have to each of these derivative
counterparties assuming changes in the level of market rates over a brief time
period.



120










NOTE 17
- Liabilities Subordinated to Claims of General Creditors



Stifel
Nicolaus maintains a deferred compensation plan for its financial advisors who
achieve certain levels of production, whereby a certain percentage of their
earnings are deferred as defined by the plan, of which 50% is deferred into
company stock units and 50% is deferred in mutual funds that earn a return based
on the performance of index mutual funds as designated by our company or a fixed
income option. We obtained approval from
FINRA
and its predecessor, the New York Stock Exchange,
to subordinate the liability for future payments for the portion of compensation
that is not deferred in stock units. Required annual payments, as of December
31, 2010, are as follows (in thousands):


	
		
		

		

		Distribution - January 31,  
		
		


		 
		
		


		Plan year
		
		


		 
		
		


		Total  
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		2011
		
		


		 
		
		


		 
		
		


		2005
		
		


		 
		
		


		$
		
		


		1,284
		
		


		 
	
	
		
		


		2012
		
		


		 
		
		


		 
		
		


		2006
		
		


		 
		
		


		 
		
		


		1,638
		
		


		 
	
	
		
		


		2013
		
		


		 
		
		


		 
		
		


		2007
		
		


		 
		
		


		 
		
		


		2,188
		
		


		 
	
	
		
		


		2014
		
		


		 
		
		


		 
		
		


		2008
		
		


		 
		
		


		 
		
		


		3,131
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		$
		
		


		8,241
		
		


		 
	
	


The
subordinated liabilities are subject to cash subordination agreements approved
by FINRA and, therefore, are included in our computation of net capital under
the SEC's Uniform Net Capital Rule. We have estimated the fair value of the
liability to be $7,739 as of December 31, 2010.



NOTE 18
- Commitments, Guarantees, and Contingencies




Broker-Dealer Commitments and Guarantees



In the
normal course of business, we enter into underwriting commitments. Settlement of
transactions relating to such underwriting commitments, which were open at
December 31, 2010, had no material effect in the consolidated financial
statements.



In
connection with margin deposit requirements of The Options Clearing Corporation,
we pledged customer-owned securities valued at $90,546 to satisfy the minimum
margin deposit requirement of $56,765 at December 31, 2010. 



In
connection with margin deposit requirements of the National Securities Clearing
Corporation, we deposited $15,000 in cash at December 31, 2010, which satisfied
the minimum margin deposit requirements of $6,250.



We also
provide guarantees to securities clearinghouses and exchanges under their
standard membership agreement, which requires members to guarantee the
performance of other members. Under the agreement, if another member becomes
unable to satisfy its obligations to the clearinghouse, other members would be
required to meet shortfalls. Our liability under these agreements is not
quantifiable and may exceed the cash and securities we have posted as
collateral. However, the potential requirement for us to make payments under
these arrangements is considered remote. Accordingly, no liability has been
recognized for these arrangements.



On
December 28, 2009, we announced that Stifel Nicolaus had reached an agreement
with the State of Missouri, the State of Indiana, the State of Colorado, and
with an association of other State securities regulatory authorities regarding
the repurchase of ARS from Eligible ARS investors. As part of the agreement, we have accelerated the previously announced repurchase plan.
We have agreed to repurchase ARS from Eligible ARS investors in four phases
starting in January 2010 and ending on December 31, 2011. At December 31, 2010,
we estimate that our retail clients held $64,525
of eligible ARS after issuer redemptions of $42,096
and Stifel repurchases of $89,729.



Phases two
and three of the modified ARS repurchase plan were completed during the year
ended December 31, 2010, in which we repurchased ARS of $39,225.
During the final phase, which will be completed by December 31, 2011, we
estimate that we will repurchase ARS of $64,250.
The amount estimated for repurchase
represents
ARS held by our clients at December 31, 2010, and
assumes no
issuer redemptions. 



121










We have recorded a liability for our estimated
exposure to the repurchase plan based upon a net present value
calculation, which is subject to change and future events, including
redemptions. ARS redemptions have been at par, and we
believe will continue to be at par over the remaining repurchase period. Future
periods' results may be affected by changes in estimated redemption rates or
changes in the fair value of ARS.



Other
Commitments



In the
ordinary course of business, Stifel Bank has commitments to extend credit in the
form of commitments to originate loans, standby letters of credit, and lines of
credit. See Note 23 in the notes to our consolidated financial statements for
further details.



Fund
Capital Commitments



At
December 31, 2010, our asset management subsidiaries had commitments to invest
in affiliated and unaffiliated investment partnerships of $4,600. These
commitments are generally called as investment opportunities are identified by
the underlying partnerships. These commitments may be called in full at any
time. 




Concentration of Credit Risk



We provide
investment, capital-raising, and related services to a diverse group of domestic
customers, including governments, corporations, and institutional and individual
investors. Our exposure to credit risk associated with the non-performance of
customers in fulfilling their contractual obligations pursuant to securities
transactions can be directly impacted by volatile securities markets, credit
markets, and regulatory changes. This exposure is measured on an individual
customer basis and on a group basis for customers that share similar attributes.
To reduce the potential for risk concentrations, counterparty credit limits have
been implemented for certain products and are continually monitored in light of
changing customer and market conditions. As of December 31, 2010 and 2009, we
did not have significant concentrations of credit risk with any one customer or
counterparty, or any group of customers or counterparties.




Operating
Leases and Purchase Obligations



We have non-cancelable operating leases for
office space and equipment. Future minimum commitments under these operating
leases at December 31, 2010 are as follows (in thousands):


	
		
		

		 
		
		
 
		
		
 
		
		
 
	
	
		
		

		2011
		
		
$
		
		
58,420
		
		
 
	
	
		
		

		2012
		
		
 
		
		
53,901
		
		
 
	
	
		
		

		2013
		
		
 
		
		
44,640
		
		
 
	
	
		
		

		2014
		
		
 
		
		
38,988
		
		
 
	
	
		
		

		2015
		
		
 
		
		
34,145
		
		
 
	
	
		
		

		Thereafter
		
		
 
		
		
62,921
		
		
 
	
	
		
		

		 
		
		
$
		
		
293,015
		
		
 
	
	
		
		

		 
		
		
 
		
		
 
		
		
 
	



Certain
leases contain provisions for renewal options and escalation clauses based on
increases in certain costs incurred by the lessor. We amortize office lease
incentives and rent escalation on a straight-line basis over the life of the
lease. Rent expense for the year ended December 31, 2010 was $53,948, net of
sublease income of $1,166. Rent expense for the years ended December 31, 2009,
and 2008 was $40,855, and $31,736, respectively. 



122










Note 19
- Legal Proceedings




Our
company and its subsidiaries are named in and subject to various proceedings and
claims arising primarily from our securities business activities, including
lawsuits, arbitration claims, class actions, and regulatory matters. Some of
these claims seek substantial compensatory, punitive, or indeterminate damages.
Our company and its subsidiaries are also involved in other reviews,
investigations, and proceedings by governmental and self-regulatory
organizations regarding our business, which may result in adverse judgments,
settlements, fines, penalties, injunctions, and other relief. We are contesting
the allegations in these claims, and we believe that there are meritorious
defenses in each of these lawsuits, arbitrations, and regulatory investigations.
In view of the number and diversity of claims against the company, the number of
jurisdictions in which litigation is pending, and the inherent difficulty of
predicting the outcome of litigation and other claims, we cannot state with
certainty what the eventual outcome of pending litigation or other claims will
be. In our opinion, based on currently available information, review with
outside legal counsel, and consideration of amounts provided for in our
consolidated financial statements with respect to these matters, the ultimate
resolution of these matters will not have a material adverse impact on our
financial position. However, resolution of one or more of these matters may have
a material effect on the results of operations in any future period, depending
upon the ultimate resolution of those matters and depending upon the level of
income for such period.



The
regulatory investigations include inquiries from the SEC and a state regulatory
authority relating to our role in investments made by five Southeastern
Wisconsin school districts (the "school districts") in transactions involving
collateralized debt obligations ("CDO"). We are fully cooperating with the SEC
and the state regulatory authority in these investigations and have provided
information and testimony.



We were
named in a civil lawsuit filed in the Circuit Court of Milwaukee, Wisconsin (the
"Wisconsin State Court") on September 29, 2008. The lawsuit has been filed
against our company, Stifel Nicolaus, Royal Bank of Canada Europe Ltd. ("RBC"),
and certain other RBC entities (collectively the "Defendants") by the school
districts and the individual trustees for other post-employment benefit ("OPEB")
trusts established by those school districts (collectively the "Plaintiffs").




The suit
arises out of purchases of certain CDO by the OPEB trusts. The RBC entities
structured and served as "arranger" for the CDO. We served as the placement
agent/broker in connection with the transactions.  The school districts each
formed trusts that made investments designed to address their OPEB liabilities. 
The total amount of the investments made by the OPEB trusts was $200,000. Since
the investments were made, we believe their value has declined significantly and
may ultimately result in a total loss for the OPEB trusts.  The Plaintiffs have
asserted that the school districts contributed $37,500 to the OPEB trusts to
purchase the investments. The balance of $162,500 used to purchase the
investments was borrowed by the OPEB trusts from Depfa Bank. The recourse of
Depfa Bank, as lender, is each of the OPEB trusts' respective assets and the
moral obligation of each school district. The legal claims asserted include
violation of the Wisconsin Securities Act, fraud, and negligence. The lawsuit
seeks equitable relief, unspecified compensatory damages, treble damages,
punitive damages, and attorney's fees and costs. The Plaintiffs claim that the
RBC entities and our company either made misrepresentations or failed to
disclose material facts in connection with the sale of the CDO, and thus
allegedly violated the Wisconsin Securities Act. We believe the Plaintiffs
reviewed and understood the relevant offering materials and that the investments
were suitable based upon, among other things, our receipt of written
acknowledgement of risks from each of the Plaintiffs. The Wisconsin State Court
denied the Defendants' motions to dismiss, and the Defendants have responded to
the allegations of the Second Amended Complaint, denying the substantive
allegations and asserting various affirmative defenses. Stifel Nicolaus and the
RBC entities have asserted cross-claims for indemnity and contribution against
each other. We believe, based upon currently available information and review
with outside counsel, that we have meritorious defenses to this lawsuit, and
intend to vigorously defend all of the Plaintiffs' claims.



Prior to
the acquisition of TWPG, FINRA commenced an administrative proceeding against
TWP, a wholly owned broker-dealer subsidiary of TWPG, related to a transaction
undertaken by a former employee in which approximately $15,700 of ARS were sold
from a TWPG account to the accounts of three customers. FINRA has alleged that
TWP violated various NASD and FINRA rules, as well as Section 10(b) of the
Securities Exchange Act and Rule 10b-5. TWP has filed an answer denying the
substantive allegations and asserting various affirmative defenses. TWP has
repurchased the ARS at issue from the customers at par. FINRA is seeking fines
and other relief against TWP and the former employee. TWP is defending the FINRA
proceeding vigorously.



123










NOTE 20
- Regulatory Capital Requirements



We operate
in a highly regulated environment and are subject to capital requirements, which
may limit distributions to our company from its subsidiaries. Distributions from
our broker-dealer subsidiaries are subject to net capital rules.
A
broker-dealer that fails to comply with the SEC's Uniform Net Capital Rule (Rule
15c3-1) may be subject to disciplinary actions by the SEC and self-regulatory
organizations, such as FINRA, including censures, fines, suspension, or
expulsion. Stifel Nicolaus and TWP have chosen to calculate their net capital
under the alternative method, which prescribes that their net capital shall not
be less than the greater of $1,000, or two percent of aggregate debit balances
(primarily receivables from customers) computed in accordance with the SEC's
Customer Protection Rule (Rule 15c3-3). CSA calculates its net capital under the
aggregate indebtedness method, whereby its aggregate indebtedness may not be
greater than fifteen times its net capital (as defined). The only restriction
with regard to the payment of cash dividends by our company is its ability to
obtain cash through dividends and advances from its subsidiaries, if needed.




At
December 31, 2010, Stifel Nicolaus had net capital of $180,544, which was 30.8%
of aggregate debit items and $168,825 in excess of its minimum required net
capital. At December 31, 2010, CSA's and TWP's net capital exceeded the minimum
net capital required under the SEC rule.



Our
international subsidiaries, SN Ltd and TWPIL, are subject to the regulatory
supervision and requirements of the Financial Services Authority ("FSA") in the
United Kingdom. At December 31, 2010, SN Ltd's and TWPIL's capital and reserves
were in excess of the financial resources requirement under the rules of the
FSA.



Our
Canadian subsidiary, SN Canada, is subject to the regulatory supervision and
requirements of the Investment Industry Regulatory Organization of Canada
("IIROC"). At December 31, 2010, SN Canada's net capital and reserves was in
excess of the financial resources requirement under the rules of the IIROC.



