# STIFEL FINANCIAL CORP (SF) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from STIFEL FINANCIAL CORP's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/720672/000095017022001451/sf-20211231.htm
Accession: 0000950170-22-001451
Filing date: 2022-02-18
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SF/
All MD&A years: /company/SF/mda/
Next year: /company/SF/mda/fy2022/ (FY 2022)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of our company should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Annual Report on Form 10-K for the year ended December 31, 2021.

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

Executive Summary

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

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

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

Stifel Financial Corp., through its wholly owned subsidiaries, is principally engaged in retail brokerage; securities trading; investment banking; investment advisory; retail, consumer, and commercial banking; and related financial services. Our major geographic area of concentration is throughout the United States, with a growing presence in the United Kingdom, Europe, and Canada. Our principal customers are individual investors, corporations, municipalities, and institutions.

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

On July 22, 2021, the Company completed an underwritten registered public offering of $300.0 million of 4.50% Non-Cumulative Perpetual Preferred Stock, Series D, $1.00 par value, with a liquidation preference of $25,000 per share (equivalent to $25 liquidation preference per depositary share).

On August 20, 2021, the Company redeemed all of the outstanding 6.25% Non-Cumulative Perpetual Preferred Stock, Series A. The redemption price was $25.00 per depository share plus accrued and unpaid dividends to, but excluding, the date of redemption.

On November 1, 2021, the Company acquired Vining Sparks and its affiliates (“Vining Sparks”). Established in 1981 and headquartered in Memphis, Tennessee, Vining Sparks has approximately 275 employees in 13 offices throughout the United States. Vining Sparks provides institutional fixed income brokerage, balance sheet management, and underwriting services to more than 4,000 institutional clients in all 50 states, with a core focus on depository institutions, but also serving municipalities, money managers, insurance companies, trust departments, and pension funds. Consideration for this acquisition consisted of cash from operations and shares of company common stock.

Results for the year ended December 31, 2021

For the year ended December 31, 2021, net revenues increased 26.3% to a record $4.7 billion compared to $3.8 billion during the comparable period in 2020. This represents our 26th consecutive year of record net revenues. Net income available to common shareholders for the year ended December 31, 2021, increased 65.7% to $789.3 million, or $6.66 per diluted common share, compared to $476.2 million, or $4.16 per diluted common share, in 2020. For the year ended December 31, 2021, our Global Wealth Management and Institutional Group segments posted record net revenues and pre-tax income.

Our revenue growth for the year ended December 31, 2021, was primarily attributable to higher advisory revenues, asset management, capital raising, commissions, and net interest income, partially offset by lower principal transaction revenues.

30

We remain well-positioned entering fiscal 2022, with nearly $436 billion of client assets under administration, strong activity levels for financial advisory recruiting, and a strong investment banking pipeline. However, we expect to continue to face headwinds from near-zero short-term interest rates and economic uncertainty, including that arising from inflation, supply chain complications, and uncertainty around U.S. economic policy. In addition, although the economy has improved since the beginning of the COVID-19 pandemic, the pace of recovery in the future is uncertain due to concerns related to the pandemic, including the spread of variants, vaccine distribution, and vaccine rates. As a result, we may experience volatility in transactional and investment banking revenues, which may negatively impact our ability to sustain the level of revenues in future periods which were achieved in fiscal 2021. Although our results during the year were positively impacted by a benefit for credit losses related to our bank loan portfolio, net loan growth and/or future market deterioration could result in increased provisions in future periods. In addition, we expect that expenses will continue to increase in fiscal 2022, as business and event-related travel increase and as we continue to make investments in our people and technology to support our growth.

External Factors Impacting Our Business

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

The global economy has recovered considerably since its decline in early 2020, but there is still a high degree of economic uncertainty resulting from the COVID-19 pandemic, as well as a new federal government administration. As a result, volatility of both transactional revenues and investment banking revenues could continue, which may negatively impact our ability to sustain the current quarter revenue levels in future periods.

Our overall financial results continue to be highly and directly correlated to the direction and activity levels of the United States equity and fixed income markets. At December 31, 2021, the key indicators of the markets’ performance, the S&P 500, the NASDAQ, and Dow Jones Industrial Average closed 26.9%, 21.4%, and 18.7% higher than their December 31, 2020, closing prices, respectively.

As a participant in the financial services industry, we are subject to complicated and extensive regulation of our business. The recent economic and political environment has led to legislative and regulatory initiatives, both enacted and proposed, that could substantially intensify the regulation of the financial services industry and may significantly impact us.

