Edgar Filing: STIFEL FINANCIAL CORP

UNITED STATES SECURITIES AND EXC

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2009


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-9305

_________________________

STIFEL FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of		43-1273600 (IRS Employer Identification No.)
incorporation or organization)

501North Broadway
St. Louis, Missouri		63102
(Address of principal executive offices)		(Zip Code)

(314) 342-2000
(Registrant’s telephone number, including area code)

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 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 (§232.405 of this chapter) 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. (Check one):


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 Exchange Act Rule 12b-2). Yes o No þ

The number of shares outstanding of the registrant's common stock as of July 31, 2009 was 28,472,666.

STIFEL FINANCIAL CORP.

Form 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Financial Condition as of June 30, 2009 (unaudited) and December 31, 2008

Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2009 and June 30, 2008 (unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and June 30, 2008 (unaudited)

Notes to Condensed Consolidated Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 4. Submission of Matters to a Vote of Security Holders

Item 6. Exhibits

Signatures

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Financial Condition


	June 30, 2009		December 31, 2008
(in thousands)	(Unaudited)
Assets
Cash and cash equivalents	$	184,282	$	239,725
Cash segregated under federal and other regulations		40		40
Receivables:
Customers		338,570		280,143
Broker, dealers and clearing organizations		411,341		111,575
Securities purchased under agreements to resell		98,144		17,723
Trading securities owned, at fair value (includes assets pledged of $221,825 and $0, respectively)		290,045		122,576
Available-for-sale securities, at fair value		133,238		50,397
Held-to-maturity securities, at amortized cost		7,574		7,574
Mortgages held for sale		43,320		31,246
Bank loans, net of allowance for loan losses of $3,060 and $2,448, respectively		172,561		181,269
Bank foreclosed assets held for sale, net of estimated cost to sell		1,889		2,326
Investments		102,241		75,407
Fixed assets, at cost, net of accumulated depreciation and amortization of $61,812 and $54,075, respectively		50,559		47,765
Goodwill		132,507		128,278
Intangible assets, net of accumulated amortization of $9,689 and $8,290, respectively		16,261		15,984
Loans and advances to financial advisors and other employees, net		146,638		105,767
Deferred tax assets, net		47,329		47,337
Other assets		111,453		93,013
Total assets	$	2,287,992	$	1,558,145

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Financial Condition (continued)


	June 30, 2009			December 31, 2008
(in thousands, except share amounts)	(Unaudited)
Liabilities and stockholders' equity
Short-term borrowings from banks	$	212,300		$	-
Payables:
Customers		193,194			156,495
Brokers, dealers and clearing organizations		159,942			29,691
Drafts		37,929			49,401
Securities sold under agreements to repurchase		54,881			2,216
Bank deposits		470,430			284,798
Federal Home Loan Bank advances and other secured financing		2,000			6,000
Trading securities sold, but not yet purchased, at fair value		189,119			98,934
Accrued compensation		104,999			130,037
Accounts payable and accrued expenses		63,715			100,528
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		9,398			19,998
		1,580,407			960,598
Liabilities subordinated to claims of general creditors		4,883			4,362
Stockholders' equity:
Preferred stock - $1 par value; authorized 3,000,000 shares; none issued		-			-
Common stock - $0.15 par value; authorized 97,000,000 shares; issued 28,396,540 and 26,300,135 shares, respectively		4,259			3,945
Additional paid-in-capital		505,195			427,480
Retained earnings		198,265			168,993
Accumulated other comprehensive loss		(4,183	)		(6,295	)
		703,536			594,123 (938
Unearned employee stock ownership plan shares, at cost, 130,153 and 146,421 shares, respectively		(834	)		(938	)
		702,702			593,185
Total liabilities and stockholders' equity	$	2,287,992		$	1,558,145

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2009		2008		2009		2008
Revenues:
Commissions	$	80,721	$	83,063	$	155,331	$	168,764
Principal transactions		121,261		65,674		218,539		132,611
Investment banking		24,702		20,935		40,206		42,779
Asset management and service fees		24,543		29,966		49,476		60,244
Interest		10,584		12,667		20,476		26,356
Other income		2,739		1,715		2,854		508
Total revenues		264,550		214,020		486,882		431,262
Interest expense		3,045		5,069		5,396		10,834
Net revenues		261,505		208,951		481,486		420,428

Non-interest expenses:
Compensation and benefits		175,881		144,795		323,721		290,825
Occupancy and equipment rental		20,714		16,010		38,581		31,726
Communications and office supplies		13,129		9,748		24,974		21,695
Commissions and floor brokerage		6,321		3,486		10,681		3,967
Other operating expenses		19,351		14,762		35,265		28,140
Total non-interest expenses		235,396		188,801		433,222		376,353

Income before income tax expense		26,109		20,150		48,264		44,075
Provision for income taxes		10,294		7,818		19,272		17,396
Net income	$	15,815	$	12,332	$	28,992	$	26,679

Earnings per basic common share:
Basic	$	0.58	$	0.53	$	1.07	$	1.14
Diluted		0.51		0.45		0.94		0.99

Weighted average number of common shares outstanding:
Basic		27,455		23,449		27,116		23,363
Diluted		31,270		27,229		30,752		26,931

