Edgar Filing: STIFEL FINANCIAL CORP

Stifel Financial Corp. Form 10-Q

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 March 31, 2010


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 April 22, 2009 was 31,033,701.

STIFEL FINANCIAL CORP.

Form 10-Q

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Statements of Financial Condition as of March 31, 2010 (unaudited) and December 31, 2009	3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and March 31, 2009 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and March 31, 2009 (unaudited)	6
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	48
Item 4. Controls and Procedures	50

PART II - OTHER INFORMATION
Item 1. Legal Proceedings	51
Item 1A. Risk Factors	51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 5. Exhibits	52
Signatures	53

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Financial Condition


(in thousands)	March 31, 2010		December 31, 2009
	(Unaudited)
Assets
Cash and cash equivalents	$	145,701	$	161,820
Cash segregated for regulatory purposes		19		19
Receivables:
Brokerage clients, net		412,726		383,222
Broker, dealers and clearing organizations		254,129		309,609
Securities purchased under agreements to resell		136,101		124,854
Trading securities owned, at fair value (includes securities pledged of $459,152 and $366,788, respectively)		586,149		454,891
Available-for-sale securities, at fair value		549,121		578,488
Held-to-maturity securities, at amortized cost		7,574		7,574
Loans held for sale		72,179		91,117
Bank loans, net		342,883		335,157
Bank foreclosed assets held for sale, net of estimated cost to sell		1,998		3,143
Investments		122,853		109,403
Fixed assets, net of accumulated depreciation and amortization of $74,702 and $71,445, respectively		62,985		62,115
Goodwill		166,725		166,725
Intangible assets, net		24,275		24,648
Loans and advances to financial advisors and other employees, net		181,521		185,123
Deferred tax assets, net		51,100		53,462
Other assets		109,344		115,986
Total Assets	$	3,227,383	$	3,167,356

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Financial Condition (continued)


(in thousands, except share and per share amounts)	March 31, 2010			December 31, 2009
	(Unaudited)
Liabilities and Shareholders' Equity
Short-term borrowings from banks	$	184,900		$	90,800
Payables:
Customers		227,353			214,883
Brokers, dealers and clearing organizations		102,529			90,460
Drafts		55,490			66,964
Securities sold under agreements to repurchase		106,617			122,533
Bank deposits		988,263			1,047,211
Federal Home Loan Bank advances		2,000			2,000
Trading securities sold, but not yet purchased, at fair value		369,825			277,370
Accrued compensation		91,544			166,346
Accounts payable and accrued expenses		94,286			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		982			9,398
		2,306,289			2,283,829
Liabilities subordinated to claims of general creditors		8,690			10,081
Shareholders' 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 31,032,251 and 30,388,270 shares, respectively		4,655			4,558
Additional paid-in-capital		639,232			623,943
Retained earnings		268,354			244,615
Accumulated other comprehensive income		840			1,302
		913,081			874,418
Treasury stock, at cost, 0 and 4,221 shares, respectively		-			(242	)
Unearned employee stock ownership plan shares, at cost, 105,751 and 113,885 shares, respectively		(677	)		(730	)
		912,404			873,446
Total Liabilities and Shareholders' Equity	$	3,227,383		$	3,167,356

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
(in thousands, except per share amounts)	2010		2009
Revenues:
Principal transactions	$	117,420	$	97,278
Commissions		105,035		74,610
Asset management and service fees		38,877		24,933
Investment banking		34,221		15,504
Interest		14,647		9,892
Other income		4,171		115
Total revenues		314,371		222,332
Interest expense		2,341		2,351
Net revenues		312,030		219,981

Non-interest expenses:
Compensation and benefits		206,242		147,840
Occupancy and equipment rental		24,858		17,867
Communications and office supplies		14,418		11,845
Commissions and floor brokerage		5,744		4,360
Other operating expenses		21,203		15,914
Total non-interest expenses		272,465		197,826

Income before income tax expense		39,565		22,155
Provision for income taxes		15,825		8,978
Net income	$	23,740	$	13,177

Earnings per common share:
Basic	$	0.77	$	0.49
Diluted	$	0.68	$	0.44

Weighted average number of common shares outstanding:
Basic		30,720		26,772
Diluted		35,025		30,198