31

RESULTS OF OPERATIONS

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change","","","As a Percentage of Net Revenues for the Year Ended December 31,"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019","","","2021","","","2020","","","2019"],["Revenues:"],["Commissions","","$","809,500","","","$","760,627","","","$","667,494","","","","6.4","%","","","14.0","%","","","17.1","%","","","20.3","%","","","20.0","%"],["Principal transactions","","","581,164","","","","588,303","","","","404,751","","","","(1.2",")","","","45.3","","","","12.3","","","","15.7","","","","12.1"],["Investment banking","","","1,565,381","","","","952,308","","","","817,421","","","","64.4","","","","16.5","","","","33.0","","","","25.4","","","","24.5"],["Asset management","","","1,206,516","","","","917,424","","","","848,035","","","","31.5","","","","8.2","","","","25.5","","","","24.5","","","","25.4"],["Interest","","","548,400","","","","523,832","","","","724,882","","","","4.7","","","","(27.7",")","","","11.6","","","","14.0","","","","21.7"],["Other income","","","72,125","","","","75,345","","","","52,378","","","","(4.3",")","","","43.8","","","","1.5","","","","1.9","","","","1.6"],["Total revenues","","","4,783,086","","","","3,817,839","","","","3,514,961","","","","25.3","","","","8.6","","","","101.0","","","","101.8","","","","105.3"],["Interest expense","","","45,998","","","","65,778","","","","177,931","","","","(30.1",")","","","(63.0",")","","","1.0","","","","1.8","","","","5.3"],["Net revenues","","","4,737,088","","","","3,752,061","","","","3,337,030","","","","26.3","","","","12.4","","","","100.0","","","","100.0","","","","100.0"],["Non-interest expenses:"],["Compensation and benefits","","","2,820,301","","","","2,279,335","","","","1,978,116","","","","23.7","","","","15.2","","","","59.5","","","","60.7","","","","59.3"],["Occupancy and equipment rental","","","290,243","","","","274,664","","","","242,893","","","","5.7","","","","13.1","","","","6.1","","","","7.3","","","","7.3"],["Communication and office supplies","","","165,490","","","","164,736","","","","147,428","","","","0.5","","","","11.7","","","","3.5","","","","4.4","","","","4.4"],["Commissions and floor brokerage","","","59,681","","","","55,960","","","","44,011","","","","6.6","","","","27.2","","","","1.3","","","","1.5","","","","1.3"],["Provision for credit losses","","","(11,502",")","","","33,925","","","","9,977","","","","(133.9",")","","","240.0","","","","(0.2",")","","","0.9","","","","0.3"],["Other operating expenses","","","345,794","","","","292,281","","","","315,467","","","","18.3","","","","(7.3",")","","","7.3","","","","7.8","","","","9.4"],["Total non-interest expenses","","","3,670,007","","","","3,100,901","","","","2,737,892","","","","18.4","","","","13.3","","","","77.5","","","","82.6","","","","82.0"],["Income before income taxes","","","1,067,081","","","","651,160","","","","599,138","","","","63.9","","","","8.7","","","","22.5","","","","17.4","","","","18.0"],["Provision for income taxes","","","242,223","","","","147,688","","","","149,152","","","","64.0","","","","(1.0",")","","","5.1","","","","4.0","","","","4.5"],["Net income","","","824,858","","","","503,472","","","","449,986","","","","63.8","","","","11.9","","","","17.4","","","","13.4","","","","13.5"],["Net income applicable to non-controlling interests","","","\u2014","","","","\u2014","","","","1,590","","","","\u2014","","","n/m","","","","\u2014","","","","\u2014","","","","0.1"],["Net income applicable to Stifel Financial Corp.","","","824,858","","","","503,472","","","","448,396","","","","63.8","","","","12.3","","","","17.4","","","","13.4","","","","13.4"],["Preferred dividends","","","35,587","","","","27,261","","","","17,319","","","","30.5","","","","57.4","","","","0.7","","","","0.7","","","","0.5"],["Net income available to common shareholders","","$","789,271","","","$","476,211","","","$","431,077","","","","65.7","%","","","10.5","%","","","16.7","%","","","12.7","%","","","12.9","%"]]
[[/GREPCENT_TABLE]]

NET REVENUES

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Revenues:"],["Commissions","","$","809,500","","","$","760,627","","","$","667,494","","","","6.4","%","","","14.0","%"],["Principal transactions","","","581,164","","","","588,303","","","","404,751","","","","(1.2",")","","","45.3"],["Transactional revenues","","","1,390,664","","","","1,348,930","","","","1,072,245","","","","3.1","","","","25.8"],["Capital raising","","","709,236","","","","524,161","","","","369,442","","","","35.3","","","","41.9"],["Advisory","","","856,145","","","","428,147","","","","447,979","","","","100.0","","","","(4.4",")"],["Investment banking","","","1,565,381","","","","952,308","","","","817,421","","","","64.4","","","","16.5"],["Asset management","","","1,206,516","","","","917,424","","","","848,035","","","","31.5","","","","8.2"],["Net interest","","","502,402","","","","458,054","","","","546,951","","","","9.7","","","","(16.3",")"],["Other income","","","72,125","","","","75,345","","","","52,378","","","","(4.3",")","","","43.8"],["Total net revenues","","$","4,737,088","","","$","3,752,061","","","$","3,337,030","","","","26.3","%","","","12.4","%"]]
[[/GREPCENT_TABLE]]