Our
company, as a bank holding company, and Stifel Bank are subject to various
regulatory capital requirements administered by the Federal Reserve Board and
the Missouri State Division of Finance, respectively. Additionally, Stifel Bank
is regulated by the Federal Depository Insurance Corporation ("FDIC"). Failure
to meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on our company's and Stifel Bank's financial results.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, our company and Stifel Bank must meet specific capital
guidelines that involve quantitative measures of our assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Our company's and Stifel Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.



124










Quantitative measures established by regulation to ensure capital adequacy
require our company, as a bank holding company, and Stifel Bank to maintain
minimum amounts and ratios of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and Tier 1 capital to average
assets (as defined). Management believes, as of December 31, 2010, that our
company and Stifel Bank meet all capital adequacy requirements to which they are
subject and are considered to be categorized as "well capitalized" under the
regulatory framework for prompt corrective action. To be categorized as "well
capitalized," our company and Stifel Bank must maintain total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the tables below.



	
		
		

		Stifel Financial Corp. - Federal
		Reserve Capital Amounts
	
	
		
		


		 
		
		

		 
		
		

		Actual
		
		

		 
		
		

		For Capital Adequacy Purposes
		
		

		 
		
		

		To Be Well Capitalized Under Prompt
		Corrective Action Provisions
	
	
		
		


		 
		
		

		 
		
		

		Amount
		
		

		 
		
		

		Ratio
		
		

		 
		
		

		Amount
		
		

		 
		
		

		Ratio
		
		

		 
		
		

		Amount
		
		

		 
		
		

		Ratio
	
	
		
		

		Total capital to
		risk-weighted assets
		
		

		 
		
		


		$
		
		827,812
		
		 
		
		29.2
		
		

		%
		
		

		 
		
		

		$ 
		
		226,817
		
		

		 
		
		


		8.0
		
		

		% 
		
		


		 
		
		

		$
		
		283,521
		
		

		 
		
		


		10.0
		
		

		%
	
	
		
		

		Tier 1 capital to
		risk-weighted assets
		
		

		 
		
		

		 
		
		825,481
		
		 
		
		29.1
		
		

		 
		
		

		 
		
		

		 
		
		113,408
		
		

		 
		
		


		4.0
		
		

		 
		
		


		 
		
		


		 
		
		170,113
		
		

		 
		
		


		6.0
		
		

		 
	
	
		
		

		Tier 1 capital to
		adjusted average total assets
		
		

		 
		
		

		 
		
		825,481
		
		 
		
		25.6
		
		

		 
		
		

		 
		
		

		 
		
		129,100
		
		

		 
		
		


		4.0
		
		

		 
		
		


		 
		
		


		 
		
		161,375
		
		

		 
		
		


		5.0
		
		

		 
	
	
		
		


		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
		
		

		 
	
	
		
		

		Stifel Bank - Federal Reserve Capital
		Amounts
	
	
		
		


		 
		
		

		 
		
		


		Actual
		
		

		 
		
		

		For Capital Adequacy Purposes
		
		

		 
		
		

		To Be Well Capitalized Under Prompt
		Corrective Action Provisions
	
	
		
		


		 
		
		

		 
		
		

		Amount
		

		 
		
		


		Ratio
		
		

		 
		
		

		Amount
		
		

		 
		
		

		Ratio
		
		

		 
		
		

		Amount
		
		

		 
		
		

		Ratio
	
	
		
		

		Total capital to
		risk-weighted assets
		
		

		 
		
		


		$
		<
		122,185
		

		 
		
		
14.4
		
		

		%
		
		

		 
		
		

		$ 
		
		67,775
		
		

		 
		
		


		8.0
		
		

		% 
		
		


		 
		
		

		$
		
		84,719
		
		

		 
		
		


		10.0
		
		

		%
	
	
		
		

		Tier 1 capital to
		risk-weighted assets
		
		

		 
		
		

		 
		
		119,854
		
		

		 
		

		
14.1
		
		

		 
		
		

		 
		
		

		 
		
		33,887
		
		

		 
		
		


		4.0
		
		

		 
		
		


		 
		
		


		 
		
		50,831
		
		

		 
		
		


		6.0
		
		

		 
	
	
		
		

		Tier 1 capital to
		adjusted average total assets
		
		

		 
		
		

		 
		

119,854
		
		

		 
		
		
7.8
		
		

		 
		
		

		 
		
		

		 
		
		61,312
		
		

		 
		
		


		4.0
		
		

		 
		
		


		 
		
		


		 
		
		76,640
		
		

		 
		
		


		5.0
		
		

		 
	
	
		
		


		 
		
		

		 
		
		

		 
		
		


		 
		
		

		 
		
		


		 
		
		

		 
		
		

		 
		
		

		 
		
		


		 
		
		

		 
		
		

		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		

		 
		
		


		 
		
		

		 
	



	
125










NOTE 21
- Employee Incentive, Deferred Compensation, and Retirement Plans



We
maintain several incentive stock award plans that provide for the granting of
stock options, stock appreciation rights, restricted stock, performance awards,
and stock units to our employees. Awards under our company's incentive stock
award plans are granted at market value at the date of grant. Options expire ten
years from the date of grant. The awards generally vest ratably over a three- to
eight-year vesting period.



All
stock-based compensation plans are administered by the Compensation Committee of
the Board of Directors ("Compensation Committee"), which has the authority to
interpret the plans, determine to whom awards may be granted under the plans,
and determine the terms of each award. According to these plans, we are
authorized to grant an additional 3,138,300 shares at December 31, 2010.




Stock-based compensation expense included in compensation and benefits expense
in the consolidated statements of operations for our company's incentive stock
award plans was $203,817, $45,744, and $52,594 for the years ended December 31,
2010, 2009, and 2008, respectively. The related income tax benefit recognized in
income was $17,487, $13,337, and $14,840 for the years ended December 31, 2010,
2009, and 2008, respectively.




Modification of Deferred Compensation Plan



On August
3,
2010, the Compensation Committee
approved the modification of the existing Stifel Nicolaus Wealth Accumulation
Plan (the "SWAP Plan") to align the requirements for vesting with that of the
TWPG deferred compensation plan, whereby forfeiture would not result from an
event of termination, except termination for cause, provided that the employee
does not compete with our company or violate non-solicitation provisions during
the remaining term of the award. This action accelerated the non-cash
compensation expense associated with all outstanding deferred compensation
awards as of August 9, 2010, resulting in a charge of
$106,400 after tax ($179,450 pre-tax) included
in compensation and benefits expense in the consolidated statements of
operations.




Under the provisions of the
modified SWAP Plan, future deferred compensation awards to employees will
continue to be subject to continued service and employment requirements with the
grant date fair value of the awards amortized as compensation expense over the
required service period, which is typically three to eight years; however,
participants who wish to leave our company and whose awards have not met the
service requirements for vesting at that time may seek the approval of the SWAP
Plan's administrative committee to receive those awards. Upon receipt of
approval, the employee's awards will continue to vest over the remaining service
period of the award provided that the employee executes a non-compete,
non-solicitation agreement, which will be effective over the remaining term of
the award. The removal of the service requirement by the administrative
committee will result in a non-cash compensation charge for the unvested portion
at the time of the approval. 



Stock
Options



We have
substantially eliminated the use of stock options as a form of compensation. On
July 1, 2010, we
granted
options to the former directors of TWPG in exchange for the options they held
prior to the merger. Pursuant to the terms of the merger agreement, all
outstanding options held by the former directors of TWPG were converted into
stock options at the exchange rate.
During the
year ended December 31, 2009, no options were granted. 



126










A summary
of option activity under the plans as of December 31, 2010, and changes during
the year then ended is presented below (in thousands, except exercise price
and contractual terms):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Options
		
		


		 
		
		


		Weighted- average exercise price
		
		


		 
		
		


		Weighted-average remaining contractual term
		
		


		 
		
		


		Aggregate intrinsic value
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Outstanding December 31, 2009
		
		


		 
		
		


		987
		
		


		 
		
		


		$
		
		


		8.63
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Granted
		
		


		 
		
		


		61
		
		


		 
		
		


		$
		
		


		57.73
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Exercised
		
		


		 
		
		


		(309
		
		


		)
		
		


		$
		
		


		6.40
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Forfeited
		
		


		 
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Expired
		
		


		 
		
		


		-
		
		


		 
		
		


		$
		
		


		-
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Outstanding December 31, 2010
		
		


		 
		
		


		739
		
		


		 
		
		


		$
		
		


		13.58
		
		


		 
		
		


		 
		
		


		2.79
		
		


		 
		
		


		$
		
		


		36,791
		
		


		 
	
	
		
		


		Exercisable December 31, 2010
		
		


		 
		
		


		726
		
		


		 
		
		


		$
		
		


		13.36
		
		


		 
		
		


		 
		
		


		2.73
		
		


		 
		
		


		$
		
		


		36,326
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



At
December 31, 2010, there was $114 of unrecognized compensation expense related
to non-vested options. The expense is expected to be recognized over a
weighted-average period of 1.0 years. The total intrinsic value of options
exercised during the years ended December 31, 2010, 2009, and 2008 was $13,922,
$10,907, and $10,344, respectively. The fair value of options vested during the
years ended December 31, 2010, 2009, and 2008 was $2,938, $4,223, and $4,394,
respectively. Cash proceeds from the exercise of stock options were $1,977,
$2,344, and $2,210 for the years ended December 31, 2010, 2009, and 2008,
respectively. Tax benefits realized from the exercise of stock options for the
years ended December 31, 2010, 2009, and 2008 were $5,653, $4,310, and $4,078,
respectively. 



127










Stock
Units



A stock
unit represents the right to receive a share of common stock from our company at
a designated time in the future without cash payment by the employee and is
issued in lieu of cash incentive, principally for deferred compensation and
employee retention plans. At December 31, 2010, the total number of stock units
outstanding was
9,445,071.

A summary
of 2009 activity for unvested stock units is presented below (in thousands,
except weighted-average fair value):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Stock Units
		
		


		 
		
		


		Weighted-average grant date fair value
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Unvested December 31, 2009
		
		


		 
		
		


		5,025
		
		


		 
		
		 
		
		


		 
		
		


		 
	
	
		
		


		Granted
		
		


		 
		
		


		3,730
		
		


		 
		
		


		$
		
		


		45.81
		
		


		 
	
	
		
		


		Vested
		
		


		 
		
		


		(8,296
		
		


		)
		
		 
		
		 
		
		


		 
	
	
		
		


		Cancelled
		
		


		 
		
		


		-
		
		


		 
		
		
 
		
		
 
		
		 
	
	
		
		

		

		Unvested December 31, 2010
		
		


		 
		
		


		459
		
		


		 
		
		
 
		
		


		 
		
		


		 
	
	
		
		

		

		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



At
December 31, 2010, there was unrecognized compensation cost for stock units of
$15,861, which is expected to be recognized over a weighted-average period of
3.2 years.



Deferred
Compensation Plans



The SWAP
Plan is provided to certain revenue producers, officers, and key administrative
employees, whereby a certain percentage of their incentive compensation is
deferred as defined by the Plan into company stock units with a 25% matching
contribution by our company. Participants may elect to defer up to an additional
15% of their incentive compensation with a 25% matching contribution. Units
generally vest over a three- to five-year period and are distributable upon
vesting or at future specified dates. Deferred compensation costs are amortized
on a straight-line basis over the vesting period. Elective deferrals are 100%
vested. As of December 31, 2010, there were 5,032,059 units outstanding under
the Plan.




Additionally, the SWAP Plan provides Stifel Nicolaus' financial advisors who
achieve certain levels of production, whereby a certain percentage of their
earnings are deferred as defined by the plan, of which 50% is deferred into
company stock units with a 25% matching contribution and 50% is deferred in
mutual funds, which earn a return based on the performance of index mutual funds
as designated by our company or a fixed income option. Financial advisors may
elect to defer an additional 1% of earnings into company stock units with a 25%
matching contribution. Financial advisors have no ownership in the mutual funds.
Included in the investments on the consolidated statements of financial
condition are investments in mutual funds of $32,193 and $28,597 at December 31,
2010 and 2009, respectively, that were purchased by our company to economically
hedge, on an after-tax basis, its liability to the financial advisors who choose
to base the performance of their return on the index mutual fund option. At
December 31, 2010 and 2009, the deferred compensation liability related to the
mutual fund option of $23,917 and $22,517, respectively, is included in accrued
compensation in the consolidated statements of financial condition.



In
addition, certain financial advisors, upon joining our company, may receive
company stock units in lieu of transition cash payments. Deferred compensation
related to these awards generally vests over a five- to eight-year period.
Deferred compensation costs are amortized on a straight-line basis over the
deferral period. As of December 31, 2010, there were 4,294,015 units outstanding
under the two plans.


128










Employee
Stock Ownership Plans



We have an
internally leveraged employee stock ownership plan ("ESOP") in which qualified
employees of our company, as defined in the ESOP, participate. We make annual
contributions to the ESOP in an amount determined by the Compensation Committee
on behalf of all eligible employees based upon the relationship of individual
compensation to total compensation. 