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2010			2009
Operating Activities:
Net income	$	23,740		$	13,177
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		5,342			4,019
Amortization of loans and advances to financial advisors and other employees		12,101			6,341
Accretion of discounts on available-for-sale securities		1,889			(75	)
Provision for loan losses and allowance for loans and advances to financial advisors and other employees		(425	)		663
Amortization of intangible assets		764			734
Deferred income taxes		(3,476	)		2,746
Stock-based compensation		15,823			13,077
Excess tax benefits from stock-based compensation		(12,683	)		(9,597	)
Loss on the sale of investments		8			2,409
Other, net		(18	)		476
Decrease/(increase) in operating assets:
Receivables:
Brokerage clients		(29,667	)		9,389
Brokers, dealers and clearing organizations		55,480			(70,560	)
Securities purchased under agreements to resell		(11,247	)		(51,870	)
Trading securities owned, including those pledged		(131,258	)		(286,010	)
Loans originated as mortgages held for sale		(166,143	)		(240,131	)
Proceeds from mortgages held for sale		184,882			240,270
Loans and advances to financial advisors and other employees		(7,943	)		(15,161	)
Other assets		19,530			(14,574	)
Increase/(decrease) in operating liabilities:
Payables:
Customers		12,470			(10,489	)
Brokers, dealers and clearing organizations		(12,995	)		13,866
Drafts		(11,474	)		(14,342	)
Trading securities sold, but not yet purchased		92,455			161,750
Other liabilities and accrued expenses		(116,432	)		(89,722	)
Net cash used in operating activities		(79,277	)		(333,614	)

See accompanying Notes to Condensed Consolidated Financial Statements.

STIFEL FINANCIAL CORP.

Condensed Consolidated Statements of Cash Flows (continued)

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2010			2009
Investing Activities:
Proceeds from:
Sale or maturity of investments	$	16,992		$	24,848
Maturities, calls and principal paydowns on available-for sale securities		32,855			9,515
Sale of bank foreclosed assets held for sale		1,302			353
Decrease/(increase) in bank loans, net		(7,694	)		10,025
Payments for:
Purchase of available-for-sale securities		-			(10,521	)
Acquisitions		(500	)		-
Purchase of investments		(30,402	)		(14,831	)
Purchase of fixed assets		(6,183	)		(3,847	)
Purchase of bank foreclosed loans held for sale		(113	)		(2,523	)
Net cash provided by investing activities		6,257			13,019
Financing Activities:
(Decrease)/increase in bank deposits, net		(58,948	)		174,507
Net proceeds from short-term borrowings from banks		94,100			163,500
Securities sold under agreements to repurchase		(15,916	)		(1,453	)
Increase in securities loaned		25,064			12,570
Excess tax benefits from stock-based compensation		12,683			9,597
Repurchase of common stock		1,067			10,072
Reissuance of treasury stock		242			-
Proceeds from Federal Home Loan Bank advances and other secured financing		-			35
Extinguishment of subordinated debt		(1,391	)		(1,300	)
Net cash provided by financing activities		56,901			367,528

(Decrease)/Increase in cash and cash equivalents		(16,119	)		46,933
Cash and cash equivalents at beginning of period		161,820			239,725
Cash and cash equivalents at end of period	$	145,701		$	286,658

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,238		$	2,264
Cash paid for income taxes, net of refunds	$	19,473		$	497
Noncash investing and financing activities:
Units, net of forfeitures	$	44,979		$	35,157
Payment of Ryan Beck contingent earn-out	$	-		$	9,301

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, 2009 on file with the SEC.

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.

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, 2009.

Recently Adopted Accounting Guidance

With the exception of those described below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2010, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2009, that are of significance, or potential significance, to our company's consolidated financial statements.

Consolidation

In February 2010, the Financial Accounting Standards Board ("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 22 - Variable Interest Entities.

Subsequent Events

In February 2010, the FASB issued Accounting Standards Update ("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 23 - 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 roll forward 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 roll forward 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 4 - Fair Value of Financial Instruments.

Accounting for Transfers of Financial Assets

In June 2009, the FASB issued and subsequently codified guidance amending ASC 860 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.

NOTE 2 - Assets and Liabilities Held for Sale

On December 30, 2009, Stifel Bank entered into a Branch Purchase and Assumption Agreement providing for the sale of a branch office to Anheuser-Busch Employees' Credit Union. Under the terms of the agreement, Anheuser-Busch Employees' Credit Union is to assume $18,928 of deposits, and will purchase $30,995 of loans as well as certain other assets, including the building and office equipment of $661. The transaction, which is subject to certain closing conditions, is expected to be completed during the second quarter of 2010.