32

Year Ended December 31, 2021, Compared With Year Ended December 31, 2020

For the year ended December 31, 2021, net revenues increased 26.3% to a record $4.7 billion from $3.8 billion in 2020. This represents our 26th consecutive year of record net revenues. The increase was primarily attributable to an increase in advisory revenues, asset management, capital raising, commissions, and net interest income, partially offset by lower principal transaction revenues.

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

For the year ended December 31, 2021, commission revenues increased 6.4% to $809.5 million from $760.6 million in 2020. The increase is primarily attributable to higher trading volumes in our mutual fund and insurance products over the comparable period in 2020. The higher trading volumes were a result of increased customer activity as a result of market volatility.

Principal transactions – Principal transaction revenues are gains and losses on secondary trading, principally fixed income transactional revenues.

For the year ended December 31, 2021, principal transactions revenues decreased 1.2% to $581.2 million from $588.3 million in 2020. The decrease is primarily attributable to lower institutional fixed income principal transaction revenues as a result of lower trading volumes and tighter credit spreads, partially offset by an increase in trading gains and the revenues from the Vining Sparks acquisition, which closed on November 1, 2021.

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

For the year ended December 31, 2021, investment banking revenues increased 64.4% to a record $1.6 billion from $952.3 million in 2020. The increase is primarily attributable to the growth of advisory revenues and equity and fixed income capital-raising revenues.

Capital-raising revenues increased 35.3% to $709.2 million for the year ended December 31, 2021, from $524.2 million in 2020. For the year ended December 31, 2021, equity capital-raising revenues increased 42.0% to $475.5 million from $334.9 million in 2020. The increase in equity capital-raising revenues is primarily attributable to an increase in deals compared to the prior year. For the year ended December 31, 2021, fixed income capital-raising revenues increased 23.5% to $233.7 million from $189.3 million in 2020. The increase is primarily attributable to the growth of our public finance business. In addition, there has been an increase in our corporate debt issuance business.

Advisory revenues increased 100.0% to $856.1 million for the year ended December 31, 2021, from $428.1 million in 2020. The increase is primarily attributable to higher completed advisory transactions and increased private placement fees.

Asset management – Asset management revenues include fees for asset-based financial services provided to individuals and institutional clients. Investment advisory fees are charged based on the value of assets in fee-based accounts. Asset management revenues are affected by changes in the balances of client assets due to market fluctuations and levels of net new client assets.

For the year ended December 31, 2021, asset management revenues increased 31.5% to a record $1.2 billion from $917.4 million in 2020. The increase is primarily attributable to higher asset values and strong fee-based asset flows. Please refer to “Asset management” in the Global Wealth Management segment discussion for information on the changes in asset management revenues.

Other income – For the year ended December 31, 2021, other income decreased 4.3% to $72.1 million from $75.3 million during 2020. The decrease is primarily attributable to a decrease in loan origination fees, partially offset by improved investment gains over 2020, the recognition of a gain on the sale of certain loans and transfer of deposits, and the recognition of a gain on the sale of aircraft. In addition, other income for the year ended December 31, 2020, includes a gain recognized on the sale of Ziegler Capital Management, LLC.

Year Ended December 31, 2020, Compared With Year Ended December 31, 2019

For the year ended December 31, 2020, net revenues increased 12.4% to $3.8 billion from $3.3 billion in 2019. The increase was primarily attributable to an increase in transactional revenues, increased capital-raising revenues, and asset management, partially offset by lower net interest income and advisory revenues.

Commissions – For the year ended December 31, 2020, commission revenues increased 14.0% to $760.6 million from $667.5 million in 2019. The increase is primarily attributable to an increase in equities trading and private placement commissions over 2019. The increase in trading volumes during 2020 was primarily due to market volatility caused by the economic uncertainty created by the COVID-19 pandemic.

Principal transactions – For the year ended December 31, 2020, principal transactions revenues increased 45.3% to $588.3 million from $404.8 million in 2019. The increase is primarily attributable to strong client engagement and market volatility, as well as an increase in trading gains over 2019.

33

Investment banking – For the year ended December 31, 2020, investment banking revenues increased 16.5% to $952.3 million from $817.4 million in 2019. The increase is primarily attributable to the growth of equity and fixed income capital-raising revenues, partially offset by lower advisory revenue.