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2009			2008
Operating Activities:
Net income	$	28,992		$	26,679
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		8,086			6,065
Deferred income taxes		(1,150	)		(1,997	)
Amortization of loans and advances to financial advisors and other employees		11,936			10,620
Accretion of discounts on available-for-sale securities		(123	)		(384	)
Provision for loan losses and allowance for loans and advances to financial advisors and other employees		1,384			380
Excess tax benefit associated with stock-based awards		(10,546	)		(7,646	)
Stock-based compensation		24,019			25,350
Loss on the sale of investments		2,142			4,420
Amortization of intangible assets		1,399			1,590
Other		257			414
Decrease/(increase) in operating assets:
Receivables:
Customers		(59,139	)		9,492
Brokers, dealers and clearing organizations		(299,766	)		(68,802	)
Securities purchased under agreements to resell		(80,421	)		(12,663	)
Loans originated as mortgages held for sale		(534,217	)		(162,819	)
Proceeds from mortgages held for sale		522,143			148,852
Trading securities owned, including those pledged		(167,469	)		(40,330	)
Loans and advances to financial advisors and other employees		(52,637	)		(15,957	)
Other assets		(10,926	)		18,284
Increase/(decrease) in operating liabilities:
Payables:
Customers		36,699			19,746
Drafts		(11,472	)		(12,922	)
Brokers, dealers and clearing organizations		91,021			27,550
Trading securities sold, but not yet purchased		90,185			83,000
Other liabilities and accrued expenses		(83,493	)		(62,291	)
Net cash used in operating activities		(493,096	)		(3,369	)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Cash Flows (continued)

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2009			2008
Investing Activities:
Proceeds from:
Sale or maturity of investments	$	39,703		$	30,871
Maturities, calls and principal paydowns on available-for sale securities		12,649			14,353
Sale of property		-			766
Sale of bank foreclosed assets held for sale		2,845			1,000
Decrease/(increase) in bank loans, net		8,096			(41,557	)
Payments for:
Purchase of available-for-sale securities		(92,209	)		(16,609	)
Purchase of bank foreclosed assets held for sale		(2,719	)		(260	)
Purchase of fixed assets		(11,005	)		(8,490	)
Purchase of investments		(68,683	)		(37,719	)
Net cash used in investing activities		(111,323	)		(57,645	)
Financing Activities:
Increase in bank deposits, net		185,632			29,768
Net proceeds from short-term borrowings from banks		212,300			56,250
Increase/(decrease) in securities loaned		39,230			(30,044	)
Securities sold under agreements to repurchase		52,665			5,199
Reissuance of treasury stock		-			722
Issuance of common stock		53,903			1,754
Excess tax benefits from stock-based compensation		10,546			7,646
Proceeds from/(payments to) Federal Home Loan Bank advances and other secured financing		(4,000	)		22,236
Repurchase of common stock		-			(12,141	)
Extinguishment of subordinated debt		(1,300	)		(914	)
Net cash provided by financing activities		548,976			80,476

(Decrease)/increase in cash and cash equivalents		(55,443	)		19,462
Cash and cash equivalents at beginning of period		239,725			47,963
Cash and cash equivalents at end of period	$	184,282		$	67,425

Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,277		$	11,713
Cash paid for income taxes, net of refunds		435			6,693
Noncash investing and financing activities:
Units, net of forfeitures	$	50,609		$	32,681
Payment of Ryan Beck contingent earn-out		9,807			-

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

NOTE 1 - Nature of Operation and Basis of Presentation

Nature of Operations

Stifel Financial Corp. (the "Parent"), through its wholly-owned subsidiaries, principally Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"), Century Securities Associates, Inc. ("CSA"), Stifel Nicolaus Limited ("SN Ltd"), 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 throughout the United States. Although we have offices throughout the United States 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.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Stifel Financial Corp. and its wholly-owned subsidiaries, principally Stifel Nicolaus & Company, Incorporated. 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.

We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. In management's opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise noted) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2008 on file with the SEC.

Effective June 30, 2009, we adopted Statement of Financial Accounting Standard ("SFAS") Statement No. 165 ("SFAS 165), "Subsequent Events." Under SFAS 165, subsequent events are defined as events or transactions that occur after the balance sheet date, but before the financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet. Unrecognized subsequent events are events or transactions that provide evidence about conditions that did not exist at the date of the balance sheet, but arose before the financial statements were issued. Recognized subsequent events are recorded in the consolidated financial statements and unrecognized subsequent events are excluded from the consolidated financial statements but disclosed in the notes to the consolidated financial statements if their effect is material. In accordance with SFAS 165, we evaluated subsequent events through August 10, 2009.

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

There have been no material changes in our significant accounting policies, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2008.

Recently Adopted Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2009, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2008, that are of significance, or potential significance, to our company's consolidated financial statements.

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement No. 157 ("SFAS 157"), "Fair Value Measurements," which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements and is effective for fiscal years beginning after November 15, 2007. We adopted SFAS 157 for all nonfinancial assets and nonfinancial liabilities on January 1, 2009. These nonfinancial items include assets and liabilities such as reporting units measured at fair value in a goodwill impairment test and nonfinancial assets acquired and liabilities assumed in a business combination. The adoption of SFAS 157 for nonfinancial assets and liabilities did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued Statement No. 141 (revised 2007) ("SFAS 141R"), "Business Combinations" and SFAS No. 160 ("SFAS 160"), "Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51." SFAS 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. We adopted SFAS 141R and SFAS 160 in the first quarter of 2009. The adoption of SFAS 141R and SFAS 160 did not have a material impact on our consolidated financial statements.