The assets and liabilities associated with the branch office are reflected in "Loans held for sale", "Other assets" and "Deposits" on the consolidated statements of financial condition as of March 31, 2010, respectively, at the lower of their carrying value or fair value less costs to sell. The branch sale has not been classified as discontinued operations as Stifel Bank will have on-going banking operations in this market.

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

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


	March 31, 2010		December 31, 2009

Deposits paid for securities borrowed	$	176,499	$	147,325
Receivable from clearing organizations		39,784		97,658
Securities failed to deliver		37,846		64,626
	$	254,129	$	309,609

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


	March 31, 2010		December 31, 2009

Securities failed to receive	$	60,235	$	73,793
Deposits received from securities loaned		41,419		16,667
Payable to clearing organizations		875		-
	$	102,529	$	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.

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 three months or less. Actively traded money market funds are measured at their net asset 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 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 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 U.S. government agency securities, certain corporate bonds, certain municipal securities, asset-backed securities, and mortgage-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 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 or when we were able to obtain only a single broker quote. 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.

Investments

Investments in public companies are valued based on quoted prices in active markets and reported in Level 1. 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 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. Auction-rate securities are valued based upon our expectations of issuer redemptions and using internal models.

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.

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


	March 31, 2010
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	3,860	$	3,860	$	-	$	-
Trading securities owned:
U.S. government agency securities		96,686		-		96,686		-
U.S. government securities		28,552		28,552		-		-
Corporate securities:
Fixed income securities		374,669		142,101		225,526		7,042
Equity securities		22,429		19,863		2,566		-
State and municipal securities		63,813		-		63,813		-
Total trading securities owned		586,149		190,516		388,591		7,042
Available-for-sale securities:
U.S. government agency securities		504		-		504		-
State and municipal securities		989		-		989		-
Mortgage-backed securities:
Agency		408,664		-		408,664		-
Non-agency		36,731		-		36,731		-
Commercial		48,175		-		48,175		-
Corporate fixed income securities		42,075		31,405		10,670		-
Asset-backed securities		11,983		-		11,983		-
Total available-for-sale securities		549,121		31,405		517,716		-
Investments:
Corporate equity securities		3,066		3,066		-		-
Mutual funds		29,551		29,551		-		-
U.S. government securities		8,072		8,072		-		-
Auction rate securities:
Equity securities		64,735		-		-		64,735
Municipal securities		10,956		-		-		10,956
Other		6,473		626		429		5,418
Total investments		122,853		41,315		429		81,109
	$	1,261,983	$	267,096	$	906,736	$	88,151

Liabilities:
Trading securities sold, but not yet purchased:
U.S. government securities	$	110,616	$	110,616	$	-	$	-
U.S. government agency securities		6,876		-		6,876		-
Corporate securities:
Fixed income securities		224,282		95,357		124,670		4,255
Equity securities		27,866		27,767		99		-
State and municipal securities		185		-		185		-
Total trading securities sold, but not yet purchased		369,825		233,740		131,830		4,255
Derivative contracts*		3,291		-		3,291		-
	$	373,116	$	233,740	$	135,121	$	4,255

* Included in "Accounts payable and accrued expenses on the condensed consolidated statements of financial condition.

	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*		78		-		78		-
	$	277,448	$	164,754	$	112,694	$	-

^{* Included in "Accounts payable and accrued expenses on the condensed consolidated statements of financial condition.}

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


	Financial Assets*															Financial Liabilities**
						Investments
	Corporate Fixed Income Securities			Asset-backed Securities			Auction Rate Securities - Equity			Auction Rate Securities - Municipal			Other			Corporate Fixed Income Securities

Balance at December 31, 2009	$	1,243		$	2,693		$	46,297		$	9,706		$	5,426		$	-
Unrealized gains/(losses):
Included in changes in net assets		(18	)		-			(1,087	)		(75	)		(182	)		50
Included in OCI		-			887			-			-			-			-
Realized gains/(losses)		230			-			-			-			-			-
Purchases, issuances, settlements, net		5,478			(3,580	)		19,525			1,325			174			3,315
Level III transfers:
Into level III		109			-			-			-			-			890
Out of level III		-			-			-			-			-			-
Net change		5,799			(2,693	)		18,438			1,250			(8	)		4,255
Balance at March 31, 2010	$	7,042		$	-		$	64,735		$	10,956		$	5,418		$	4,255

^{* Included in "Trading securities owned" on the condensed consolidated statements of financial condition.}
^{** Included in "Trading securities sold, but not yet purchased" on the condensed consolidated statements of financial condition.}

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 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 three months ended March 31, 2010. There were no changes in unrealized gains/(losses) recorded in earnings for the three months ended March 31, 2010 relating to Level 3 assets still held at March 31, 2010. Investment gains and losses of our investments are included in our condensed 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 ASC Topic 810. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial instruments among the levels occur at the end of the reporting period. There were no material transfers between our Level 1 and Level 2 classified instruments during the three months ended March 31, 2010.