Advisory revenue decreased 4.4% to $428.1 million for the year ended December 31, 2020, from $448.0 million in 2019. Advisory revenues were negatively impacted by the decrease in industry-wide completed mergers and acquisitions transactions, which was driven by an increase in market volatility and the economic slow-down in 2020.

Capital-raising revenues increased 41.9% to $524.2 million for the year ended December 31, 2020, from $369.4 million in 2019. For the year ended December 31, 2020, equity capital-raising revenues increased 44.8% to $334.9 million from $231.3 million in 2019. For the year ended December 31, 2020, fixed income capital-raising revenues increased 37.0% to $189.3 million from $138.1 million in 2019.

Asset management – For the year ended December 31, 2020, asset management revenues increased 8.2% to $917.4 million from $848.0 million in 2019. The increase is primarily attributable to higher asset values and strong fee-based asset flows. Please refer to “Asset management” in the Global Wealth Management segment discussion for information on the changes in asset management revenues.

Other income – For the year ended December 31, 2020, other income increased 43.8% to $75.3 million from $52.4 million in 2019. The increase is primarily attributable to the gain recognized on the sale of Ziegler Capital Management, LLC in the first quarter of 2020 and an increase in loan origination fees, partially offset by investment losses.

NET INTEREST INCOME

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended"],["","","December 31, 2021","","","December 31, 2020","","December 31, 2019"],["","","Average Balance","","","Interest Income/ Expense","","","Average Interest Rate","","","Average Balance","","","Interest Income/ Expense","","","Average Interest Rate","","","Average Balance","","","Interest Income/ Expense","","","Average Interest Rate"],["Interest-earning assets:"],["Interest-bearing cash and federal funds sold","","$","1,617,859","","","$","3,794","","","","0.23","%","","$","1,488,666","","","$","6,883","","","","0.46","%","","$","960,450","","","$","21,465","","","","2.23","%"],["Financial instruments owned","","","987,188","","","","15,041","","","","1.52","%","","","827,658","","","","12,594","","","","1.52","%","","","1,207,452","","","","23,528","","","","1.95","%"],["Margin balances","","","1,043,515","","","","25,780","","","","2.47","%","","","988,694","","","","28,155","","","","2.85","%","","","1,287,498","","","","52,008","","","","4.04","%"],["Investment portfolio","","","6,974,668","","","","129,858","","","","1.86","%","","","6,297,475","","","","149,915","","","","2.38","%","","","6,690,488","","","","231,021","","","","3.45","%"],["Loans","","","13,407,458","","","","378,086","","","","2.82","%","","","10,929,464","","","","331,813","","","","3.04","%","","","9,312,199","","","","379,848","","","","4.08","%"],["Other interest-bearing assets","","","686,610","","","","(4,159",")","","","(0.61","%)","","","525,350","","","","(5,528",")","","","(1.05","%)","","","722,246","","","","17,012","","","","2.36","%"],["Total interest-earning assets/interest income","","$","24,717,298","","","$","548,400","","","","2.22","%","","$","21,057,307","","","$","523,832","","","","2.49","%","","$","20,180,333","","","$","724,882","","","","3.59","%"],["Interest-bearing liabilities:"],["Short-term borrowings","","$","2,140","","","$","10","","","","0.49","%","","$","25,678","","","$","112","","","","0.44","%","","$","37,626","","","$","1,032","","","","2.74","%"],["Stock loan","","","230,208","","","","(17,348",")","","","(7.54","%)","","","215,309","","","","(18,031",")","","","(8.37","%)","","","488,989","","","","6,269","","","","1.28","%"],["Senior notes","","","1,112,899","","","","47,500","","","","4.27","%","","","1,234,427","","","","54,063","","","","4.38","%","","","1,016,443","","","","44,507","","","","4.38","%"],["Stifel Capital Trusts","","","60,000","","","","1,197","","","","1.99","%","","","60,000","","","","1,601","","","","2.67","%","","","60,000","","","","2,571","","","","4.29","%"],["Deposits","","","19,227,385","","","","4,510","","","","0.02","%","","","16,216,699","","","","14,550","","","","0.09","%","","","14,901,655","","","","95,813","","","","0.64","%"],["Federal Home Loan Bank advances","","","54,972","","","","164","","","","0.30","%","","","283,128","","","","3,667","","","","1.30","%","","","448,333","","","","7,872","","","","1.76","%"],["Other interest-bearing liabilities","","","1,070,764","","","","9,965","","","","0.93","%","","","822,883","","","","9,816","","","","1.19","%","","","1,106,301","","","","19,867","","","","1.80","%"],["Total interest-bearing liabilities/interest expense","","$","21,758,368","","","","45,998","","","","0.21","%","","$","18,858,124","","","","65,778","","","","0.35","%","","$","18,059,347","","","","177,931","","","","0.99","%"],["Net interest income/margin","","","","","$","502,402","","","","2.03","%","","","","","$","458,054","","","","2.18","%","","","","","$","546,951","","","","2.71","%"]]
[[/GREPCENT_TABLE]]

Please refer to Distribution of Assets, Liabilities, and Shareholders’ Equity; Interest Rates and Interest Differential table included in “Results of Operations – Global Wealth Management” for additional information on Stifel Bancorp’s average balances and interest income and expense.