In March 2008, the FASB issued Statement No. 161 ("SFAS 161"), "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," which requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities" and how derivative instruments and related hedged items affect a company's financial position, financial performance and cash flows. We adopted SFAS 161 in the first quarter of 2009. The adoption did not have a material effect on our consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position ("FSP") No. 142-3 ("FSP 142-3"), "Determination of the Useful Life of Intangible Assets." FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, "Goodwill and Other Intangible Assets." We adopted FSP 142-3 in the first quarter of 2009. FSP 142-3 will be applied prospectively to business combinations and asset acquisitions that occur on or after January 1, 2009.

In June 2008, the FASB issued FSP EITF No. 03-6-1 ("FSP EITF 03-06-1"), "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities," which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method described in FASB Statement No. 128, "Earnings per Share." FSP EITF 03-6-1 specifies that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. We adopted FSP EITF 03-06-1 in the first quarter of 2009. The adoption did not impact our calculation of earnings per share for the three and six months ended June 30, 2009.

In September 2008, the FASB issued FSP No. 133-1 and FASB Interpretation ("FIN") FIN 45-4 ("FSP FAS 133-1 and FIN 45-4"), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161." FSP FAS 133-1 and FIN 45-4 amend SFAS 133 to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. FSP FAS 133-1 and FIN 45-4 also amend FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others," to require additional disclosure about the current status of the payment/performance risk of a guarantee. We adopted the provisions of FSP FAS 113-1 and FIN 45-4 in the first quarter of 2009. FSP FAS 133-1 and FIN 45-4 also clarify the effective date in SFAS 161. The adoption did not impact our consolidated financial statements.

In November 2008, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 08-7 ("EITF 08-7"), "Accounting for Defensive Intangible Assets," which requires that a defensive intangible asset be accounted for as a separate unit of accounting and should not be included as part of the cost of the acquirer's existing intangible assets. In addition, EITF 08-7 requires that a defensive intangible asset be assigned a useful life that reflects the entity's consumption of the expected benefits related to the asset. EITF 08-7 is to be applied to all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We adopted the provisions of EITF 08-7 in the first quarter of 2009. EITF 08-7 will be applied prospectively to business combinations and asset acquisitions that occur on or after January 1, 2009.

In January 2009, the FASB issued FSP EITF No. 99-20-1 ("FSP EITF 99-20-1"), "Amendments to the Impairment Guidance of EITF Issue No. 99-20," which amends the impairment guidance in EITF No. 99-20, "Recognition of Interest Income and Impairment on Purchased Beneficial Interest That Continue to be Held by a Transferor in Securitized Financial Assets," to achieve more consistent determination of whether an other-than-temporary impairment has occurred. In addition, this interpretation retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities." We adopted the provisions of FSP EITF 99-20-1 on January 1, 2009. The adoption did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 141(R)-1 ("FSP FAS 141R-1"), "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies" whereby assets acquired and liabilities assumed in a business combination that arise from contingencies should be recognized at fair value on the acquisition date if fair value can be determined during the measurement period. If fair value cannot be determined, companies should typically account for the acquired contingencies using existing accounting guidance. FSP FAS 141R-1 is effective for new acquisitions consummated on or after January 1, 2009.

In April 2009, the FASB issued FSP No. 157-4 ("FSP FAS 157-4"), "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly," which provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is distressed. We adopted FSP FAS 157-4 during the second quarter of 2009. The adoption of FAP FAS 157-4 did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2 ("FSP FAS 115-2 and FAS 124-2"), "Recognition and Presentation of Other-Than-Temporary-Impairments." FSP FAS 115-2 and FAS 124-2 amend existing guidance to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 require separate display of losses related to credit deterioration and losses related to other market factors. When an entity does not intend to sell the security and it is more likely than not that an entity will not have to sell the security before recovery of its cost basis, it must recognize the credit component of an other-than-temporary impairment in earnings and the remaining portion in other comprehensive income. We adopted FSP FAS 115-2 and FAS 124-2 during the second quarter of 2009. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1 ("FSP FAS 107-1 and APB 28-1"), "Interim Disclosures about Fair Value of Financial Instruments," which require disclosures about fair value of financial instruments for interim reporting periods. FSP FAS 107-1 and APB 28-1 relate to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to adoption, we were required to disclose the fair values for these assets and liabilities in our annual audited financial statements. We adopted FSP FAS 107-1 and APB 28-1 during the second quarter of 2009. The adoption expanded our disclosures regarding the use of fair value in interim periods. See Note 4 for the impact of adoption of FSP FAS 107-1 and APB 28-1 on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In May 2009, the FASB issued Statement No. 165 ("SFAS 165"), "Subsequent Events," which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. SFAS 165 defines the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in the financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. We adopted SFAS 165 on June 30, 2009. The adoption of SFAS 165 did not impact our consolidated financial statements.