The following is a summary of the carrying values and estimated fair values of certain financial instruments as of March 31, 2010 and December 31, 2009 (in thousands):


	March 31, 2010				December 31, 2009
	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Financial assets:
Cash and cash equivalents	$	145,701	$	145,701	$	161,820	$	161,820
Cash segregated for regulatory purposes *		19		19		19		19
Securities purchased under agreements to resell *		136,101		136,101		124,854		124,854
Trading securities owned		586,149		586,149		454,891		454,891
Available-for-sale securities		549,121		549,121		578,488		578,488
Held-to-maturity securities		7,574		4,177		7,574		4,276
Loans held for sale *		72,179		72,179		91,117		91,117
Bank loans		342,883		340,810		335,157		332,437
Investments		122,853		122,853		109,403		109,403
Financial liabilities:
Non-interest-bearing deposits	$	17,947	$	17,664	$	19,521	$	19,013
Interest-bearing deposits		970,316		969,819		1,027,690		1,027,403
Securities sold under agreements to repurchase *		106,617		106,617		122,533		122,533
Federal Home Loan Bank advances *		2,000		2,000		2,000		2,000
Trading securities sold but not yet purchased		369,825		369,825		277,370		277,370
Derivative contracts**		3,291		3,291		78		78
Liabilities subordinated to the claims of general creditors		8,690		7,912		10,081		9,299

* Carrying value approximates fair value.
^{** Included in "Accounts payable and accrued expenses on the condensed consolidated statements of financial condition.}

The following describes the valuation techniques used in estimating the fair value of those financial instruments, not previously described above, as of March 31, 2010 and December 31, 2009.

Financial Assets

Securities purchased under agreements to resell

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

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. The 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.

The decrease in fair value below the carrying amount at March 31, 2010 and December 31, 2009 is primarily due to unrealized losses that were caused primarily by: widening of credit spreads; 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.

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. Fair value is determined based on prevailing market prices for loans with similar characteristics or on sale contract prices. The carrying value as of March 31, 2010 and December 31, 2009 approximates 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

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 March 31, 2010 and December 31, 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.

Securities sold under agreements to repurchase

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

Trading securities sold but not yet purchased

Trading securities sold but not purchased are recorded at fair value based on quoted prices in active markets and other observable market data. Trading securities owned 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. 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.

Derivative contracts

Most of our derivatives are not exchange traded but instead traded in over the counter markets where quoted market prices are not readily available. The fair value of those derivatives is derived using models that use primarily market observable inputs, such as interest rate yield curves, credit curves, option volatility and currency rates. These derivatives are included in "Accounts payable and accrued expenses" on the consolidated statements of financial condition.

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.

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 March 31, 2010 and December 31, 2009, are as follows (in thousands):


Trading securities owned:	March 31, 2010		December 31, 2009
U.S. government agency securities	$	96,686	$	158,724
U.S. government securities		28,552		20,254
Corporate securities:
Fixed income securities		374,669		209,950
Equity securities		22,429		18,505
State and municipal securities		63,813		47,458
	$	586,149	$	454,891

Trading securities sold, but not yet purchased:
U.S. government securities	$	110,616	$	127,953
U.S. government agency securities		6,876		1,537
Corporate securities:
Fixed income securities		224,282		122,491
Equity securities		27,866		25,057
State and municipal securities		185		332
	$	369,825	$	277,370

At March 31, 2010 and December 31, 2009, trading securities owned in the amount of $459,152 and $366,788, respectively, were pledged as collateral for our repurchase agreements and short-term borrowings from banks.