34

Year Ended December 31, 2021, Compared With Year Ended December 31, 2020

Net interest income – Net interest income is the difference between interest earned on interest-earning assets and interest paid on funding sources. Net interest income is affected by changes in the volume and mix of these assets and liabilities, as well as by fluctuations in interest rates and portfolio management strategies. For the year ended December 31, 2021, net interest income increased 9.7% to $502.4 million from $458.1 million in 2020.

For the year ended December 31, 2021, interest revenue increased 4.7% to $548.4 million from $523.8 million in 2020, principally as a result of an increase in interest-earning assets, partially offset by lower interest rates. The average interest-earning assets of Stifel Bancorp increased to $21.2 billion during the year ended December 31, 2021, compared to $18.0 billion during 2020 at average interest rates of 2.40% and 2.70%, respectively.

For the year ended December 31, 2021, interest expense decreased 30.1% to $46.0 million from $65.8 million in 2020. The decrease is primarily attributable to lower interest rates partially offset by higher interest-bearing liabilities.

Year Ended December 31, 2020, Compared With Year Ended December 31, 2019

Net interest income – For the year ended December 31, 2020, net interest income decreased 16.3% to $458.1 million from $547.0 million in 2019. Decreases in short-term interest rates have had a negative impact on our results, in particular on our net interest income. The Federal Reserve significantly further lowered interest rates in response to COVID-19 pandemic concerns.

For the year ended December 31, 2020, interest revenue decreased 27.7% to $523.8 million from $724.9 million in 2019, principally as a result of a decrease in interest revenue generated from interest-earning assets of Stifel Bancorp due to lower interest rates. The average interest-earning assets of Stifel Bancorp increased to $18.0 billion during the year ended December 31, 2020, compared to $16.5 billion in 2019 at average interest rates of 2.70% and 3.78%, respectively.

For the year ended December 31, 2020, interest expense decreased 63.0% to $65.8 million from $177.9 million in 2019. The decrease is primarily driven by the impact of lower interest rates, partially offset by the increase interest expense on our senior notes. In May 2020, we sold in a registered underwritten public offering, $400.0 million in aggregate principal amount of 4.00% senior notes due May 2030. In December 2020, our $300.0 million notes matured.

NON-INTEREST EXPENSES

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Non-interest expenses:"],["Compensation and benefits","","$","2,820,301","","","$","2,279,335","","","$","1,978,116","","","","23.7","%","","","15.2","%"],["Occupancy and equipment rental","","","290,243","","","","274,664","","","","242,893","","","","5.7","","","","13.1"],["Communications and office supplies","","","165,490","","","","164,736","","","","147,428","","","","0.5","","","","11.7"],["Commissions and floor brokerage","","","59,681","","","","55,960","","","","44,011","","","","6.6","","","","27.2"],["Provision for credit losses","","","(11,502",")","","","33,925","","","","9,977","","","","(133.9",")","","","240.0"],["Other operating expenses","","","345,794","","","","292,281","","","","315,467","","","","18.3","","","","(7.3",")"],["Total non-interest expenses","","$","3,670,007","","","$","3,100,901","","","$","2,737,892","","","","18.4","%","","","13.3","%"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2021, Compared With Year Ended December 31, 2020

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

For the year ended December 31, 2021, compensation and benefits expense increased 23.7% to $2.8 billion from $2.3 billion in 2020. The increase in compensation and benefits expenses is primarily attributable to higher compensatory revenues. Compensation and benefits expense as a percentage of net revenues was 59.5% for the year ended December 31, 2021, compared to 60.7% for the year ended December 31, 2020. The decline in the compensation ratio reflects the operating leverage of higher net revenues, as well a change in the composition of our revenues.

Occupancy and equipment rental – For the year ended December 31, 2021, occupancy and equipment rental expense increased 5.7% to $290.2 million from $274.7 million in 2020. The increase is primarily attributable to higher data processing costs associated with an increase in business activity.

35

Communications and office supplies – Communications expense includes costs for telecommunication and data transmission, primarily for obtaining third-party market data information. For the year ended December 31, 2021, communications and office supplies expense increased 0.5% to $165.5 million from $164.7 million in 2020. The increase is primarily attributable to higher communication and quote equipment expenses associated with the continued growth of our business.