In June 2009, the FASB issued Statement No. 166 ("SFAS 166"), "Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140," which improves the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets. SFAS 166 removes the concept of a qualifying special-purpose entity from FASB Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities," to variable interest entities that are qualifying special-purpose entities. SFAS 166 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009 (January 1, 2010 for our company) and will apply only to original transfers made after that date. Early adoption is prohibited. We are evaluating the impact that the adoption of SFAS 166 will have on our consolidated financial statements.

In June 2009, the FASB issued Statement No. 167 ("SFAS 167"), "Amendments to FASB Interpretation 46(R)," which improves financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. SFAS 167 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009 (January 1, 2010 for our company). Early adoption is prohibited. We are evaluating the impact that the adoption of SFAS 167 will have on our consolidated financial statements.

In June 2009, the FASB issued Statement No. 168 ("SFAS 168") "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162," which makes the FASB Accounting Standards Codification (the "Codification") the single source of authoritative non-governmental generally accepted accounting principles, superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and related accounting literature. Also included is relevant SEC guidance organized using the same topical structure in separate sections. SFAS 168 is effective for interim and annual reporting periods ending after September 15, 2009. SFAS 168 will impact our financial statement disclosures since all future references to authoritative accounting literature will be referenced in accordance with the Codification.

NOTE 2 - Acquisitions

On March 23, 2009, we entered into a definitive agreement with UBS Financial Services Inc. ("UBS"), which was amended on May 4, 2009, to acquire 56 branches from the UBS Wealth Management Americas branch network. The transaction is structured as an asset purchase for cash at a premium over certain balance sheet items, subject to adjustment. The total consideration includes: (1) an upfront cash payment of up to approximately $29,000 based on the actual number of branches and financial advisors acquired; and (2) aggregate payments of up to approximately $21,100 for net fixed assets and employee loans. In addition, we will issue transition pay in the form of upfront payments of up to $37,100. Of the upfront payments issued to UBS financial advisors, we expect to pay 70% in cash and the remaining payments in our company's stock units. A contingent earn-out payment is payable based on the performance of UBS financial advisors who become our employees, over the two-year period following the closing. The closing of the acquisition is subject to customary conditions and the approval of all required governmental and other regulatory entities and is expected to occur in four phases. The first three phases, which represent 40 branches, are expected to close during the third quarter of 2009. The final phase is expected to close during the fourth quarter of 2009.

On December 31, 2008, we closed on the acquisition of Butler Wick & Company, 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. Revisions to the allocation will be reported as changes to various assets and liabilities, including goodwill and other intangible assets. Pro forma information is not presented because the acquisition is not considered to be material.

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 $9,807 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.

NOTE 3 - Receivables from and Payables to Brokers, Dealers and Clearing Organizations

Amounts receivable from brokers, dealers and clearing organizations at June 30, 2009 and December 31, 2008, included (in thousands):


	June 30, 2009		December 31, 2008
Securities failed to deliver	$	186,090	$	3,837
Receivable from clearing organization		149,086		57,954
Deposits paid for securities borrowed		76,165		49,784
	$	411,341	$	111,575

Amounts payable to brokers, dealers and clearing organizations at June 30, 2009, and December 31, 2008, included (in thousands):


	June 30, 2009		December 31, 2008
Securities failed to receive	$	103,867	$	8,811
Deposits received from securities loaned		56,075		16,987
Payable from clearing organizations		-		3,893
	$	159,942	$	29,691

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.

NOTE 4 - 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 and trading securities sold, but not yet purchased.

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 90 days or less. Actively traded money market funds are measured at their net asset value and classified as Level I.

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 I. Level I financial instruments include highly liquid instruments with quoted prices such as certain U.S. treasury bonds, corporate bonds, certain municipal securities and equities listed in active markets.

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 II. 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 II financial instruments generally include certain U.S. government agency securities, certain corporate bonds, certain municipal securities, asset-backed securities, and mortgage-backed securities.

Level III 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 III financial instruments to include certain asset-backed securities, consisting of collateral loan obligation securities, that have experienced low volumes of executed transactions; and certain corporate bonds where there was less frequent or nominal market activity. Our Level III asset-backed securities are valued using cash flow models that utilize unobservable inputs. Level III corporate bonds are valued using prices from comparable securities.

Investments

Investments in public companies are valued based on quoted prices on active markets and reported in Level I. Investments in certain equity securities with unobservable inputs and auction-rate securities for which the market has been dislocated and largely ceased to function are reported as Level III 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. Auction-rate securities are valued based upon our expectations of issuer redemptions and using internal models.

The following table summarizes the valuation of our financial instruments by SFAS 157 pricing observability levels as of June 30, 2009 (in thousands):


	June 30, 2009
	Total		Level I		Level II		Level III
Assets:
Cash equivalents	$	128,118	$	128,118	$	-	$	-
Trading securities owned:
U.S. government agency securities		74,315		-		74,315		-
U.S. government securities		15,494		15,494		-		-
Corporate securities:
Equity securities		11,154		11.154		-		-
Fixed income securities		152,338		88,530		62,712		1,096
State and municipal securities		36,744		6,684		30,060		-
Total trading securities owned		290,045		121,862		167,087		1,096
Available-for-sale securities:
U.S. government agency securities		2,031		-		2,031		-
State and municipal securities		983		-		983		-
Mortgage-backed securities:
Agency		26,502		-		26,502		-
Non-agency		39,427		-		39,427		-
Commercial		9,684		-		9,684		-
Corporate fixed income securities		39,962		30,120		9,842		-
Asset-backed securities		14,649		-		6,791		7,858
Total available-for-sale securities		133,238		-		95,260		7,858
Investments:
Corporate equity securities		2,810		2,810		-		-
Mutual funds		24,206		24,206		-		-
U.S. government securities		4,228		4,228		-		-
Auction rate securities:
Equity securities		46,740		-		-		46,740
Municipal securities		10,338		-		-		10,338
Other		5,838		566		443		4,829
Total investments		94,160		31,810		443		61,907
	$	645,561	$	311,910	$	262,790	$	70,861