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 on 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 March 31, 2010 and December 31, 2009 (in thousands):


	March 31, 2010
	Amortized cost		Gross unrealized gains ⁽¹⁾		Gross unrealized losses ⁽¹⁾			Estimated fair value
Available-for-sale
U.S. government securities	$	500	$	4	$	-		$	504
State and municipal securities		960		29		-			989
Mortgage-backed securities:
Agency		404,399		4,624		(359	)		408,664
Non-agency		38,039		670		(1,978	)		36,731
Commercial		47,002		1,173		-			48,175
Corporate fixed income securities		39,878		2,197		-			42,075
Asset-backed securities		11,152		831		-			11,983
	$	541,930	$	9,528	$	(2,337	)	$	549,121
Held-to-maturity
Asset-backed securities	$	7,574		-		(3,397	)	$	4,177

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

	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
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.

During the three months ended March 31, 2010, available-for-sale securities with an aggregate par value of $2,953 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 three months ended March 31, 2010, Stifel Bank received principal payments on mortgage-backed securities of $28,515. During the three months ended March 31, 2010 and 2009, unrealized gains, net of deferred taxes, of $3,382 and $1,372, respectively, were recorded in accumulated other comprehensive income.

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.


	March 31, 2010
	Available-for-sale				Held-to-maturity
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Debt securities
Within one year	$	18,361	$	18,794	$	-	$	-
After one year through three years		18,027		19,156		-		-
After three years through five years		6,085		6,732		-		-
After five years through ten years		10,017		10,869		-		-
After ten years		-		-		7,574		4,177

Mortgage-backed securities
After three years through five years		9,991		10,124		-		-
After five years through ten years		24,343		24,488		-		-
After ten years		455,106		458,958		-		-
	$	541,930	$	549,121	$	7,574	$	4,177

The carrying value of securities pledged as collateral to secure public deposits and other purposes was $71,820 and $76,502 at March 31, 2010 and December 31, 2009, respectively.

Certain investments in the available-for-sale portfolio at March 31, 2010 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 March 31, 2010 was $125,459, which was 22.8% of our company's available-for-sale investment portfolio. The amortized cost basis of these investments was $127,796 at March 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 were 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 lead to a significant amount of bank failures.

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 March 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
Mortgage-backed securities:
Agency	$	(254	)	$	96,809	$	(105	)	$	10,281	$	(359	)	$	107,090
Non-agency		(239	)		9,121		(1,739	)		9,248		(1,978	)		18,369
	$	(493	)	$	105,930	$	(1,844	)	$	19,529	$	(2,337	)	$	125,459

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 March 31, 2010.

Other-Than-Temporary Impairment

We evaluate our investment securities portfolio on a quarterly basis for other-than-temporary impairment ("OTTI"). We assesses 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 it is not more likely than not to be required to sell, credit-related OTTI, represented by the expected loss in principal, is recognized in earnings, while noncredit-related OTTI is recognized in other comprehensive income/(loss). For securities which we expect to sell, all OTTI is recognized in earnings.

Noncredit-related OTTI results from other 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 OCI. We applied the related OTTI guidance on the debt security types listed below.

Pooled-trust-preferred securities represent collateralized debt obligations ("CDOs") 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 a specialist 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 ASC 820, "Fair Value Measurements and Disclosures."

Based on the evaluation, we recognized other-than-temporary impairment of $166 related to credit through earnings for the three months ended March 31, 2010. For the impaired security, unrealized losses not related to credit and therefore recognized in other comprehensive income was $1,267 (net of tax was $760) as of March 31, 2010.

As of March 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 with independent third parties and do not believe there is additional OTTI from these securities other than what has already been recorded. We do not intend to sell, nor do we believe we will be required to sell these securities until the fair value is recovered, which may be maturity and, therefore, do not consider them to be other-than-temporarily impaired at March 31, 2010.

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 March 31, 2010 and December 31, 2009 (in thousands, except percentages):


	March 31, 2010						December 31, 2009
	Balance			Percent			Balance			Percent

Consumer ⁽¹⁾	$	233,001			67.8	%	$	227,436			67.8	%
Residential real estate		52,725			15.4			52,086			15.5
Home equity lines of credit		33,245			9.7			33,369			10.0
Commercial		13,890			4.0			11,294			3.4
Commercial real estate		10,093			2.9			10,152			3.0
Construction and land		574			0.2			952			0.3
		342,528			100.0	%		335,289			100.0	%
Unamortized loan origination costs, net of loan fees		1,319						1,556
Loans in process		(295	)					14
Allowance for loan losses		(1,669	)					(1,702	)
	$	342,883					$	335,157

^{(1)
Includes
stock-secured loans of $232,418 and $226,527 at March 31, 2010 and December 31,
2009, respectively.}