The ESOP
shares were initially pledged as collateral for its debt. As the debt is repaid,
shares are released from collateral and allocated to active participants. The
remaining collateral shares are reported as a reduction to paid-in capital in
equity. As shares are committed to be released, we report compensation expense
equal to the current market value of the shares.




Compensation expense of $1,678, $1,555, and $1,212 relating to the ESOP was
recorded for the years ended December 31, 2010, 2009, and 2008, respectively.
The ESOP trust owned 473,289 and 457,947 shares of common stock at December 31,
2010 and 2009, respectively. At December 31, 2010 and 2009, there were 81,349
and 113,885 shares held in suspense with a fair value of $5,047 and $6,747,
respectively.



Retirement
Plans



Eligible
employees of our company who have met certain service requirements may
participate in the Stifel Nicolaus Profit Sharing 401(k) Plan (the "Profit
Sharing Plan"). Under the Profit Sharing Plan, participants can purchase up to
500,000 shares of our common stock. We may match certain employee contributions
or make additional contributions to the Profit Sharing Plan at our discretion.
Our contributions to the Profit Sharing Plan were $3,326, $3,076, and $1,871 for
the years ended December 31, 2010, 2009, and 2008, respectively.



NOTE 22
- Restructuring



As a
result of the merger and integration of TWPG, we incurred certain restructuring
charges. These charges relate to costs associated with contract and lease
terminations, consolidation of facilities and infrastructure, and employee
termination benefits, which represent one-time activities and do not represent
ongoing costs to fully integrate TWPG. The charges were included in other
operating expenses, occupancy and equipment rental, and compensations and
benefits expense, respectively, on the consolidated statements of operations.




Contract
termination fees are determined based on the provisions of ASC Topic 420, 
"Exit or Disposal Cost Obligations," which among other things, requires the
recognition of a liability for contract termination under a cease-use date
concept. Lease terminations represent costs associated with redundant office
space disposed of as part of the restructuring plan. Payments related to
terminated lease contracts continue through the original terms of the leases,
which run for various periods, with the longest lease term running through 2011.



The
following table presents a summary of the activity with respect to the
restructuring-related liabilities included in accrued compensation and accounts
payable and accrued expenses on the consolidated statements of financial
condition (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Balance at December 31, 2009
		
		


		 
		
		


		$
		
		


		-
		
		


		 
	
	
		
		


		Provision charged to operating expense
		
		


		 
		
		


		 
		
		


		9,300
		
		


		 
	
	
		
		


		Cash outlays
		
		


		 
		
		


		 
		
		


		(2,798
		
		


		)
	
	
		
		


		Non-cash write-downs
		
		


		 
		
		


		 
		
		


		(207
		
		


		)
	
	
		
		


		Balance at December 31, 2010
		
		


		 
		
		


		$
		
		


		6,295
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



129










NOTE 23
- Off-Balance Sheet Credit Risk



In the
normal course of business, we execute, settle, and finance customer and
proprietary securities transactions. These activities expose our company to
off-balance sheet risk in the event that customers or other parties fail to
satisfy their obligations.



In
accordance with industry practice, securities transactions generally settle
within three business days after trade date. Should a customer or broker fail to
deliver cash or securities as agreed, we may be required to purchase or sell
securities at unfavorable market prices.



We borrow
and lend securities to facilitate the settlement process and finance
transactions, utilizing customer margin securities held as collateral. We
monitor the adequacy of collateral levels on a daily basis. We periodically
borrow from banks on a collateralized basis, utilizing firm and customer margin
securities in compliance with SEC rules. Should the counterparty fail to return
customer securities pledged, we are subject to the risk of acquiring the
securities at prevailing market prices in order to satisfy our customer
obligations. We control our exposure to credit risk by continually monitoring
our counterparties' positions, and where deemed necessary, we may require a
deposit of additional collateral and/or a reduction or diversification of
positions. Our company sells securities it does not currently own (short sales)
and is obligated to subsequently purchase such securities at prevailing market
prices. We are exposed to risk of loss if securities prices increase prior to
closing the transactions. We control our exposure to price risk from short sales
through daily review and setting position and trading limits. 



We manage
our risks associated with the aforementioned transactions through position and
credit limits and the continuous monitoring of collateral. Additional collateral
is required from customers and other counterparties when appropriate.



We have
accepted collateral in connection with resale agreements, securities borrowed
transactions, and customer margin loans. Under many agreements, we are permitted
to sell or repledge these securities held as collateral and use these securities
to enter into securities lending arrangements or to deliver to counterparties to
cover short positions. At December 31, 2010, the fair value of securities
accepted as collateral where we are permitted to sell or repledge the securities
was $864,677, and the fair value of the collateral that had been sold or
repledged was $109,595. At December 31, 2009, the fair value of securities
accepted as collateral where we are permitted to sell or repledge the securities
was $792,094, and the fair value of the collateral that had been sold or
repledged was $122,533.




Derivatives' notional contract amounts are not reflected as assets or
liabilities in the consolidated statements of financial condition. Rather, the
market, or fair value, of the derivative transactions are reported in the
consolidated statements of financial condition as other assets or accounts
payable and accrued expenses, as applicable.



 We enter
into interest rate derivative contracts to manage exposures that arise from
business activities that result in the receipt or payment of future known and
uncertain cash amounts, the value of which are determined by interest rates. Our
derivative financial instruments are principally used to manage differences in
the amount, timing, and duration of our known or expected cash payments related
to certain variable-rate affiliated deposits.  Interest rate swaps designated as
cash flow hedges involve the receipt of variable-rate amounts from a
counterparty in exchange for us making fixed-rate payments. Our interest rate
hedging strategies may not work in all market environments and, as a result, may
not be effective in mitigating interest rate risk. 



For a
complete discussion of our activities related to derivative instruments, see
Note 16 in the notes to our consolidated financial statements.



In the
ordinary course of business, Stifel Bank has commitments to originate loans,
standby letters of credit, and lines of credit. Commitments to originate loans
are agreements to lend to a customer as long as there is no violation of any
condition established by the contract. These commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since a portion of the commitments may expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash commitments.
Each customer's creditworthiness is evaluated on a case-by-case basis. The
amount of collateral obtained, if necessary, is based on the credit evaluation
of the counterparty. Collateral held varies, but may include accounts
receivable, inventory, property, plant and equipment, commercial real estate,
and residential real estate. 



At
December 31, 2010 and 2009, Stifel Bank had outstanding commitments to originate
loans aggregating $107,171 and $91,670, respectively. The commitments extended
over varying periods of time, with all commitments at December 31, 2010
scheduled to be disbursed in the following two months. 



130










Through
Stifel Bank, in the normal course of business, we originate residential mortgage
loans and sell them to investors. We may be required to repurchase mortgage
loans that have been sold to investors in the event there are breaches of
certain representations and warranties contained within the sales agreements.
While we have yet to repurchase a loan sold to an investor, we may be required
to repurchase mortgage loans that were sold to investors in the event that there
was inadequate underwriting or fraud, or in the event that the loans become
delinquent shortly after they are originated. We also may be required to
indemnify certain purchasers and others against losses they incur in the event
of breaches of representations and warranties and in various other
circumstances, and the amount of such losses could exceed the repurchase amount
of the related loans. Consequently, we may be exposed to credit risk associated
with sold loans.



Standby
letters of credit are irrevocable conditional commitments issued by Stifel Bank
to guarantee the performance of a customer to a third party. Financial standby
letters of credit are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. Performance standby letters of credit are issued to guarantee
performance of certain customers under non-financial contractual obligations.
The credit risk involved in issuing standby letters of credit is essentially the
same as that involved in extending loans to customers. Should Stifel Bank be
obligated to perform under the standby letters of credit, it may seek recourse
from the customer for reimbursement of amounts paid. At December 31, 2010 and
2009, Stifel Bank had outstanding letters of credit totaling $9,178 and $1,047,
respectively. One of the standby letters of credit has an expiration of January
1, 2012. All of the remaining standby letters of credit commitments at December
31, 2010, have expiration terms that are less than one year. 



Lines of
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Lines of credit generally have fixed
expiration dates. Since a portion of the line may expire without being drawn
upon, the total unused lines do not necessarily represent future cash
requirements. Each customer's creditworthiness is evaluated on a case-by-case
basis. The amount of collateral obtained, if necessary, is based on the credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, commercial real estate,
and residential real estate. Stifel Bank uses the same credit policies in
granting lines of credit as it does for on-balance sheet instruments. At
December 31, 2010 and 2009, Stifel Bank had granted unused lines of credit to
commercial and consumer borrowers aggregating $97,398 and $27,148, respectively.


131










NOTE 24 -
Income Taxes



The
provision for income taxes/(benefit) consists of the following (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,  
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		Current taxes:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Federal
		
		


		 
		
		


		$ 
		
		


		35,998
		
		


		 
		
		


		$
		
		


		46,646
		
		


		 
		
		


		$
		
		


		35,400
		
		


		 
	
	
		
		


		State
		
		


		 
		
		


		 
		
		


		9,647
		
		


		 
		
		


		 
		
		


		10,854
		
		


		 
		
		


		 
		
		


		7,525
		
		


		 
	
	
		
		


		Foreign
		
		


		 
		
		


		 
		
		


		(19
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		45,626
		
		


		 
		
		


		 
		
		


		57,500
		
		


		 
		
		


		 
		
		


		42,925
		
		


		 
	
	
		
		


		Deferred taxes:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Federal
		
		


		 
		
		


		 
		
		


		(36,965
		
		


		)
		
		


		 
		
		


		(5,844
		
		


		)
		
		


		 
		
		


		(5,491
		
		


		)
	
	
		
		


		State
		
		


		 
		
		


		 
		
		


		(11,821
		
		


		)
		
		


		 
		
		


		(7,040
		
		


		)
		
		


		 
		
		


		(1,167
		
		


		)
	
	
		
		


		Foreign
		
		


		 
		
		


		 
		
		


		1,024
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		(47,762
		
		


		)
		
		


		 
		
		


		(12,884
		
		


		)
		
		


		 
		
		


		(6,658
		
		


		)
	
	
		
		


		Provision for income taxes/(benefit)
		
		


		 
		
		


		$
		
		


		(2,136
		
		


		)
		
		


		$
		
		


		44,616
		
		


		 
		
		


		$
		
		


		36,267
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	




Reconciliation of the statutory federal income tax rate with our company's
effective income tax rate is as follows:


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Statutory rate
		
		


		$
		
		


		(80
		
		


		)
		
		


		$
		
		


		42,145
		
		


		 
		
		


		$
		
		


		32,119
		
		


		 
	
	
		
		


		State income taxes, net of federal income tax benefit
		
		


		 
		
		


		(845
		
		


		)
		
		


		 
		
		


		6,052
		
		


		 
		
		


		 
		
		


		4,318
		
		


		 
	
	
		
		


		Investment and jobs creation state tax credit, net of federal income tax
		effect
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(3,444
		
		


		) 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Change in valuation allowance
		
		


		 
		
		


		(767
		
		


		)
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Other, net
		
		


		 
		
		


		(444
		
		


		) 
		
		


		 
		
		


		(137
		
		


		) 
		
		


		 
		
		


		(170
		
		


		) 
	
	
		
		


		Effective tax rate
		
		


		$
		
		


		(2,136
		
		


		)
		
		


		$
		
		


		44,616
		
		


		 
		
		


		$
		
		


		36,267
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



132








 

Tax effect
of temporary differences and carryforwards that comprise significant portions of
deferred tax assets and liabilities (in thousands):


	
		
		


		 
		
		


		 
		
		


		December 31,
		

		
		

		2010
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		


		Deferred tax assets:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Deferred compensation
		
		


		 
		
		


		$
		
		


		144,773
		
		


		 
		
		


		$
		
		


		49,309
		
		


		 
	
	
		
		


		Net operating loss carryforwards
		
		


		 
		
		


		 
		
		


		35,397
		
		


		 
		
		


		 
		
		


		1,152
		
		


		 
	
	
		
		


		Accrued expenses
		
		


		 
		
		


		 
		
		


		22,280
		
		


		 
		
		


		 
		
		


		8,336
		
		


		 
	
	
		
		


		Unrealized loss on investments
		
		


		 
		
		


		 
		
		


		7,453
		
		


		 
		
		


		 
		
		


		2,042
		
		


		 
	
	
		
		


		Depreciation
		
		


		 
		
		


		 
		
		


		4,377
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Receivable reserves
		
		


		 
		
		


		 
		
		


		2,480
		
		


		 
		
		


		 
		
		


		2,128
		
		


		 
	
	
		
		


		Investment and jobs creation credit
		
		


		 
		
		


		 
		
		


		2,069
		
		


		 
		
		


		 
		
		


		2,740
		
		


		 
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		1,807
		
		


		 
		
		


		 
		
		


		63
		
		


		 
	
	
		
		


		Total deferred tax assets
		
		


		 
		
		


		 
		
		


		220,636
		
		


		 
		
		


		 
		
		


		65,770
		
		


		 
	
	
		
		


		Valuation allowance
		
		


		 
		
		


		 
		
		


		(6,287
		
		


		)
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		214,349
		
		


		 
		
		


		 
		
		


		65,770
		
		


		 
	
	
		
		


		Deferred tax liabilities:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Goodwill and other intangibles
		
		


		 
		
		


		 
		
		


		(13,635
		
		


		)
		
		


		 
		
		


		(7,337
		
		


		)
	
	
		
		


		Prepaid expenses
		
		


		 
		
		


		 
		
		


		(3,575
		
		


		)
		
		


		 
		
		


		(2,990
		
		


		)
	
	
		
		


		Depreciation
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(1,637
		
		


		)
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(344
		
		


		)
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		(17,210
		
		


		)
		
		


		 
		
		


		(12,308
		
		


		)
	
	
		
		


		Net deferred tax asset
		
		


		 
		
		


		$
		
		


		197,139
		
		


		 
		
		


		$
		
		


		53,462
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



We will
establish a valuation allowance if either it is more likely than not that the
deferred tax asset will expire before we are able to realize their benefits, or
the future deductibility is uncertain. We recorded a deferred tax asset
valuation allowance of $6,287 as of December 31, 2010, related to capital
losses, both realized and unrealized, incurred by TWPG, certain state net
operating losses of TWPG, and TWPIL's net operating loss carryforwards. We
believe our company's future tax profits will be sufficient to recognize our net
deferred tax assets.