Liabilities:
Trading securities sold, but not yet purchased:
U.S. government agency securities	$	8,552	$	-	$	8,552	$	-
U.S. government securities		85,854		85,854		-		-
Corporate securities:
Equity securities		6,779		6,779		-		-
Fixed income securities		87,508		57,533		29,975		-
State and municipal securities		426		-		426		-
	$	189,119	$	150,166	$	38,953	$	-

The following table summarizes the valuation of our financial instruments by SFAS 157 pricing observability levels as of December 31, 2008 (in thousands):


	December 31, 2008
	Total		Level I		Level II		Level III
Assets:
Cash equivalents	$	172,589	$	172,589	$	-	$	-
Trading securities owned:
U.S. government agency securities		26,525		-		26,525		-
U.S. government securities		13,876		13,876		-		-
Corporate securities:
Equity securities		14,094		14,094		-		-
Fixed income securities		43,131		11,820		27,150		4,161
State and municipal securities		24,950		4,397		20,553		-
Total trading securities owned		122,576		44,187		74,228		4,161
Available-for-sale securities:
U.S. government agency securities		8,591		-		8,591		-
State and municipal securities		1,531		-		1,531		-
Mortgage-backed securities:
Agency		12,430		-		12,430		-
Non-agency		17,422		-		17,422		-
Asset-backed securities		10,423		-		-		10,423
Total available-for-sale securities		50,397		-		39,974		10,423
Investments:
Corporate equity securities		2,668		2,668		-		-
Mutual funds		23,082		23,082		-		-
U.S. government securities		7,132		9		7,123		-
Auction rate securities:
Equity securities		11,366		-		-		11,470
Municipal securities		7,143		-		-		7,039
Other		5,678		90		419		5,169
Total investments		57,069		25,849		7,542		23,678
	$	402,631	$	242,625	$	121,744	$	38,262

Liabilities:
Trading securities sold, but not yet purchased:
U.S. government securities	$	33,279	$	33,279	$	-	$	-
Corporate securities:
Equity securities		3,489		3,489		-		-
Fixed income securities		62,012		24,081		37,931		-
State and municipal securities		154		-		154		-
	$	98,934	$	60,849	$	38,085	$	-

Our company's investment in a U.S. government security used to fund our venture capital activities in qualified Missouri business is classified as held-to-maturity and is not subject to fair value accounting and therefore is not included in the above analysis of fair value at June 30, 2009 and December 31, 2008. This investment is included in "Investments" in the condensed consolidated statements of financial condition at June 30, 2009.

The following table summarizes the changes in fair value carrying values associated with Level III financial instruments during the six months ended June 30, 2009 (in thousands):


	Balance at December 31, 2008		Purchases/ (sales), net			Net transfers in/(out)			Realized gains/ (losses)⁽¹⁾		Unrealized gains/ (losses)⁽¹⁾⁽²⁾			Balance at June 30, 2009
Assets:
Trading securities owned:
Corporate fixed income securities	$	4,161	$	(2,454	)	$	-		$	352	$	(963	)	$	1,096
Available-for-sale securities:
Asset-backed securities		10,423		(3,326	)		-			-		761			7,858
Investments:
Auction rate securities:
Equity securities		11,470		38,490			-			-		(3,220	)		46,740
Municipal securities		7,039		3,475			-			-		(176	)		10,338
Other		5,169		273			(503	)		-		(110	)		4,829
Total investments		23,678		42,238			(503	)		-		(3,506	)		61,907
	$	38,262	$	36,458		$	(503	)	$	352	$	(3,708	)	$	70,861

⁽¹⁾ Realized and unrealized gains/(losses) related to trading securities and investments are reported in other income on the consolidated statements of operations.

⁽²⁾ Unrealized gains/(losses) related to available-for-sale securities are reported in 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 I or Level II valued assets or liabilities. We did not have any Level III liabilities at June 30, 2009 or December 31, 2008. The changes to our company's Level III classified instruments were principally a result of: purchases of auction rate securities ("ARS") from our customers, principal pay-downs of our available-for-sale securities, unrealized gains and losses, and redemptions of ARS at par during the first half of 2009. There were no changes in unrealized gains/(losses) recorded in earnings for the six months ended June 30, 2009 relating to Level III assets still held at June 30, 2009. Investment gains and losses of our investments are included in our condensed consolidated statements of operations as a component of other income.