Commissions and floor brokerage – For the year ended December 31, 2021, commissions and floor brokerage expense increased 6.6% to $59.7 million from $56.0 million in 2020. The increase is primarily attributable to higher processing expenses, partially offset by lower electronic communication network (“ECN”) trading costs.

Provision for credit losses – For the year ended December 31, 2021, provision for credit losses decreased 133.9% to a credit of $11.5 million from $33.9 million in 2020. Provision for credit losses decreased from a year ago as a result of reserve reductions driven by an improved macroeconomic environment and a release related to loans sold at a premium during 2021 partially offset by provisions related to the growth of the loan portfolio during the year.

Other operating expenses – Other operating expenses primarily include license and registration fees, litigation-related expenses, which consist of amounts we reserve and/or payout for legal and regulatory matters, travel and entertainment, promotional, investment banking deal costs, and professional service expenses.

For the year ended December 31, 2021, other operating expenses increased 18.3% to $345.8 million from $292.3 million in 2020. The increase is primarily attributable to the recognition of additional earn-out expense, higher conference-related expenses, an increase in investment banking transaction expenses, travel and entertainment expenses, professional fees, and subscription expense.

Provision for income taxes – For the year ended December 31, 2021, our provision for income taxes was $242.2 million, representing an effective tax rate of 22.7%, compared to $147.7 million in 2020, representing an effective tax rate of 22.7%. The effective tax rate was impacted by the benefit related to the tax impact on stock-based compensation.

Year Ended December 31, 2020, Compared With Year Ended December 31, 2019

Except as noted in the following discussion of variances, the underlying reasons for the increase in non-interest expenses can be attributed principally to our continued expansion, both organically and through our acquisitions, and increased administrative overhead to support the growth in our segments.

Compensation and benefits – For the year ended December 31, 2020, compensation and benefits expense increased 15.2% to $2.3 billion from $2.0 billion in 2019. The increase is primarily attributable to higher variable compensation expense as a result of strong revenue growth over 2019.

Compensation and benefits expense as a percentage of net revenues was 60.7% for the year ended December 31, 2020, compared to 59.3% for the year ended December 31, 2019. The increase was primarily attributable to the change in the composition of revenues as compared to 2019.

Occupancy and equipment rental – For the year ended December 31, 2020, occupancy and equipment rental expense increased 13.1% to $274.7 million from $242.9 million in 2019. The increase is primarily attributable to higher occupancy costs as a result of an increase in locations and higher data processing costs associated with an increase in business activity.

Communications and office supplies – For the year ended December 31, 2020, communications and office supplies expense increased 11.7% to $164.7 million from $147.4 million in 2019. The increase is primarily attributable to higher communication and quote equipment expenses and shipping costs associated with the continued growth of our business.

Commissions and floor brokerage – For the year ended December 31, 2020, commissions and floor brokerage expense increased 27.2% to $56.0 million from $44.0 million in 2019. The increase is primarily attributable to higher volume-related expenses, including brokerage trading costs, reflecting an increase in activity levels.

Provision for credit losses – For the year ended December 31, 2020, provision for credit losses increased 240.0% to $33.9 million from $10.0 million in 2019. The provision for credit losses was impacted by growth in the loan portfolio and the impact of accounting for credit losses under the CECL standard, which was heightened by the impact of COVID-19 on the broader economic environment.

Other operating expenses – For the year ended December 31, 2020, other operating expenses decreased 7.3% to $292.3 million from $315.5 million in 2019. The decrease is primarily attributable to significantly lower travel, entertainment, and conference-related expenses. In addition, net provisions for litigation matters were lower. These decreases were partially offset by higher taxes and licensing fees, professional fees, investment banking transaction expenses, reflecting an increase in activity levels, and insurance costs.

Provision for income taxes – For the year ended December 31, 2020, our provision for income taxes was $147.7 million, representing an effective tax rate of 22.7%, compared to $149.2 million in 2019, representing an effective tax rate of 25.0%.

36

SEGMENT PERFORMANCE FROM CONTINUING OPERATIONS

Our reportable segments include Global Wealth Management, Institutional Group, and Other.

Our Global Wealth Management segment consists of two businesses, the Private Client Group and Stifel Bancorp. The Private Client Group includes branch offices and independent contractor offices of our broker-dealer subsidiaries located throughout the United States. These branches provide securities brokerage services, including the sale of equities, mutual funds, fixed income products, and insurance, as well as offering banking products to their private clients through our bank subsidiaries, which provide residential, consumer, and commercial lending, as well as FDIC-insured deposit accounts to customers of our broker-dealer subsidiaries and to the general public.