As of
December 31, 2010, we have net operating loss carryforwards of $147,482 with
expiration dates between 2011 and 2027.



133











Uncertain Tax Positions



As of
December 31, 2010 and 2009, we had $3,138 and $2,046, respectively, of gross
unrecognized tax benefits, all of which, if recognized, would impact the
effective tax rate. We recognize interest and penalties related to uncertain tax
positions in provision of income taxes/(benefits) in the consolidated statements
of operations. As of December 31, 2010 and 2009, we had accrued interest and
penalties of $906 and $422, respectively, before benefit of federal tax
deduction, included in accounts payable and accrued expenses on our consolidated
statements of financial condition. The amount of interest and penalties
recognized on our consolidated statements of operations for the years ended
December 31, 2010, 2009, and 2008 was not significant.

The
following table summarizes the activity related to our company's unrecognized
tax benefits from January 1, 2008 to December 31, 2010 (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31,
		

		
		

		2010
		
		


		 
		
		


		December 31,
		



		2009
		
		


		 
		
		


		December 31,



		 2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Beginning balance
		
		


		 
		
		


		$ 
		
		


		2,046
		
		


		 
		
		


		$ 
		
		


		2,015
		
		


		 
		
		


		$
		
		


		2,869
		
		


		 
	
	
		
		


		Increase related to prior year tax positions
		
		


		 
		
		


		 
		
		


		1,907
		
		


		 
		
		


		 
		
		


		303
		
		


		 
		
		


		 
		
		


		109
		
		


		 
	
	
		
		


		Decrease related to prior year tax positions
		
		


		 
		
		


		 
		
		


		(586
		
		


		)
		
		


		 
		
		


		(157
		
		


		) 
		
		


		 
		
		


		(530
		
		


		)
	
	
		
		


		Increase related to current year tax positions
		
		


		 
		
		


		 
		
		


		35
		
		


		 
		
		


		 
		
		


		233
		
		


		 
		
		


		 
		
		


		254
		
		


		 
	
	
		
		


		Decreases related to settlements with taxing authorities
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		(319
		
		


		)
		
		


		 
		
		


		(572
		
		


		)
	
	
		
		


		Decreases related to lapsing of statute of limitations
		
		


		 
		
		


		 
		
		


		(264
		
		


		)
		
		


		 
		
		


		(29
		
		


		)
		
		


		 
		
		


		(115
		
		


		)
	
	
		
		


		Ending balance
		
		


		 
		
		


		$
		
		


		3,138
		
		


		 
		
		


		$
		
		


		2,046
		
		


		 
		
		


		$
		
		


		2,015
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



We file
income tax returns with the U.S. federal jurisdiction, various states, and
certain foreign jurisdictions. We are not subject to U.S. federal, certain state
and local, or non-U.S. income tax examination by tax authorities for taxable
years before 2006. Certain state returns are not subject to examination by tax
authorities for taxable years before 2001.



There is a
reasonable possibility that the unrecognized tax benefits will change within the
next 12 months as a result of the expiration of various statutes of limitations
or for the resolution of U.S. federal and state examinations, but we do not
expect this change to be material to the consolidated financial statements.



134










NOTE 25 -
Segment Reporting



We
currently operate through the following three business segments: Global Wealth
Management, Institutional Group (formerly Capital Markets), and various
corporate activities combined in the Other segment.
The UBS Acquired Locations acquisition and related customer account conversion to our
platform has enabled us to leverage our customers' assets, which allows us the
ability to provide a full array of financial products to both our Private Client
Group and Stifel Bank customers. As a result, we have changed how we manage
these reporting units, and consequently, they were combined to form the Global
Wealth Management segment. Previously reported segment information has been
revised to reflect this change. 



As a
result of organizational changes in the second quarter of 2009, which included a
change in the management reporting structure of our company, the segments
formerly reported as Equity Capital Markets and Fixed Income Capital Markets
have been combined into a single segment called Institutional Group. Previously
reported segment information has been revised to reflect this change.



Our Global
Wealth Management segment consists of two businesses, the Private Client Group
and Stifel Bank.  The Private Client Group includes branch offices and
independent contractor offices of our broker-dealer subsidiaries located
throughout the 
United
States, primarily in the Midwest and Mid-Atlantic regions with a growing
presence in the Northeast, Southeast, and Western United States. These branches
provide securities brokerage services, including the sale of equities, mutual
funds, fixed income products, and insurance, as well as offering banking
products to their private clients through Stifel Bank.
Stifel Bank segment provides residential, consumer, and commercial lending, as
well as FDIC-insured deposit accounts to customers of our broker-dealer
subsidiaries and to the general public.



The
Institutional Group segment includes institutional sales and trading. It
provides securities brokerage, trading, and research services to institutions,
with an emphasis on the sale of equity and fixed income products. This segment
also includes the management of and participation in underwritings for both
corporate and public finance (exclusive of sales credits generated through the
private client group, which are included in the Global Wealth Management
segment), merger and acquisition, and financial advisory services. 



The Other
segment includes certain corporate activities of our company.



135











Information concerning operations in these segments of business for the years
ended December 31, 2010, 2009, and 2008 is as follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		Net revenues:  (1) 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Global Wealth Management
		
		


		 
		
		


		$ 
		
		


		843,269
		
		


		 
		
		


		$
		
		


		595,974
		
		


		 
		
		


		$
		
		


		473,852
		
		


		 
	
	
		
		


		Institutional Group
		
		


		 
		
		


		 
		
		


		541,839
		
		


		 
		
		


		 
		
		


		494,092
		
		


		 
		
		


		 
		
		


		390,726
		
		


		 
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		(3,082
		
		


		) 
		
		


		 
		
		


		570
		
		


		 
		
		


		 
		
		


		5,759
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		1,382,026
		
		


		 
		
		


		$
		
		


		1,090,636
		
		


		 
		
		


		$
		
		


		870,337
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Income/(loss) before income taxes:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Global Wealth Management
		
		


		 
		
		


		 
		
		


		194,023
		
		


		 
		
		


		 
		
		


		104,699
		
		


		 
		
		


		 
		
		


		100,944
		
		


		 
	
	
		
		


		Institutional Group
		
		


		 
		
		


		 
		
		


		129,535
		
		


		 
		
		


		 
		
		


		129,133
		
		


		 
		
		


		 
		
		


		91,892
		
		


		 
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		


		(323,787
		
		


		)
		
		


		 
		
		


		(113,418
		
		


		)
		
		


		 
		
		


		(101,067
		
		


		)
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		(229
		
		


		)
		
		


		$
		
		


		120,414
		
		


		 
		
		


		$
		
		


		91,769
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



(1) 


No
individual client accounted for more than 10 percent of total net revenues for
the years ended December 31, 2010, 2009, or 2008.



The
following table presents our company's total assets on a segment basis at
December 31, 2010 and 2009 (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		December 31,
		

		
		

		2010
		
		


		 
		
		


		December 31, 2009
		
		


		 
	
	
		
		


		Total assets: 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Global Wealth Management
		
		


		 
		
		


		$
		
		
2,965,168
		
		


		 
		
		


		$
		
		


		2,226,050
		
		


		 
	
	
		
		


		Institutional Group
		
		


		 
		
		


		 
		
		
883,235
		
		


		 
		
		


		 
		
		


		701,213
		
		


		 
	
	
		
		


		Other
		
		


		 
		
		


		 
		
		
364,712
		
		


		 
		
		


		 
		
		


		240,093
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$ 
		
		


		4,213,115
		
		


		 
		
		


		$
		
		


		3,167,356
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



We have
operations in the United States, Canada, United Kingdom, and Europe. Our
company's foreign operations are conducted through its wholly owned
subsidiaries, SN Ltd., SN Canada, and TWPIL. Substantially all long-lived assets
are located in the United States.



136










Revenues,
classified by the major geographic areas in which they are earned for the years
ended December 31, 2010, 2009, and 2008, were as follows (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		

		

		Net revenues:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		United States
		
		


		 
		
		


		$ 
		
		


		1,340,727
		
		


		 
		
		


		$
		
		


		1,069,066
		
		


		 
		
		


		$
		
		


		837,152
		
		


		 
	
	
		
		


		United Kingdom
		
		


		 
		
		


		 
		
		


		20,479
		
		


		 
		
		


		 
		
		


		13,527
		
		


		 
		
		


		 
		
		


		21,610
		
		


		 
	
	
		
		


		Canada
		
		


		 
		
		


		 
		
		


		10,739
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Other European
		
		


		 
		
		


		 
		
		


		10,081
		
		


		 
		
		


		 
		
		


		8,043
		
		


		 
		
		


		 
		
		


		11,575
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		$
		
		


		1,382,026
		
		


		 
		
		


		$
		
		


		1,090,636
		
		


		 
		
		


		$
		
		


		870,337
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



137










 NOTE 26
- Other Comprehensive Income



The
following table sets forth the components of other comprehensive income for the
years ended December 31, 2010, 2009, and 2008 (in thousands):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,  
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		$
		
		


		1,907
		
		


		 
		
		


		$
		
		


		75,798
		
		


		 
		
		


		$
		
		


		55,502
		
		


		 
	
	
		
		


		Other comprehensive income/(loss):
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Unrealized gains/(losses) on available-for-sale securities, net of tax
		
		


		 
		
		


		 
		
		


		3,132
		
		


		 
		
		


		 
		
		


		7,517
		
		


		 
		
		


		 
		
		


		(6,634
		
		


		)
	
	
		
		


		Unrealized (losses)/gains in cash flow hedging instruments, net of tax
		
		


		 
		
		


		 
		
		


		(5,793
		
		


		) 
		
		


		 
		
		


		80
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Foreign currency translation adjustment, net of tax
		
		


		 
		
		


		 
		
		


		1,740
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		Reclassification adjustment for losses included in net income, net of
		tax
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		-
		
		


		 
		
		


		 
		
		


		999
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		(921
		
		


		)
		
		


		 
		
		


		7,597
		
		


		 
		
		


		 
		
		


		(5,635
		
		


		)
	
	
		
		


		Comprehensive income
		
		


		 
		
		


		$ 
		
		


		986
		
		


		 
		
		


		$ 
		
		


		83,395
		
		


		 
		
		


		$
		
		


		49,867
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



NOTE 27
- Earnings Per Share



Basic EPS
is computed by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. Diluted
earnings per share include dilutive stock options and stock units under the
treasury stock method. 



The
following table sets forth the computation of basic and diluted earnings per
share for the years ended December 31, 2010, 2009, and 2008 (in thousands,
except per share data):


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		Year Ended December 31,  
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		2010
		
		


		 
		
		


		2009
		
		


		 
		
		


		2008
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		$
		
		


		1,907
		
		


		 
		
		


		$
		
		


		75,798
		
		


		 
		
		


		$
		
		


		55,502
		
		


		 
	
	
		
		


		Shares for basic and diluted calculations:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Average shares used in basic computation
		
		


		 
		
		


		 
		
		


		32,482
		
		


		 
		
		


		 
		
		


		28,297
		
		


		 
		
		


		 
		
		


		24,069
		
		


		 
	
	
		
		


		Dilutive effect of stock options and units  
		(1)
		
		


		 
		
		


		 
		
		


		5,966
		
		


		 
		
		


		 
		
		


		3,997
		
		


		 
		
		


		 
		
		


		4,004
		
		


		 
	
	
		
		


		Average shares used in diluted computation
		
		


		 
		
		


		 
		
		


		38,448
		
		


		 
		
		


		 
		
		


		32,294
		
		


		 
		
		


		 
		
		


		28,073
		
		


		 
	
	
		
		


		Net income per share:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Basic
		
		


		 
		
		


		$
		
		


		0.06
		
		


		 
		
		


		$
		
		


		2.68
		
		


		 
		
		


		$
		
		


		2.31
		
		


		 
	
	
		
		


		Diluted  (1)
		
		


		 
		
		


		$ 
		
		


		0.05
		
		


		 
		
		


		$
		
		


		2.35
		
		


		 
		
		


		$ 
		
		


		1.98
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



 (1)     
Diluted earnings per share is computed on the basis of the weighted average
number of shares of common stock plus the effect of dilutive potential common
shares outstanding during the period using the treasury stock method. Diluted
earnings per share include stock options and units.