The following is a summary of the carrying values and estimated fair values of certain financial instruments as of June 30, 2009 (in thousands):


	June 30, 2009
	Carrying Value		Estimated fair value
Financial assets:
Held-to-maturity securities	$	7,574	$	5,934
Bank loans (including loans held for sale), net of allowance		215,881		211,893
Financial liabilities:
Time deposits		19,690		20,110
Debentures to Stifel Financial Capital Trusts		82,500		39,436

This summary excludes financial assets and liabilities for which carrying value approximates fair value. For financial assets, these include cash and cash equivalents, cash segregated under federal and other regulations, our investment in a U.S. government security used to fund our venture capital activities in qualified Missouri business which is classified as held-to-maturity and included in "Investments," convertible notes and bank foreclosed assets held for sale. For financial liabilities, these include demand, savings, and money market deposits, Federal Home Loan Bank advances and other secured financing, federal funds purchased, and security repurchase agreements. The estimated fair value of demand, savings, and money market deposits is the amount payable on demand at the reporting date. SFAS 107 requires the use of carrying value because the accounts have no stated maturity and the customer has the ability to withdraw funds immediately. Also excluded from the summary are financial instruments recorded at fair value on a recurring basis, as previously described.

The fair value of loans is estimated by discounting future cash flows on "pass" grade loans using the LIBOR yield curve adjusted by a factor that reflects the credit and interest rate risk inherent in the loan. These future cash flows are then reduced by the estimated "life-of-the-loan" aggregate credit losses in the loan portfolio. These adjustments for lifetime future credit losses are highly judgmental because we do not have a validated model to estimate lifetime losses on large portions of our loan portfolio. Loans accounted for under SFAS 114 "Accounting by Creditors for Impairment of a Loan" are not included in this credit adjustment as they are already considered to be held at fair value. Loans, other than those held for sale, are not normally purchased and sold by our company, and there are no active trading markets for most of this portfolio. The fair value of time deposits is estimated by discounting future cash flows using the LIBOR yield curve.

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 loss experience, 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.

NOTE 5 - 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 June 30, 2009 and December 31, 2008, are as follows (in thousands):


	June 30, 2009		December 31, 2008
Trading securities owned:
U.S. government agency securities	$	74,315	$	26,525
U.S. government securities		15,494		13,876
Corporate securities:
Equity securities		11,154		14,094
Fixed income securities		152,338		43,131
State and municipal securities		36,744		24,950
	$	290,045	$	122,576
Trading securities sold, but not yet purchased:
U.S. government agency securities	$	8,552	$	-
U.S. government securities		85,854		33,279
Corporate securities:
Equity securities		6,779		3,489
Fixed income securities		87,508		62,012
State and municipal securities		426		154
	$	189,119	$	98,934

We pledge securities owned as collateral to counterparties who have the ability to repledge the collateral, therefore, we have reported the pledged securities under the caption "Trading securities owned, at fair value" in the condensed consolidated statements of financial condition.

NOTE 6 - Available-for-Sale Securities 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 June 30, 2009 and December 31, 2008 (in thousands):


	June 30, 2009
	Amortized cost		Gross unrealized gains ⁽¹⁾		Gross unrealized losses ⁽¹⁾			Estimated fair value
Available-for-sale
U.S. government securities	$	1,995	$	36	$	-		$	2,031
State and municipal securities		961		22		-			983
Mortgage-backed securities:
Agency		26,469		136		(103	)		26,502
Non-agency		53,395		3		(4,287	)		49,111
Corporate fixed income securities		39,627		510		(174	)		39,963
Asset-backed securities		14,507		673		(532	)		14,648
	$	136,954	$	1,380	$	(5,096	)	$	133,238

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


	June 30, 2009
	Amortized cost		Gross unrealized gains ⁽¹⁾		Gross unrealized losses ⁽¹⁾			Carrying value		Gross unrealized gains ⁽²⁾		Gross unrealized losses ⁽²⁾			Estimated fair value
Held-to-maturity
Asset-backed securities	$	10,069		-		(2,495	)	$	7,574		-		(1,640	)	$	5,934

⁽¹⁾ Unrealized gains/(losses) recognized in other comprehensive income.

⁽²⁾ Unrealized gains/(losses) not recognized in other comprehensive income.


	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

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


	December 31, 2008
	Amortized cost		Gross unrealized gains ⁽¹⁾		Gross unrealized losses ⁽¹⁾			Carrying value		Gross unrealized gains ⁽²⁾		Gross unrealized losses ⁽²⁾			Estimated fair value
Held-to-maturity
Asset-backed securities	$	10,069		-		(2,495	)	$	7,574		-		(1,324	)	$	6,250

⁽¹⁾ Unrealized gains/(losses) recognized in other comprehensive income.

⁽²⁾ Unrealized gains/(losses) not recognized in other comprehensive income.

During the six months ended June 30, 2009, available-for-sale securities with an aggregate par value of $7,050 were called by the issuing agencies or matured resulting in no gains or losses recorded through the condensed consolidated statement of operations. Additionally, during the six months ended June 30, 2009, Stifel Bank received principal payments on asset-backed and mortgage-backed securities of $5,599. During the three months ended June 30, 2009, unrealized gains, net of deferred taxes, of $629 were recorded in accumulated other comprehensive income. During the three months ended June 30, 2008, unrealized losses, net of deferred tax benefits, of $859 were recorded in accumulated other comprehensive income. During the six months ended June 30, 2009, unrealized gains, net of deferred taxes, of $2,001 were recorded in accumulated other comprehensive income. During the six months ended June 30, 2008, unrealized losses, net of deferred tax benefits, of $2,191 were recorded in accumulated other comprehensive income.