The success of our Global Wealth Management segment is dependent upon the quality of our products, services, financial advisors, and support personnel, including our ability to attract, retain, and motivate a sufficient number of these associates. We face competition for qualified associates from major financial services companies, including other brokerage firms, insurance companies, banking institutions, and discount brokerage firms. Segment revenue growth, operating income, and segment pre-tax operating margin are used to evaluate and measure segment performance by our management team in deciding how to allocate resources and in assessing performance.

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

The success of our Institutional Group segment is dependent upon the quality of our personnel, the quality and selection of our investment products and services, pricing (such as execution pricing and fee levels), and reputation. Segment operating income and segment pre-tax operating margin are used to evaluate and measure segment performance by our management team in deciding how to allocate resources and in assessing performance.

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

37

Results of Operations – Global Wealth Management

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change","","","As a Percentage of Net Revenues for the Year Ended December 31,"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019","","","2021","","","2020","","","2019"],["Revenues:"],["Commissions","","$","567,491","","","$","513,247","","","$","477,401","","","","10.6","%","","","7.5","%","","","21.8","%","","","23.4","%","","","22.4","%"],["Principal transactions","","","207,474","","","","174,101","","","","172,298","","","","19.2","","","","1.0","","","","8.0","","","","8.0","","","","8.1"],["Transactional revenues","","","774,965","","","","687,348","","","","649,699","","","","12.7","","","","5.8","","","","29.8","","","","31.4","","","","30.5"],["Asset management","","","1,206,406","","","","917,353","","","","847,977","","","","31.5","","","","8.2","","","","46.4","","","","41.9","","","","39.8"],["Interest","","","538,940","","","","516,918","","","","682,696","","","","4.3","","","","(24.3",")","","","20.7","","","","23.6","","","","32.0"],["Investment banking","","","48,210","","","","36,024","","","","37,915","","","","33.8","","","","(5.0",")","","","1.9","","","","1.6","","","","1.8"],["Other income","","","57,563","","","","71,153","","","","36,077","","","","(19.1",")","","","97.2","","","","2.2","","","","3.2","","","","1.7"],["Total revenues","","","2,626,084","","","","2,228,796","","","","2,254,364","","","","17.8","","","","(1.1",")","","","101.0","","","","101.7","","","","105.8"],["Interest expense","","","27,247","","","","37,970","","","","123,805","","","","(28.2",")","","","(69.3",")","","","1.0","","","","1.7","","","","5.8"],["Net revenues","","","2,598,837","","","","2,190,826","","","","2,130,559","","","","18.6","","","","2.8","","","","100.0","","","","100.0","","","","100.0"],["Non-interest expenses:"],["Compensation and benefits","","","1,370,308","","","","1,138,525","","","","1,046,429","","","","20.4","","","","8.8","","","","52.7","","","","52.0","","","","49.1"],["Occupancy and equipment rental","","","138,644","","","","122,888","","","","119,916","","","","12.8","","","","2.5","","","","5.3","","","","5.6","","","","5.6"],["Communication and office supplies","","","56,378","","","","58,214","","","","57,249","","","","(3.2",")","","","1.7","","","","2.2","","","","2.7","","","","2.7"],["Commissions and floor brokerage","","","26,007","","","","22,269","","","","19,931","","","","16.8","","","","11.7","","","","1.0","","","","1.0","","","","0.9"],["Provision for credit losses","","","(11,502",")","","","33,542","","","","9,977","","","","(134.3",")","","","236.2","","","","(0.4",")","","","1.5","","","","0.5"],["Other operating expenses","","","104,049","","","","89,504","","","","91,097","","","","16.3","","","","(1.7",")","","","4.0","","","","4.1","","","","4.3"],["Total non-interest expenses","","","1,683,884","","","","1,464,942","","","","1,344,599","","","","14.9","","","","9.0","","","","64.8","","","","66.9","","","","63.1"],["Income before income taxes","","$","914,953","","","$","725,884","","","$","785,960","","","","26.0","%","","","(7.6",")%","","","35.2","%","","","33.1","%","","","36.9","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2021","","","2020","","","2019"],["Branch offices","","","396","","","","392","","","","382"],["Financial advisors","","","2,227","","","","2,187","","","","2,127"],["Independent contractors","","","91","","","","93","","","","95"],["Total financial advisors","","","2,318","","","","2,280","","","","2,222"]]
[[/GREPCENT_TABLE]]

38

Year Ended December 31, 2021, Compared With Year Ended December 31, 2020

NET REVENUES

For the year ended December 31, 2021, Global Wealth Management net revenues increased 18.6% to a record $2.6 billion from $2.2 billion in 2020. The increase in net revenues is primarily attributable to higher asset management revenues, transactional revenues, net interest income, and investment banking revenues, partially offset by a decrease in other income.

Commissions – For the year ended December 31, 2021, commission revenues increased 10.6% to $567.5 million from $513.2 million in 2020. The increase is primarily attributable to higher trading volumes in our mutual fund and insurance products, as well as equities, over the comparable period in 2020. The higher trading volumes were a result of increased customer activity as a result of market volatility.