For the
years ended December 31, 2010, 2009, and 2008, the anti-dilutive effect from
restricted stock units was immaterial.



138










NOTE 28
- Shareholders' Equity



On August
3, 2010, the Board authorized the repurchase of an additional 2,000,000 shares.

These purchases may be made on the open market or in privately negotiated
transactions, depending upon market conditions and other factors. Repurchased
shares may be used to meet obligations under our employee benefit plans and for
general corporate purposes. Under existing Board authorizations at December 31,
2010, we are permitted to buy an additional 2,038,517 shares. The repurchase
program has no expiration date. 



During the
years ended December 31, 2010 and 2008, we repurchased
$91,769
and $15,880,
or
1,972,314 and 567,953
shares,
respectively, using existing Board authorizations at average prices of $46.53
and
$27.96
per
share, respectively, to meet obligations under our company's employee benefit
plans and for general corporate purposes. During the year ended December 31,
2009, we did not repurchase shares. During the year ended December 31, 2010, we
issued
5,428,977

shares, which included the reissuance of 539,476

shares from treasury, for the purchase of TWPG, the exercise of warrants that
were issued as part of the Ryan Beck acquisition, and shares
for employee benefit plans. See Note 3 in the notes to our consolidated
financial statements for additional information regarding the acquisition of
TWPG.
No shares
were reissued during the year ended December 31, 2009. We reissued 581,833
shares during the year ended December 31, 2008, for employee benefit plans.
We
issued 654,342, 1,091,952, and 2,980,259 new shares, respectively, for employee
benefit plans during the years ended December 31, 2010, 2009, and 2008,
respectively.



As partial
consideration of the purchase price of Ryan Beck, we issued 3,701,400 shares of
common stock valued at $27.70 per share and issued five-year immediately
exercisable warrants, upon obtaining shareholder approval on June 22, 2007, to
purchase up to 750,000 shares of our common stock at an exercise price of $24.00
per share. The warrants were initially determined to be a liability recorded at
fair value as of the date of closing. Upon obtaining shareholder approval, the
fair value of the warrants at that date was reclassified to shareholders'
equity. At December 31, 2010 and 2009, there were 23,627 and 746,950 warrants
outstanding, respectively, to purchase shares of our common stock at an exercise
price of $24.00.



On January
14, 2008, we repurchased 375,000 shares of our company's outstanding common
stock from BankAtlantic Bancorp, Inc. in a privately negotiated transaction. The
shares were purchased at $28.23 per share, the closing price on Friday, January
11, 2008. These shares had been initially acquired by BankAtlantic Bancorp, Inc.
on February 28, 2007, pursuant to our acquisition of Ryan Beck. The repurchase
transaction was effected pursuant to a previously announced authorization by our
company's board of directors to acquire shares of common stock to meet
obligations under our company's employee benefit plans and for general corporate
purposes. 



During the
second quarter of 2008, we elected to pay the contingent earn-out for the Ryan
Beck first year investment banking of $1,790 in 57,059 shares of our common
stock valued at $31.35 per share, with partial shares paid in cash. On August
14, 2008, we agreed to prepay $9,585 of BankAtantic's pro rata share of the
estimated private client contingent earn-out payment in exchange for a $10,000
permanent reduction of BankAtlantic's pro rata share of the private client
contingent payment. We elected to make such pre-payment using 233,500 shares of
our common stock at an agreed upon per share price of $41.05 per share.




On
September 29, 2008, we completed the public offering of 1,495,000 new shares of
our common stock at an offering price of $45.00 per share, which generated gross
proceeds of $67,275 (net proceeds of $64,369 after fees and expenses). 
Net
proceeds were used for general corporate purposes.



On
November 4, 2008, we issued 142,196 shares of our common stock in exchange for
$12,500 par value of 6.78% Cumulative Trust Preferred Securities. The Cumulative
Trust Preferred Securities were originally offered and sold in a $35,000 private
placement by Stifel Financial Capital Trust IV, a non-consolidated wholly owned
subsidiary of our company, on June 28, 2007. As a result, we extinguished
$12,500 of our debenture to Stifel Financial Capital Trust IV and recorded an
approximate $6,700 gain before certain expenses and taxes.



During the
first quarter of 2009, we paid $9,301 related to the Ryan Beck two-year private
client contingent earn-out in 271,353 shares of our company's common stock at an
average price of $34.30 per share, with partial shares paid in cash.



In June
2009, we completed an "at-the-market" public offering of 1,000,000 shares of our
common stock at an average price of $45.00 per share, which generated gross
proceeds of $45,000 (net proceeds of $44,694 after fees and expenses).  Net
proceeds were used for general corporate purposes.



In
September 2009, we completed a public offering of 1,725,000 shares of our common
stock at an average price of $56.00 per share, which generated gross proceeds of
$96,600 (net proceeds of $91,770 after fees and expenses).  Net proceeds were
used for general corporate purposes.



139










On July 1,
2010, we completed the purchase of all the outstanding shares of common stock of
TWPG. As consideration, at the close of the merger, we issued approximately

3,719,000
shares, including approximately 780,000 exchangeable shares to the holders of
TWPG common stock and approximately 1,800,000 restricted stock units to
employees of TWPG, which resulted in purchase consideration of $271,285.
Exchangeable shares
are
exchangeable at any time into shares of our common stock; entitle the holder to
dividend and other rights substantially economically equivalent to those of a
share of common stock; and, through a voting trust, entitle the holder to a vote
on matters presented to common shareholders.



NOTE 29 -
Variable Interest Entities



The
determination as to whether an entity is a VIE is based on the structure and
nature of the entity. We also consider other characteristics, such as the
ability to influence the decision-making relative to the entity's activities and
how the entity is financed. The determination as to whether we are the primary
beneficiary for entities subject to the deferral is based on a qualitative
analysis of the VIE's expected losses and expected residual returns. This
analysis includes a review of, among other factors, the VIE's capital structure,
contractual terms, which interests create or absorb variability, related party
relationships, and the design of the VIE. For entities not subject to the
deferral, the determination as to whether we are the primary beneficiary is
based on an analysis of the power to direct the activities of the VIE as well as
the obligation to absorb losses or benefits that could potentially be
significant to the entity. Where qualitative analyses are not conclusive, we
perform a quantitative analysis.  Our company's involvement with VIEs is limited
to entities used as investment vehicles and private equity funds, the
establishment of Stifel Financial Capital Trusts,
and our
issuance of a convertible promissory note.



We have
formed several non-consolidated investment funds with third-party investors that
are typically organized as limited liability companies or limited partnerships.
These partnerships and LLCs have assets of approximately $290,050 at December
31, 2010. For those funds where we act as the general partner, our company's
economic interest is generally limited to management fee arrangements as
stipulated by the fund operating agreements. We have generally provided the
third-party investors with rights to terminate the funds or to remove us as the
general partner. In assessing whether or not we have control, we look to the
relevant accounting guidance in determining whether a general partner controls a
limited partnership. Management fee revenue earned by our company was
insignificant during the years ended December 31, 2010, 2009, and 2008,
respectively. In addition, our direct investment interest in these entities is
insignificant at December 31, 2010 and 2009, respectively.



Thomas
Weisel Capital Management LLC, a subsidiary of our company, acts as the general
partner of a series of investment funds in venture capital and fund of funds and
manages investment funds that are active buyers of secondary interests in
private equity funds, as well as portfolios of direct interests in
venture-backed companies. These partnerships have combined assets of
approximately $175,358 at December 31, 2010. We hold variable interests in these
funds as a result of our company's rights to receive management fees. Our
company's investment in and additional capital commitments to the private equity
funds are also considered variable interests. The additional capital commitments
are subject to call at a later date and are limited in amount. Our exposure to
loss is limited to our investments in, advances and commitments to, and
receivables due from these funds, and that exposure is $1,762 at December 31,
2010. Management fee revenue earned by our company was insignificant during the
year ended December 31, 2010.



Under the
current accounting rules, the general partner in a limited partnership is
presumed to control that limited partnership. The presumption may be overcome if
the limited partners have either: (1) the substantive ability to dissolve the
limited partnership or otherwise remove the general partner without cause, or
(2) substantive participating rights, which provide the limited partners with
the ability to effectively participate in significant decisions that would be
expected to be made in the ordinary course of the limited partnership's business
and thereby preclude the general partner from exercising unilateral control over
the partnership. If the criteria are not met, the consolidation of the
partnership or limited liability company is required. Based on our evaluation of
these entities, we determined that these entities do not require consolidation.




140










Debenture
to Stifel Financial Capital Trusts



We have
completed private placements of cumulative trust preferred securities through
Stifel Financial Capital Trust II, Stifel Financial Capital Trust III, and
Stifel Financial Capital Trust IV (collectively, the "Trusts"). The Trusts are
non-consolidated wholly owned business trust subsidiaries of our company and
were established for the limited purpose of issuing trust securities to third
parties and lending the proceeds to our company.



The trust
preferred securities represent an indirect interest in junior subordinated
debentures purchased from our company by the Trusts, and we effectively provide
for the full and unconditional guarantee of the securities issued by the Trusts.
We make timely payments of interest to the Trusts as required by contractual
obligations, which are sufficient to cover payments due on the securities issued
by the Trusts, and believe that it is unlikely that any circumstances would
occur that would make it necessary for our company to make payments related to
these Trusts other than those required under the terms of the debenture
agreements and the trust preferred securities agreements. The Trusts were
determined to be VIEs because the holders of the equity investment at risk do
not have adequate decision-making ability over the Trust's activities.
Our
investment in the Trusts is not a variable interest, because equity interests
are variable interests only to the extent that the investment is considered to
be at risk. Because our investment was funded by the Trusts, it is not
considered to be at risk.



Interest
in FSI Group, LLC ("FSI")



We have
provided financing of $18,000 in the form of a convertible promissory note to
FSI, a limited liability company

specializing in investing in banks, thrifts, insurance companies, and other
financial services firms.
The note is convertible at our election into a 49.9% interest in FSI at any time
after the third anniversary or during the defined conversion period. The
convertible promissory note has a minimum coupon rate equal to 10% per annum
plus additional interest related to certain defined cash flows of the business,
not to exceed 18% per annum. As we do not hold the power to direct the
activities of FSI nor to absorb a majority of the expected losses, or receive a
majority of the expected benefits, it was determined that we are not the primary
beneficiary.



Our
company's exposure to loss is limited to the carrying value of the note with FSI
at December 31, 2010, of $18,000, which is included in other assets in the
consolidated statements of financial condition. Our company had no liabilities
related to this entity at December 31, 2010. We have the discretion to make
additional capital contributions. We have not provided financial or other
support to FSI that we were not previously contractually required to provide as
of December 31, 2010. Our company's involvement with FSI has not had a material
effect on its consolidated financial position, operations, or cash flows.



NOTE 30 -
Subsequent Events



In
accordance with Topic 855, "Subsequent Events," we evaluate subsequent
events that have occurred after the balance sheet date but before the financial
statements are issued. There are two types of subsequent events: (1) recognized,
or those that provide additional evidence about conditions that existed at the
date of the balance sheet, including the estimates inherent in the process of
preparing financial statements, and (2) non-recognized, or those that provide
evidence about conditions that did not exist at the date of the balance sheet
but arose after that date. Based on the evaluation, we did not identify any
recognized subsequent events that would have required adjustment to the
consolidated financial statements.