On June 30, 2008, we transferred $10,000 par value asset backed security, consisting of investment-grade trust preferred securities related primarily to banks, with an amortized cost basis of $10,069 from our available-for-sale securities portfolio to our held-to-maturity portfolio. This security was transferred at the estimated fair value of $7,574. The gross unrealized loss of $2,495 included in accumulated other comprehensive income is being amortized as an adjustment of yield over the remaining life of the security. The estimated fair value of the held-to-maturity security at June 30, 2009 was $5,934. The estimated fair value was determined using several factors; however, primary weight was given to discounted cash flow modeling techniques that incorporated an estimated discount rate based upon recent observable debt security issuances with similar characteristics. Based upon the results of this analysis and our intent and ability to hold this investment to maturity, we do not consider this security to be other-than-temporarily impaired as of June 30, 2009.

The table below summarizes the amortized cost and fair values 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.


	June 30, 2009
	Available-for-sale				Held-to-maturity
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Debt securities
Within one year	$	7,737	$	7,240	$	-	$	-
After one year through three years		34,392		34,710		-		-
After three years through five years		9,733		10,075		-		-
After five years through ten years		5,228		5,600		-		-
After ten years		-		-		7,574		5,934

Mortgage-backed securities
After five years through ten years		23,694		22,753		-		-
After ten years		56,170		52,860		-		-
	$	136,954	$	133,238	$	7,574	$	5,934

The carrying value of securities pledged as collateral to secure public deposits and other purposes was $24,475 and $39,570 at June 30, 2009 and December 31, 2008, respectively.

Certain investments in the available-for-sale portfolio at June 30, 2009 are reported in the condensed consolidated statements of financial condition at an amount less than their amortized cost. The total fair value of these investments at June 30, 2009 was $74,496, which was 56% of our company's available-for-sale investment portfolio. The amortized cost basis of these investments was $79,592 at June 30, 2009. The declines in the available-for-sale portfolio primarily resulted from changes in interest rates, the widening of credit spreads and liquidity issues that have had a pervasive impact on the market.

Our investment in a held-to-maturity asset-backed security consists of investment grade pools of trust preferred securities related to banks. Unrealized losses were caused primarily by: 1) widening of credit spreads; 2) illiquid markets for collateralized debt obligations; 3) global disruptions in the credit markets; and 4) increased supply of collateralized debt obligation secondary market securities from distressed sellers. There have been no adverse changes to the estimated cash flows of these securities.

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 June 30, 2009 (in thousands):


	June 30, 2009
	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
Mortgage-backed securities:
Agency	$	-		$	-	$	(103	)	$	11,672	$	(103	)	$	11,672
Non-agency		(1,166	)		36,125		(3,121	)		9,049		(4,287	)		45,174
Corporate fixed income securities		(174	)		11,440		-			-		(174	)		11,440
Asset-backed securities		-			-		(532	)		6,210		(532	)		6,210
	$	(1,340	)	$	47,565	$	(3,756	)	$	26,931	$	(5,096	)	$	74,496

Our company's available-for-sale securities and held-to-maturity security are reviewed quarterly in accordance with its accounting policy for other-than-temporary impairment. Since the decline in fair value of the securities presented in the table above is not attributable to credit quality but to changes in interest rates, the widening of credit spreads, and the liquidity issues that have had a pervasive impact on the market and because we have the ability and intent to hold these investments until a fair value recovery or maturity, we do not consider these securities to be other-than-temporarily impaired as of June 30, 2009.

NOTE 7 - Bank Loans

The following table presents the balance and associated percentage of each major loan category in Stifel Bank's loan portfolio at June 30, 2009 and December 31, 2008 (in thousands, except percentages):


	June 30, 2009						December 31, 2008
	Balance			Percent			Balance			Percent
Commercial real estate	$	40,177			22.9	%	$	38,446			20.6	%
Construction and land		6,060			3.5			13,968			7.5
Commercial ⁽¹⁾		17,145			9.8			27,538			14.7
Residential real estate		50,714			29.0			58,778			31.4
Home equity lines of credit		29,671			16.9			28,612			15.3
Consumer ⁽²⁾		31,346			17.9			19,628			10.5
Other		24			-			52			-
		175,137			100.0	%		187,022			100.0	%
Unamortized loan origination costs, net of loan fees		406						591
Loans in process		78						(3,896	)
Allowance for loan losses		(3,060	)					(2,448	)
	$	172,561					$	181,269

⁽¹⁾ Includes stock-secured loans of $588 and $1,770 at June 30, 2009 and December 31, 2008, respectively.

⁽²⁾ Includes stock-secured loans of $29,434 and $18,861 at June 30, 2009 and December 31, 2008, respectively.