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


	Three Months Ended March 31,
	2010			2009

Allowance for loan losses, beginning of period	$	1,702		$	2,448
Provision for loan losses		113			533
Charge-offs:
Residential real estate		(149	)		-
Construction and land		-			(31	)
Commercial real estate		-			(219	)
Real estate construction loans		-			(21	)
Total charge-offs		(149	)		(271	)
Recoveries		3			-
Allowance for loan losses, end of period	$	1,669		$	2,710

Net charge-offs to average bank loans outstanding, net		0.04	%		0.12	%

At March 31, 2010 and December 31, 2009, Stifel Bank had mortgage loans held for sale of $72,179 and $91,117, respectively. For the three months ended March 31, 2010 and 2009, Stifel Bank recognized a gain of $1,074 and $933, 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 March 31, 2010, Stifel Bank had $1,064 of non-accrual loans that were more than 90 days past due, for which there was a specific allowance of $192. Further, Stifel Bank had $394 in troubled debt restructurings at March 31, 2010. At December 31, 2009, Stifel Bank had $1,368 of non-accrual loans that were more than 90 days past due, for which there was a specific reserve of an insignificant amount. In addition, there were $533 in troubled debt restructurings at December 31, 2009. 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 March 31, 2010 and December 31, 2009, Stifel Bank had loans outstanding to its executive officers, directors and significant stockholders and their affiliates in the amount of $790 and $590, respectively, and loans outstanding to other Stifel Financial Corp. executive officers, directors and significant stockholders and their affiliates in the amount of $993 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 8 - 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, 2009.

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

March 31, 2010

Goodwill

Global Wealth Management

112,420

Institutional Group

54,305

166,725


	December 31, 2009		Net additions		Amortization			March 31, 2010
Intangible assets
Global Wealth Management	$	21,356	$	-	$	(647	)	$	20,709
Institutional Group		3,292		391		(117	)		3,566
	$	24,648	$	391	$	(764	)	$	24,275

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


	March 31, 2010				December 31, 2009
	Gross carrying value		Accumulated Amortization		Gross carrying value		Accumulated Amortization

Customer lists	$	31,145	$	8,294	$	30,754	$	7,584
Non-compete agreement		2,789		2,425		2,789		2,371
Core deposits		2,157		1,097		2,157		1,097
	$	36,091	$	11,816	$	35,700	$	11,052

Amortization expense related to intangible assets was $764 and $734 for the three months ended March 31, 2010 and 2009, respectively.

The weighted-average remaining lives of the following intangible assets at March 31, 2010 are: customer lists 8.2 years; core deposits 5.5 years; and non-compete agreements 1.7 years. As of March 31, 2010, we expect amortization expense in future periods to be as follows (in thousands):


Fiscal year *
Remainder of 2010	$	2,335
2011		2,827
2012		2,448
2013		2,184
2014		2,022
Thereafter		11,400
	$	23,216

* The above table does not include the amortization expense associated with our core deposit intangible. We have determined that the assets and liabilities meet the criteria for being classified as held for sale, therefore, we have stopped amortizing the intangible asset.

NOTE 9 - Short-Term Borrowings from Banks

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 the customer-owned securities used as collateral is not reflected in the condensed consolidated statements of financial condition. We maintain available ongoing credit arrangements with banks that provided a peak daily borrowing of $302,800 during the three months ended March 31, 2010. There are no compensating balance requirements under these arrangements. At March 31, 2010, short-term borrowings from banks were $184,900 at an average rate of 1.10%, which were collateralized by company-owned securities valued at $240,135. 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 $106,356 and $63,948 during the three months ended March 31, 2010 and 2009, respectively, at weighted average daily interest rates of 1.01%, and 0.81%, respectively. At March 31, 2010 and December 31, 2009, Stifel Nicolaus had a stock loan balance of $41,419 and $16,667, respectively, at weighted average daily interest rates of 0.50% and 0.33%, respectively. The average outstanding securities lending arrangements utilized in financing activities were $36,140 and $44,285 during the three months ended March 31, 2010 and 2009, respectively, at weighted average daily effective interest rates of 1.89%, and 0.84%, respectively. Customer-owned securities were utilized in these arrangements.

NOTE 10 - Bank Deposits

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


	March 31, 2010		December 31, 2009

Money market and savings accounts	$	931,453	$	993,264
Demand deposits (interest bearing)		22,298		16,181
Demand deposits (non-interest bearing)		17,947		19,521
Certificates of deposit		16,565		18,245
	$	988,263	$	1,047,211

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

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


		March 31, 2010