141










NOTE 31
- Quarterly Financial Information (Unaudited)


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		1st Quarter
		
		


		 
		
		


		2nd Quarter
		
		


		 
		
		


		3rd Quarter
		
		


		 
		
		


		4th Quarter
		
		


		 
	
	
		
		

		

		Year Ended December 31, 2010:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Total revenues
		
		


		 
		
		


		$
		
		


		314,371
		
		


		 
		
		


		$
		
		


		330,358
		
		


		 
		
		


		$
		
		


		344,086
		
		


		 
		
		


		$
		
		


		406,422
		
		


		 
	
	
		
		


		Interest expense
		
		


		 
		
		


		$
		
		


		2,341
		
		


		 
		
		


		$
		
		


		2,349
		
		


		 
		
		


		$
		
		


		3,698
		
		


		 
		
		


		$
		
		


		4,823
		
		


		 
	
	
		
		


		Net revenues
		
		


		 
		
		


		$
		
		


		312,030
		
		


		 
		
		


		$
		
		


		328,009
		
		


		 
		
		


		$
		
		


		340,388
		
		


		 
		
		


		$
		
		


		401,599
		
		


		 
	
	
		
		


		Non-interest expense
		
		


		 
		
		


		$
		
		


		272,465
		
		


		 
		
		


		$
		
		


		292,064
		
		


		 
		
		


		$
		
		


		482,944
		
		


		 
		
		


		$
		
		


		334,782
		
		


		 
	
	
		
		


		Income/(loss) before income taxes
		
		


		 
		
		


		$
		
		


		39,565
		
		


		 
		
		


		$
		
		


		35,945
		
		


		 
		
		


		$
		
		


		(142,556
		
		


		)
		
		


		$
		
		


		66,817
		
		


		 
	
	
		
		


		Net income/(loss)
		
		


		 
		
		


		$
		
		


		23,740
		
		


		 
		
		


		$
		
		


		21,109
		
		


		 
		
		


		$
		
		


		(84,336
		
		


		)
		
		


		$
		
		


		41,394
		
		


		 
	
	
		
		


		Earnings per common share:
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
	
	
		
		


		Basic
		
		


		 
		
		


		$
		
		


		0.77
		
		


		 
		
		


		$
		
		


		0.68
		
		


		 
		
		


		$
		
		


		(2.47
		
		


		)
		
		


		$
		
		


		1.21
		
		


		 
	
	
		
		


		Diluted  (1)
		
		


		 
		
		


		$
		
		


		0.68
		
		


		 
		
		


		$
		
		


		0.60
		
		


		 
		
		


		$
		
		


		(2.47
		
		


		)
		
		


		$
		
		


		0.97
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		1st Quarter
		
		


		 
		
		


		2nd Quarter
		
		


		 
		
		


		3rd Quarter
		
		


		 
		
		


		4th Quarter
		
		


		 
	
	
		
		

		

		Year Ended December 31, 2009:
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		Total revenues
		
		


		 
		
		


		$
		
		


		222,332
		
		


		 
		
		


		$
		
		


		264,550
		
		


		 
		
		


		$
		
		


		292,589
		
		


		 
		
		


		$
		
		


		323,399
		
		


		 
	
	
		
		


		Interest expense
		
		


		 
		
		


		$
		
		


		2,351
		
		


		 
		
		


		$
		
		


		3,045
		
		


		 
		
		


		$
		
		


		2,906
		
		


		 
		
		


		$
		
		


		3,932
		
		


		 
	
	
		
		


		Net revenues
		
		


		 
		
		


		$
		
		


		219,981
		
		


		 
		
		


		$
		
		


		261,505
		
		


		 
		
		


		$
		
		


		289,683
		
		


		 
		
		


		$
		
		


		319,467
		
		


		 
	
	
		
		


		Non-interest expense
		
		


		 
		
		


		$
		
		


		197,826
		
		


		 
		
		


		$
		
		


		235,396
		
		


		 
		
		


		$
		
		


		258,847
		
		


		 
		
		


		$
		
		


		278,153
		
		


		 
	
	
		
		


		Income before income taxes
		
		


		 
		
		


		$
		
		


		22,155
		
		


		 
		
		


		$
		
		


		26,109
		
		


		 
		
		


		$
		
		


		30,836
		
		


		 
		
		


		$
		
		


		41,314
		
		


		 
	
	
		
		


		Net income
		
		


		 
		
		


		$
		
		


		13,177
		
		


		 
		
		


		$
		
		


		15,815
		
		


		 
		
		


		$
		
		


		22,138
		
		


		 
		
		


		$
		
		


		24,668
		
		


		 
	
	
		
		


		Earnings per common share:
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
		
		

		 
		
		


		 
		
		


		 
	
	
		
		


		Basic
		
		


		 
		
		


		$
		
		


		0.49
		
		


		 
		
		


		$
		
		


		0.58
		
		


		 
		
		


		$
		
		


		0.77
		
		


		 
		
		


		$
		
		


		0.82
		
		


		 
	
	
		
		


		Diluted
		
		


		 
		
		


		$
		
		


		0.44
		
		


		 
		
		


		$
		
		


		0.51
		
		


		 
		
		


		$
		
		


		0.67
		
		


		 
		
		


		$
		
		


		0.71
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		


		(1)
		In accordance with Topic 260, "Earnings Per Share," earnings per
		diluted common share is calculated using the basic weighted average 

		    number of common shares outstanding in periods a loss is incurred.
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



 



142










ITEM
9.   
CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None



ITEM
9A.   
CONTROLS
AND PROCEDURES



Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures   




As of the
end of the period covered by this report, an evaluation was carried out by the
management of Stifel Financial Corp., with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that these disclosure
controls and procedures were effective as of the end of the period covered by
this report. In addition, no change in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of
1934) occurred during the fourth quarter of our fiscal year ended December 31,
2010, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.




Management's Report on Internal Control Over Financial Reporting



Management
of Stifel Financial Corp., together with its consolidated subsidiaries, is
responsible for establishing and maintaining adequate internal control over
financial reporting. Our company's internal control over financial reporting is
a process designed under the supervision of our principal executive and
principal financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our consolidated
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.



As of
December 31, 2010, we conducted an assessment of the effectiveness of our
company's internal control over financial reporting based on the framework
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
assessment, we have determined that our company's internal control over
financial reporting as of December 31, 2010, was effective.



Our
internal control over financial reporting includes those policies and procedures
that pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets;
provide reasonable assurances that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. generally
accepted accounting principles, and that receipts and expenditures are being
made only in accordance with authorizations of management and directors of our
company; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of our company's
assets that could have a material effect on our consolidated financial
statements.



Our
company's internal control over financial reporting as of December 31, 2010, has
been audited by Ernst & Young LLP, an independent registered public accounting
firm, as stated in their report appearing on the following page, which expresses
an unqualified opinion on the effectiveness of our company's internal control
over financial reporting as of December 31, 2010.



143










Report of
Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting



The Board
of Directors and Shareholders of Stifel Financial Corp.



We have
audited Stifel Financial Corp.'s (the "Company's") internal control over
financial reporting as of December 31, 2010, based on criteria established in 
Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the "COSO criteria"). The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management's
Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company's internal control over financial reporting
based on our audit.



We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.



A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that: (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.



Because of
the inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation of the
effectiveness to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.  



In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2010, based on the COSO
criteria.



We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements of the
Company as of December 31, 2010 and 2009, and the related consolidated
statements of operations, changes in shareholders' equity, and cash flows for

each of the three years in the period ended December 31, 2010,
and our report dated February 28, 2011, expressed an unqualified opinion
thereon.



 



/s/ Ernst
& Young LLP



Chicago, Illinois

February 28, 2011



144










ITEM
9B.   
OTHER
INFORMATION



None



PART
III



ITEM
10.   
DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE




Information regarding our Board of Directors and committees, our Corporate
Governance, compliance with Section 16(a) of the Securities Exchange Act of
1934, and procedures by which stockholders may recommend nominees to our Board
of Directors is contained in our Proxy Statement for the 2010 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after our fiscal year-end,
which information is incorporated herein by reference.




Information regarding the executive officers is contained in Part 1, Item 1,
"Executive Officers of the Registrant," hereof. There is no family relationship
between any of the directors or named executive officers.



Under
Section 303A.12 (a) NYSE Listed Company Manual, the CEO certification was
submitted to the NYSE after the 2009 Annual Meeting of Stockholders.



ITEM
11.   
EXECUTIVE
COMPENSATION




Information regarding compensation of certain executive officers and directors
("Executive Compensation"), as well as "Compensation Committee Interlocks and
Insider Participation" and "Compensation Committee Report" is contained in our
Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed with the
SEC within 120 days after our fiscal year-end, which information is incorporated
herein by reference.



ITEM
12.   
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS



Securities
authorized for issuance under equity compensation plans



The
following table provides information as of December 31, 2010, with respect to
the shares of our common stock that may be issued under our existing equity
compensation plans.  


	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	
	
		
		

		

		Plan category
		
		


		Number of securities to be issued upon exercise of outstanding options
		and units
		
		


		 
		
		


		Weighted-average exercise price of outstanding options and units
		
		


		 
		
		


		Number of securities remaining available for future issuance under
		equity compensation plans
		
		


		 
	
	
		
		


		Equity compensation plans approved by the shareholders
		
		


		 
		
		


		10,123,690
		
		


		 
		
		


		$
		
		


		34.51
		
		


		 
		
		


		 
		
		


		3,138,300
		
		


		 
	
	
		
		


		Equity compensation plans not approved by the shareholders
		
		


		 
		
		


		60,492
		
		


		 
		
		


		$
		
		


		57.73
		
		


		 
		
		


		 
		
		


		-
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		10,184,182
		
		


		 
		
		


		$
		
		


		34.65
		
		


		 
		
		


		 
		
		


		3,138,300
		
		


		 
	
	
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
		
		


		 
	



On
December 31, 2010, the total number of securities to be issued upon exercise of
options and units consisted of 739,110 options and 9,445,072 units, for a total
of 10,184,182 shares. The equity compensation plans approved by the stockholders
contained 678,618 options and 9,445,072 units, for a total of 10,123,690 shares.
The equity compensation plan not approved by the stockholders contained 60,492
options, for a total of 60,492 shares.



145











Equity compensation plans approved by stockholders



The total
options granted as of December 31, 2010, for equity compensation plans approved
by the stockholders consists of
3,149
shares subject to options granted under the 1997 Stock Incentive Plan, 623,577
shares subject to options granted under the 2001 Incentive Stock Plan, and

51,892
shares subject to options granted under the Equity Incentive Plan for
Non-Employee Directors. 



The total
units granted as of December 31, 2010, for equity compensation plans approved by
the stockholders consists of
8,840,203
shares that are subject to stock units granted under the 2001 Incentive Stock
Plan,
485,872
under the 2007 Incentive Stock Plan, and
118,997
shares that are subject to stock units granted under the Equity Incentive Plan
for Non-Employee Directors.  



As of
December 31, 2010, the remaining shares available for future grants or awards
under equity compensation plans approved by the stockholders consist of
2,357,402
shares under the 2001 Incentive Stock Plan,
527,265
under the 2007 Incentive Stock Plan, and
253,633
shares under the Equity Incentive Plan for Non-Employee Directors, for a total
of
3,138,300
shares.  




Equity compensation plans not approved by stockholders



Equity
compensation plans not approved by the stockholders as of December 31, 2010,
include 60,492 shares that are subject to stock options granted to the former
directors of TWPG in exchange for the options they held prior to the merger.
There were no shares reserved for future grants or awards under this plan as of
December 31, 2010.



Security
ownership of certain beneficial owners




Information regarding security ownership of certain beneficial owners is
contained in "Ownership of Certain Beneficial Owners," included in our Proxy
Statement for the 2010 Annual Meeting of Stockholders to be filed with the SEC
within 120 days after our fiscal year-end, which information is incorporated
herein by reference.



Security
ownership of management




Information regarding security ownership of certain beneficial owners and
management is contained in "Ownership of Directors, Nominees, and Executive
Officers," included in our Proxy Statement for the 2010 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after our fiscal year-end,
which information is incorporated herein by reference.



ITEM
13.   
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




Information regarding certain relationships and related transactions and
director independence is contained in "Certain Relationships and Related
Transactions," and "Director Independence" included in our Proxy Statement for
the 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days
after our fiscal year-end, which information is incorporated herein by
reference.



ITEM
14.   
PRINCIPAL
ACCOUNTANT FEES AND SERVICES




Information regarding principal accounting fees and services is contained in
"Ratification of Appointment of Independent Registered Public Accounting Firm,"
included in our Proxy Statement for the 2010 Annual Meeting of Stockholders to
be filed with the SEC within 120 days after our fiscal year-end, which
information is incorporated herein by reference.



146










PART IV



ITEM
15.   
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES



(a)  
1.     Financial Statements



The
following financial statements are included in Item 8, "Financial Statements and
Supplementary Data," and incorporated by reference hereto:



 


	
		
		

		 
		
		

		
		Page
	
	
		
		


		Report of Independent Registered Public Accounting Firm
		
		

		79
	
	
		
		


		Consolidated Financial Statements:
		
		

		 
	
	
		
		


		Statements of Financial Condition as of December 31, 2010 and 2009
		
		

		80
	
	
		
		


		Statements of Operations for the years ended December 31, 2010, 2009,
		and 2008
		
		

		82
	
	
		
		


		Statements of Changes in Shareholders' Equity for the years ended
		December 31, 2010, 2009, and 2008
		
		

		83
	
	
		
		


		Statements of Cash Flows for the years ended December 31, 2010, 2009,
		and 2008
		
		

		85
	
	
		
		


		Notes to the Consolidated Financial Statements
		
		

		88
	
	
		
		

		 
		
		

		 
	



    
	
  1. 

	Financial Statement Schedules
    2. 