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


	Three Months Ended						Six Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Allowance for loan losses, beginning of period	$	2,710		$	1,567		$	2,448		$	1,685
Provision for loan losses		374			935			907			1,070
Charge-offs:
Real estate construction loans		-			(493	)		(134	)		(493	)
Commercial real estate		-			-			(106	)		-
Construction and land		-			-			(31	)		(253	)
Other		(24	)		-			(24	)		-
Total charge-offs		(24	)		(493	)		(295	)		(746	)
Recoveries		-			-			-			-
Allowance for loan losses, end of period	$	3,060		$	2,009		$	3,060		$	2,009

Net charge-offs to average bank loans outstanding, net		0.01	%		0.28	%		0.13	%		0.48	%

At June 30, 2009, Stifel Bank had $43,320 in mortgage loans held for sale. For the three months ended June 30, 2009 and 2008, Stifel Bank recognized a gain of $1,302 and $814, respectively from the sale of loans originated for sale, net of fees and costs to originate these loans. For the six months ended June 30, 2009 and 2008, Stifel Bank recognized a gain of $2,235 and $1,056, respectively from the sale of loans originated for sale, net of fees and costs to originate these loans.

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 June 30, 2009, Stifel Bank had $4,007 of non-accrual loans, which was comprised of $1,660 in non-accrual loans that were less than 90 days past due and $2,347 in non-accrual loans that were more than 90 days past due, for which there was a specific allowance of $1,135. Further, Stifel Bank had $464 in troubled debt restructurings at June 30, 2009. At December 31, 2008, Stifel Bank had $573 in non-accrual loans, for which there was a specific reserve of $189. In addition, there were no accrual loans delinquent 90 days or more or troubled debt restructurings at December 31, 2008. Stifel Bank has no exposure to sub-prime mortgages. 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 immaterial to the condensed consolidated financial statements.

At June 30, 2009 and December 31, 2008, Stifel Bank had loans outstanding to its executive officers, directors and significant stockholders and their affiliates in the amount of $0 and $1,578, respectively, and loans outstanding to other Stifel Financial Corp. executive officers, directors and significant stockholders and their affiliates in the amount of $231 and $48, 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) as those prevailing at the time for comparable transactions with other persons.

NOTE 8 - Goodwill and Intangible Assets

The carrying amount of goodwill and intangible assets attributable to each of our company's reportable segments is presented in the following table (in thousands):


	Private Client Group			Capital Markets			Stifel Bank			Total
Goodwill
Balance at December 31, 2008	$	58,373		$	53,220		$	16,685		$	128,278
Net additions		3,144			1,085			-			4,229
Impairment losses		-			-			-			-
Balance at June 30, 2009	$	61,517		$	54,305		$	16,685		$	132,507

Intangible assets
Balance at December 31, 2008	$	10,888		$	3,742		$	1,354		$	15,984
Net additions		1,676			-			-			1,676
Amortization of intangible assets		(997	)		(231	)		(171	)		(1,399	)
Impairment losses		-			-			-			-
Balance at June 30, 2009	$	11,567		$	3,511		$	1,183		$	16,261

The changes in goodwill during the six months ended June 30, 2009 primarily consist of payments for the contingent earn-out of $4,338 for the Ryan Beck acquisition. The changes in intangible assets during the six months ended June 30, 2009 primarily consist of purchase price adjustments related to our acquisition of Butler Wick on December 31, 2008.

Intangible assets consist of acquired customer lists, core deposits, and non-compete agreements that are amortized to expense over their contractual or determined useful lives. Intangible assets subject to amortization as of June 30, 2009 and December 31, 2008 were as follows (in thousands):


	June 30, 2009				December 31, 2008
	Gross carrying value		Accumulated Amortization		Gross carrying value		Accumulated Amortization
Customer lists	$	21,004	$	6,456	$	19,533	$	5,371
Core deposits		2,157		974		2,157		804
Non-compete agreements		2,789		2,259		2,584		2,115
	$	25,950	$	9,689	$	24,274	$	8,290

Amortization expense related to intangible assets was $665 and $766 for the three months ended June 30, 2009 and 2008, respectively. Amortization expense related to intangible assets was $1,399 and $1,590 for the six months ended June 30, 2009 and 2008, respectively.

The weighted-average remaining lives of the following intangible assets at June 30, 2009 are: customer lists 6.9 years; core deposits 5.8 years; and non-compete agreements 2.4 years. As of June 30, 2009, we expect amortization expense in future periods to be as follows (in thousands):


Fiscal year
Remainder of 2009	$	1,319
2010		2,317
2011		2,104
2012		1,743
2013		1,575
Thereafter		7,203
	$	16,261

NOTE 9 - Bank Deposits

Deposits consist of demand deposits, money market and savings accounts and certificates of deposit. Deposits at June 30, 2009 and December 31, 2008 were as follows (in thousands):


	June 30, 2009		December 31, 2008
Demand deposits (non interest-bearing)	$	15,096	$	23,162
Demand deposits (interest-bearing)		3,542		4,258
Money market and savings accounts		432,102		233,276
Certificates of deposit		19,690		24,102
	$	470,430	$	284,798

The weighted average interest rate on deposits was 0.7% and 0.4% at June 30, 2009 and December 31, 2008, respectively.

Scheduled maturities of certificates of deposit at June 30, 2009 and December 31, 2008 were as follows (in thousands):


	June 30, 2009		December 31, 2008
Certificates of deposit, less than $100:
Within one year	$	6,891	$	8,525
One to three years		2,521		3,562
Over three years		1,389		1,349
		10,801		13,436

Certificates of deposit, $100 and greater:
Within one year	$	6,301	$	7,455
One to three years		1,365		1,949
Over three years		1,223		1,262
		8,889		10,666

	$	19,690	$