All
schedules are omitted, since the required information is either not applicable,
not deemed material, or is shown in the respective financial statements or in
the notes thereto.




(b)           Exhibits



A list of
the exhibits to this Annual Report on Form 10-K is set forth on the Exhibit
Index immediately preceding such exhibits and is incorporated herein by
reference.



147










EXHIBIT
INDEX 



STIFEL
FINANCIAL CORP.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2010


	
		
		


		Exhibit No.
		
		

		 
		
		


		Description
	
	
		
		

		2.
		
		


		(a)
		
		

		 
		
		


		Agreement and Plan of Merger dated as of April 25, 2010, among Stifel
		Financial Corp., PTAS, Inc., and Thomas Weisel Partners Group, Inc.,


		incorporated herein by reference to Exhibit 2.1 of Stifel Financial
		Corp.'s Registration Statement on Form S-4 Amendment No. 1 (File No.
		333-166355) filed May 20, 2010.
	
	
		
		

		 
		
		


		(b)
		
		

		 
		
		


		Form of Plan of Arrangement (including Exchangeable Share Provisions),
		incorporated herein by reference to Exhibit 2.1 of Stifel Financial
		Corp.'s Registration Statement on Form S-3 Amendment No. 1 (File No.
		333-166355) filed July 2, 2010.
	
	
		
		

		3.
		
		


		(a)
		
		

		 
		
		


		Restated Certificate of Incorporation, as amended, filed with the
		Secretary of State of Delaware on June 3, 2009, incorporated herein by
		reference to Exhibit 4.1 to Stifel Financial Corp.'s Registration
		Statement on Form S-8 (Registration File No. 333-160523) filed on July
		10, 2009.
	
	
		
		

		 
		
		


		(b)
		
		

		 
		
		


		Stifel Financial Corp. Amended and Restated By-Laws, incorporated herein
		by reference to Exhibit 3. (b)(1) to Stifel Financial Corp.'s Annual
		Report on Form 10-K for fiscal year ended July 30, 1993.
	
	
		
		

		 
		
		


		(c)
		
		

		 
		
		


		Certificate of Designations, Preferences, and Rights of the Special
		Voting Preferred Stock, incorporated herein by reference to Exhibit 3.1
		to Stifel Financial Corp.'s Current Report on Form 8-K filed on July 1,
		2010.
	
	
		
		

		4.
		
		

		 
		
		

		 
		
		


		Stifel Financial Corp. Registration Rights Agreement dated February 28,
		2007, incorporated herein by reference to Stifel Financial Corp.'s
		Current Report on Form 8-K/A filed March 6, 2007.
	
	
		
		


		10.
		
		


		(a)
		
		

		 
		
		


		Form of Indemnification Agreement with directors dated as of June 30,
		1987, incorporated herein by reference to Exhibit 10.2 to Stifel
		Financial Corp.'s Current Report on Form 8-K (date of earliest event
		reported - June 22, 1987) filed July 14, 1987.  
	
	
		
		

		 
		
		


		(b)
		
		

		 
		
		


		Stifel Financial Corp. Dividend Reinvestment and Stock Purchase Plan,
		incorporated herein by reference to Stifel Financial Corp.'s
		Registration Statement on Form S-3 (Registration File No. 33-53699)
		filed May 18, 1994.
	
	
		
		

		 
		
		


		(c)
		
		

		 
		
		


		Stifel Financial Corp. Amended and Restated 1997 Incentive Plan,
		incorporated herein by reference to Stifel Financial Corp.'s
		Registration Statement on Form S-8 (Registration File No. 333-84717)
		filed on August 6, 1999. *
	
	
		
		

		 
		
		


		(d)(1)
		
		

		 
		
		


		Employment Letter with Ronald J. Kruszewski, incorporated herein by
		reference to Exhibit 10.(l) to Stifel Financial Corp.'s Annual Report on
		Form 10-K for the year ended December 31, 1997.*
	
	
		
		

		 
		
		


		(d)(2)
		
		

		 
		
		


		Stock Unit Agreement with Ronald J. Kruszewski, incorporated herein by
		reference to Exhibit 10.(j)(2) to Stifel Financial Corp.'s Annual Report
		on Form 10-K for the year ended December 31, 1998. *
	
	
		
		

		 
		
		


		(e)
		
		

		 
		
		


		Stifel Financial Corp. 1999 Executive Incentive Performance Plan,
		incorporated herein by reference to Annex B of Stifel Financial Corp.'s
		Proxy Statement for the 1999 Annual Meeting of Stockholders filed March
		26, 1999. *
	
	
		
		

		 
		
		


		(f)
		
		

		 
		
		


		Stifel Financial Corp. Equity Incentive Plan for Non-Employee Directors,
		incorporated herein by reference to Stifel Financial Corp.'s
		Registration Statement on Form S-8 (Registration File No. 333-52694)
		filed December 22, 2000. *
	
	
		
		

		 
		
		


		(f)(1)
		
		

		 
		
		


		Stifel Financial Corp. Equity Incentive Plan for Non-Employee Directors,
		as restated and amended, incorporated by reference to Annex A of Stifel
		Financial Corp.'s Definitive Proxy Statement for the 2008 Annual Meeting
		of Shareholders filed on April 29, 2008. *
	
	
		
		

		 
		
		


		(g)(1)
		
		

		 
		
		


		Stifel, Nicolaus & Company, Incorporated Wealth Accumulation Plan,
		incorporated herein by reference to Stifel Financial Corp.'s
		Registration Statement on Form S-8 (Registration File No. 333-60506)
		filed May 9, 2001. *
	
	
		
		

		 
		
		


		(g)(2)
		
		

		 
		
		


		Stifel, Nicolaus & Company, Incorporated Wealth Accumulation Plan
		Amendment No. 1, incorporated herein by reference to Stifel Financial
		Corp.'s Registration Statement on Form S-8 (Registration File No.
		333-105759) filed June 2, 2003. *
	
	
		
		

		 
		
		


		(h)
		
		

		 
		
		


		Stifel Nicolaus Profit Sharing 401(k) Plan, incorporated herein by
		reference to Stifel Financial Corp.'s Registration Statement on Form S-8
		(Registration File No. 333-60516) filed May 9, 2001. *
	
	
		
		

		 
		
		

		(i)(1)
		
		

		 
		
		


		Stifel Financial Corp. 2001 Incentive Plan, incorporated herein by
		reference to Stifel Financial Corp.'s Registration Statement on Form S-8
		(Registration File No. 333-82328) filed February 7, 2002. *
	
	
		
		

		 
		
		

		(i)(2)
		
		

		 
		
		


		Stifel Financial Corp. 2001 Incentive Plan Amendment No. 1, incorporated
		herein by reference to Stifel Financial Corp.'s Registration Statement
		on Form S-8 (Registration File No. 333-105756) filed June 2, 2003. *
	
	
		
		

		 
		
		


		(i)(3)
		
		

		 
		
		


		Stifel Financial Corp. 2001 Incentive Plan Amendment No. 2, incorporated
		herein by reference to Stifel Financial Corp.'s Registration Statement
		on Form S-8 (Registration File No. 333-140662) filed February 13, 2007.
		*
	
	
		
		

		 
		
		


		(i)(4)
		
		

		 
		
		


		Stifel Financial Corp. 2001 Incentive Stock Plan, as restated and
		amended, incorporated herein by reference to Annex B to the Stifel
		Financial Corp.'s Definitive Proxy Statement for the 2008 Annual Meeting
		of Shareholders filed on April 29, 2008. *
	
	
		
		

		 
		
		


		(j)
		
		

		 
		
		


		Stock Unit Agreement with James M. Zemlyak dated January 11, 2000,
		incorporated herein by reference to Exhibit 10.(s) to Stifel Financial
		Corp.'s Annual Report on Form 10-K / A Amendment No. 1 for the year
		ended December 31, 2001, filed on April 9, 2002. *
	
	




148









	
		
		

		 
		
		

		 
		
		

		 
		
		

		 
	
	
		
		


		Exhibit No.
		
		

		 
		
		


		Description
	
	
		
		

		 
		
		


		(k)
		
		

		 
		
		


		Stock Unit Agreement with Scott B. McCuaig dated December 20, 1998,
		incorporated herein by reference to Exhibit 10.(t) to Stifel Financial
		Corp.'s Annual Report on Form 10-K / A Amendment No. 1 for the year
		ended December 31, 2001, filed on April 9, 2002. *
	
	
		
		

		 
		
		


		(l)
		
		

		 
		
		


		Amended and Restated Promissory Note dated December 21, 1998, from
		Ronald J. Kruszewski payable to Financial, incorporated herein by
		reference to Exhibit 10.(u) to Stifel Financial Corp.'s Annual Report on
		Form 10-K / A Amendment No. 1 for the year ended December 31, 2001,
		filed on April 9, 2002. *
	
	
		
		

		 
		
		


		(m)(1)
		
		

		 
		
		


		Third Amendment to Lease by and among EBS Building, L.L.C., Stifel
		Financial Corp., and Stifel, Nicolaus & Company, Incorporated, dated
		September 1, 1999, incorporated herein by reference to EBS Building,
		L.L.C.'s Annual Report on Form 10-K (File No. 000-24167) for the year
		ended December 31, 2001.
	
	
		
		

		 
		
		


		(m)(2)
		
		

		 
		
		


		Fourth Amendment to Lease by and among EBS Building, L.L.C., Stifel
		Financial Corp., and Stifel, Nicolaus & Company, Incorporated, dated
		November 1, 1999, incorporated herein by reference to EBS Building,
		L.L.C.'s Annual Report on Form 10-K (File No. 000-24167) for the year
		ended December 31, 2001.
	
	
		
		

		 
		
		


		(m)(3)
		
		

		 
		
		


		Fifth Amendment to Lease by and among EBS Building, L.L.C., Stifel
		Financial Corp., and Stifel, Nicolaus & Company, Incorporated dated June
		11, 2001, incorporated herein by reference to EBS Building, L.L.C.'s
		Annual Report on Form 10-K (File No. 000-24167) for the year ended
		December 31, 2001.
	
	
		
		

		 
		
		


		(n)
		
		

		 
		
		


		Stifel Financial Corp. 2003 Employee Stock Purchase Plan, incorporated
		herein by reference to Stifel Financial Corp.'s Registration Statement
		on Form S-8 (Registration File No. 333-100414) filed October 8, 2002. *
	
	
		
		

		 
		
		


		(o)(1)
		
		

		 
		
		


		Acquisition agreement by and between Stifel Financial Corp. and
		Citigroup Inc., incorporated herein by reference to Exhibit 10 to Stifel
		Financial Corp.'s quarterly report on Form 10-Q/A No. 1 for the
		quarterly period ended September 30, 2005.
	
	
		
		

		 
		
		


		(o)(2)
		
		

		 
		
		


		Amendment No. 1 to Acquisition Agreement by and between Stifel Financial
		Corp. and Citigroup Inc., incorporated herein by reference to Exhibit
		10.(v)(2) to Stifel Financial Corp.'s Annual Report on Form 10-K for the
		year ended December 31, 2005, filed on March 16, 2006.
	
	
		
		

		 
		
		


		(o)(3)
		
		

		 
		
		


		Amendment No. 2 to Acquisition Agreement by and between Stifel Financial
		Corp. and Citigroup Inc., incorporated herein by reference to Exhibit
		10.(v)(3) to Stifel Financial Corp.'s Annual Report on Form 10-K for the
		year ended December 31, 2005, filed on March 16, 2006.
	
	
		
		

		 
		
		


		(p)
		
		

		 
		
		


		Employment Agreement with Richard Himelfarb dated September 6, 2005,
		incorporated

		herein by reference to Exhibit 10.(p) to Stifel Financial Corp.'s Annual
		Report on Form 10-K/A

		Amendment No. 1 for the year ended December 31, 2005, filed on January
		26, 2007. *
	
	
		
		

		 
		
		


		(q)
		
		

		 
		
		


		Employment Agreement with Thomas Mulroy dated September 7, 2005,
		incorporated herein by reference to Exhibit 10.(q) to Stifel Financial
		Corp.'s Annual Report on Form 10-K/A Amendment No. 1 for the year ended
		December 31, 2005, filed on January 26, 2007. *
	



	
		
		

		 
		
		


		(r)
		
		

		 
		
		


		Agreement and Plan of Merger, dated as of November 20, 2006, by and
		among Stifel Financial Corp., FSFC Acquisition Co., and First Service
		Financial Company, incorporated herein by reference to Exhibit 2.1 to
		Stifel Financial Corp.'s Current Report on Form 8-K (date of earliest
		event reported - November 20, 2006) filed on November 20, 2006.
	
	
		
		

		 
		
		


		(s)(1)
		
		

		 
		
		


		Office Sublease Agreement by and between Deutsche Bank Securities, Inc.
		(Lessor) and Stifel, Nicolaus & Company, Incorporated (Lessee),
		incorporated herein by reference to Exhibit 10.(t)(1) to Stifel
		Financial Corp.'s Annual Report on Form 10-K/A Amendment No. 1 for the
		year ended December 31, 2006, filed on June 28, 2007.  
	
	
		
		

		 
		
		


		(s)(2)
		
		

		 
		
		


		Office Lease Agreement by and between ABB South Street Associates, LLC
		(Landlord) and Stifel, Nicolaus & Company, Incorporated (Tenant),
		incorporated herein by reference to Exhibit 10.(t)(1) to Stifel
		Financial Corp.'s Annual Report on Form 10-K/A Amendment No. 1 for the
		year ended December 31, 2006, filed on June 28, 2007.  
	
	
		
		

		 
		
		


		(t)(1)
		
		

		 
		
		


		Agreement and Plan of Merger, dated as of January 8, 2007, by and among
		Stifel Financial Corp., SF RB Merger Sub, Inc., BankAtlantic Bancorp,
		Inc., and Ryan Beck Holdings, Inc., incorporated herein by reference to
		Exhibit 2.1 to Stifel Financial Corp.'s Current Report
		on Form 8-K / A (date of earliest
		event reported - January 8, 2007) filed on January 12, 2007.
	
	
		
		

		 
		
		


		(t)(2)
		
		

		 
		
		


		Amendment No.1 to Merger Agreement by and among Stifel Financial Corp.
		and
		BankAtlantic Bancorp, Inc., incorporated herein by reference to
		Exhibit 2.1 to Stifel Financial Corp.'s Current Report on Form 8-K (date
		of earliest event reported
		-

		August 14, 2008) filed on August 15, 2008.
	
	
		
		

		 
		
		


		(u)
		
		

		 
		
		


		Stifel Financial Corp. 2007 Incentive Stock Plan, incorporated herein by
		reference to Stifel Financial Corp.'s Registration Statement on Form S-8
		(Registration File No. 333-145990) filed September 11, 2007. *
	
	
		
		

		 
		
		


		(v)
		
		

		 
		
		


		Purchase Agreement among Stifel Financial Corp., The Western and
		Southern Life Insurance Company ("Western and Southern"), and Stifel,
		Nicolaus & Company, Incorporated, Merrill Lynch & Co., Merrill Lynch,
		Pierce, Fenner & Smith Incorporated, and Keefe, Bruyette & Woods, Inc.,
		incorporated herein by reference to Exhibit 10.1 to Stifel Financial
		Corp.'s Current Report on Form 8-K (date of earliest event reported -
		September 24, 2008) filed on September 29, 2008.
	
	
		
		

		 
		
		


		(x)
		
		

		 
		
		


		Stock Purchase Agreement, dated December 18, 2008, by and among Stifel
		Financial Corp., Butler Wick & Co. Inc., and Butler Wick Corp.,
		incorporated herein by reference to Exhibit 10. (x) to Stifel Financial
		Corp.'s Annual Report on Form 10-K for the year ended December 31, 2008,
		filed on February 27, 2009.
	
	
		
		

		 
		
		


		(y)
		
		

		 
		
		


		Asset Purchase Agreement dated March 23, 2009, by and between Stifel,
		Nicolaus & Company, Incorporated and UBS Financial Services, Inc.,
		incorporated herein by reference to Exhibit 2.1 to Stifel Financial
		Corp.'s Current Report on Form 8-K (date of earliest event reported -
		March 23, 2009) filed on March 23, 2009.
	
	


149









	
		
		


		Exhibit No.
		
		

		 
		
		


		Description
	
	
		
		 
		
		(z)
		
		 
		

		


		Amendment No. 1 to Asset Purchase Agreement, dated May 4, 2009, by and
		between Stifel Nicolaus & Company, Incorporated and UBS Financial Services, Inc.,
		incorporated herein by reference to Exhibit 2.1 to Stifel Financial
		Corp.'s Current Report on Form 8-K (date of earliest event reported May
		4, 2009) filed on May 11, 2009.

		
	
	
		
		
 
		
		
(aa)
		
		
 
		

		


		Amendment No. 2 to Asset Purchase Agreement, dated June 1, 2009, by and
		between Stifel, Nicolaus & Company, Incorporated and UBS Financial
		Services, Inc., incorporated herein by reference to Exhibit 10 (aa) to
		Stifel Financial Corp.'s Quarterly Report on Form 10-Q for the quarterly
		period ended September 30, 2009, filed on November 9, 2009.
	
	
		
		
 
		
		
(bb)
		
		
 
		

		


		Amendment No. 3 to Asset Purchase Agreement, dated August 12, 2009, by
		and between Stifel, Nicolaus & Company, Incorporated and UBS Financial
		Services, Inc., incorporated herein by reference to Exhibit 2.1 to
		Stifel Financial Corp.'s Current Report on Form 8-K (date of earliest
		event reported August 12, 2009) filed on August 18, 2009.
	
	
		
		
 
		
		
(cc)
		
		
 
		

		


		Amendment No. 4 to Asset Purchase Agreement, dated September 11, 2009,
		by and between Stifel, Nicolaus & Company, Incorporated and UBS
		Financial Services, Inc. incorporated herein by reference to Exhibit 10
		(cc) to Stifel Financial Corp.'s Quarterly Report on Form 10-Q for the
		quarterly period ended September 30, 2009, filed on November 9, 2009.
	
	
		
		
 
		
		
(dd)
		
		
 
		

		


		Office Sublease Agreement by and between The Bear Stearns Companies LLC
		(Landlord) and Stifel, Nicolaus & Company, Incorporated (Tenant),
		incorporated herein by reference to Exhibit 10 (dd) to Stifel Financial
		Corp.'s Quarterly Report on Form 10-Q for the quarterly period ended
		September 30, 2009, filed on November 9, 2009.
	
	
		
		
 
		
		
(ee)
		
		
 
		

		


		Employment Agreement with Victor Nesi dated June 25, 2009, incorporated
		herein by reference to Exhibit 10.(ee) to Stifel Financial Corp.'s
		Annual Report on Form 10-K for the year ended December 31, 2009, filed
		on February 26, 2010. *
	
	
		
		
 
		
		
(ff)
		
		
 
		

		


		First Amendment to Stifel, Nicolaus & Company, Incorporated Wealth
		Accumulation Plan 2010 Restated, incorporated herein by reference to
		Exhibit 10.1 to Stifel Financial Corp.'s Current Report on Form 8-K
		filed on August 9, 2010. *
	
	
		
		
 
		
		
(gg)
		
		
 
		
		


		First Amendment to Stifel, Nicolaus & Company, Incorporated Wealth
		Accumulation Plan 2010 Restated, incorporated herein by reference to
		Exhibit 10.1 to Stifel Financial Corp.'s Current Report on Form 8-K
		filed on August 9, 2010. *
	
	
		
		


		11.
		
		

		 
		
		

		 
		
		


		Computation of Per Share Earnings is set forth in Note 27 of Notes to
		Consolidated Financial Statements included in this Form 10-K.
		
		
	
	
		
		


		16.
		
		

		 
		
		

		 
		
		


		Letter from Stifel Financial Corp.'s former independent accountant
		regarding its concurrence with the statements made by the Company in the
		current report concerning the dismissal as the Company's principal
		accountant is incorporated herein by reference to Exhibit 16 to Stifel
		Financial Corp.'s Current Report on Form 8-K (date of earliest event
		reported
		-

		April 8, 2008) filed on April 14, 2008.
	
	
		
		


		21.1
		
		

		 
		
		

		 
		
		


		List of Subsidiaries of Stifel Financial Corp., filed herewith.
	
	
		
		


		23.1
		
		

		 
		
		

		 
		
		


		Consent of Independent Registered Public Accounting Firm, filed
		herewith.
	
	
		
		


		31.1.
		
		

		 
		
		

		 
		
		


		Rule 13a-14(a) Certification of Chief Executive Officer.
	
	
		
		


		31.2.
		
		

		 
		
		

		 
		
		


		Rule 13a-14(a) Certification of Chief Financial Officer.
	
	
		
		


		32.1
		
		

		 
		
		

		 
		
		


		Section 1350 Certification of Chief Executive Officer. **
	
	
		
		


		32.2.
		
		

		 
		
		

		 
		
		


		Section 1350 Certification of Chief Financial Officer. **
	
	
		
		


		101.
		
		

		 
		
		

		 
		
		


		Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i)
		Consolidated Statements of Financial Condition as of December 31, 2010
		and 2009; (ii) Consolidated Statements of Operations for the years ended
		December 31, 2010, 2009, and 2008; (iii) Statements of Changes in
		Shareholders' Equity for the years ended December 31, 2010, 2009, and
		2008; (iv) Consolidated Statements of Cash Flows for the years ended
		December 31, 2010, 2009, and 2008; and (v) Notes to Consolidated
		Financial Statements. **
	



*      Management contract or compensatory plan or
arrangement.



** 
The
certifications attached as Exhibits 32.1 and 32.2 and the interactive data files
attached as Exhibit 101 that accompany this Annual Report on Form 10-K are not
deemed filed with the Securities and Exchange Commission and are not to be
incorporated by reference into any filing of Stifel Financial Corp. under the
Securities Act of 1933, as amended, or the Securities Act of 1934, as amended,
whether made before or after the date of this Form 10-K, irrespective of any
general incorporation language contained in such filing.



150











SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on February 28, 2011.



 



STIFEL
FINANCIAL CORP.


	
		
		

		 
		
		

		 
	
	
		
		


		By:
		
		


		/s/ Ronald J. Kruszewski
	
	
		
		

		 
		
		


		Ronald J. Kruszewski

		Chairman of the Board, President,

		Chief Executive Officer, and Director
	



 



Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated on February 28, 2011.


	
		
		


		/s/
		
		


		Ronald J. Kruszewski
		
		


		Chairman of the Board, President,

		Chief Executive Officer, and Director

		(Principal Executive Officer)
	
	
		
		

		 
		
		


		Ronald J. Kruszewski
	
	
		
		


		/s/
		
		


		James M. Zemlyak  
		
		


		Senior Vice President, Chief Financial

		Officer, Treasurer, and Director

		(Principal Financial and Accounting Officer)
	
	
		
		

		 
		
		


		James M. Zemlyak
	
	
		
		


		/s/
		
		


		Bruce A. Beda
		
		


		Director

	
	
		
		

		 
		
		


		Bruce A. Beda
		
		

		 
	
	
		
		


		/s/  
		
		


		Michael W. Brown
		
		


		Director

	
	
		
		

		 
		
		


		Michael W. Brown
		
		

		 
	
	
		
		


		/s/
		
		


		Charles A. Dill
		
		


		Director

	
	
		
		

		 
		
		


		Charles A. Dill
		
		

		 
	
	
		
		


		/s/
		
		


		John P. Dubinsky
		
		


		Director
	
	
		
		

		 
		
		


		John P. Dubinsky
		
		

		 
	
	
		
		


		/s/
		
		


		Richard F. Ford
		
		


		Director

	
	
		
		

		 
		
		


		Richard F. Ford
		
		

		 
	
	
		
		


		/s/
		
		


		Robert E. Grady
		
		


		Director
	
	
		
		

		 
		
		


		Robert E. Grady
		
		

		 
	
	


151









	
		
		


		/s/
		
		


		Frederick O. Hanser
		
		


		Director

	
	
		
		

		 
		
		


		Frederick O. Hanser
		
		

		 
	
	
		
		


		/s/
		
		


		Richard J. Himelfarb
		
		


		Director
	
	
		
		

		 
		
		


		Richard J. Himelfarb
		
		

		 
	
	
		
		


		/s/
		
		


		Alton F. Irby III
		
		


		Director

	
	
		
		

		 
		
		


		Alton F. Irby III
		
		

		 
	
	
		
		


		/s/
		
		


		Robert E. Lefton
		
		


		Director

	
	
		
		

		 
		
		


		Robert E. Lefton
		
		

		 
	
	
		
		


		/s/
		
		


		Scott B. McCuaig
		
		


		Director

	
	
		
		

		 
		
		


		Scott B. McCuaig
		
		

		 
	
	
		
		


		/s/
		
		


		Thomas P. Mulroy
		
		


		Director
	
	
		
		

		 
		
		


		Thomas P. Mulroy
		
		

		 
	
	
		
		


		/s/
		
		


		Victor J. Nesi
		
		


		Director
	
	
		
		

		 
		
		


		Victor J. Nesi
		
		

		 
	
	
		
		


		/s/
		
		


		James M. Oates
		
		


		Director
	
	
		
		

		 
		
		


		James M. Oates
		
		

		 
	
	
		
		


		/s/
		
		


		Ben A. Plotkin
		
		


		Director
	
	
		
		

		 
		
		


		Ben A. Plotkin
		
		

		 
	
	
		
		


		/s/
		
		


		Thomas W. Weisel
		
		

		 
	
	
		
		

		 
		
		


		Thomas W. Weisel
		
		


		Director
	
	
		
		


		/s/
		
		


		Kelvin R. Westbrook
		
		


		Director
	
	
		
		

		 
		
		


		Kelvin R. Westbrook
		
		

		 
	



152