Principal transactions – For the year ended December 31, 2021, principal transactions revenues increased 19.2% to $207.5 million from $174.1 million in 2020. The increase is primarily a result of increased market activity levels and higher gains recorded on our trading portfolio over 2020.

Asset management – For the year ended December 31, 2021, asset management revenues increased 31.5% to $1.2 billion from $917.4 million in 2020. The increase is primarily attributable to higher asset levels and strong fee-based asset flows. Fee-based account revenues are primarily billed based on asset values at the end of the prior quarter.

Client asset metrics as of the periods indicated (in thousands):

[[GREPCENT_TABLE]]
[["","","December 31,","","","Percentage Change"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Client assets","","$","435,978,000","","","$","357,429,000","","","$","329,495,000","","","","22.0","%","","","8.5","%"],["Fee-based client assets","","$","162,428,000","","","$","129,372,000","","","$","117,189,000","","","","25.6","","","","10.4"],["Number of client accounts","","","1,125,000","","","","1,075,000","","","","1,020,000","","","","4.7","","","","5.4"],["Number of fee-based client accounts","","","298,000","","","","262,000","","","","229,000","","","","13.7","","","","14.4"]]
[[/GREPCENT_TABLE]]

The increase in the value of our client assets and fee-based assets was primarily attributable to the rise in the markets, as well as asset growth resulting from strong recruiting efforts.

Interest revenue – For the year ended December 31, 2021, interest revenue increased 4.3% to $538.9 million from $516.9 million in 2020. The increase is primarily attributable to higher interest-earning assets, partially offset by lower interest rates. Please refer to “Net Interest Income – Stifel Bancorp” below for a further discussion of the changes in net interest income.

Investment banking – Investment banking, which represents sales credits for investment banking underwritings, increased 33.8% to $48.2 million for the year ended December 31, 2021, from $36.0 million in 2020. Please refer to “Investment banking” in the Institutional Group segment discussion for information on the changes in investment banking revenues.

Other income – For the year ended December 31, 2021, other income decreased 19.1% to $57.6 million from $71.2 million in 2020. The decrease is primarily attributable to a decrease in loan origination fees, partially offset by improved investment gains over 2020, the recognition of a gain on the sale of certain loans and transfer of deposits, and the recognition of a gain on the sale of aircraft. In addition, other income for the year ended December 31, 2020, includes a gain recognized on the sale of Ziegler Capital Management, LLC.

Interest expense – For the year ended December 31, 2021, interest expense decreased 28.2% to $27.2 million from $38.0 million in 2020. The decrease in interest expense is primarily attributable to lower interest rates over 2020, partially offset by higher interest-bearing liabilities. Please refer to “Net Interest Income – Stifel Bancorp” below for a further discussion of the changes in net interest income.

NON-INTEREST EXPENSES

For the year ended December 31, 2021, Global Wealth Management non-interest expenses increased 14.9% to $1.7 billion from $1.5 billion in 2020.

Compensation and benefits – For the year ended December 31, 2021, compensation and benefits expense increased 20.4% to $1.4 billion from $1.1 billion in 2020. The increase is primarily attributable to higher variable compensation expense as a result of strong revenue growth over 2020.

Compensation and benefits expense as a percentage of net revenues was 52.7% for the year ended December 31, 2021, compared to 52.0% in 2020. The increase is principally due to higher compensable revenues.

39

Occupancy and equipment rental – For the year ended December 31, 2021, occupancy and equipment rental expense increased 12.8% to $138.6 million from $122.9 million in 2020. The increase is primarily attributable to higher data processing costs associated with an increase in business activity and higher occupancy costs as a result of an increase in locations.

Communications and office supplies – For the year ended December 31, 2021, communications and office supplies expense decreased 3.2% to $56.4 million from $58.2 million in 2020. The decrease is primarily attributable to lower telecommunication costs.

Commissions and floor brokerage – For the year ended December 31, 2021, commissions and floor brokerage expense increased 16.8% to $26.0 million from $22.3 million in 2020. The increase is primarily attributable to higher volume-related expenses, including brokerage trading costs, reflecting an increase in activity levels.

Provision for credit losses – For the year ended December 31, 2021, provision for credit losses decreased 134.3% to a credit of $11.5 million from $33.5 million in 2020. Provision for credit losses decreased from a year ago as a result of reserve reductions driven by an improved macroeconomic environment and a release related to loans sold at a premium during 2021, partially offset by provisions related to the growth of the loan portfolio during the year.

Other operating expenses – For the year ended December 31, 2021, other operating expenses increased 16.3% to $104.0 million from $89.5 million in 2020. The increase is primarily attributable to higher subscription costs, professional fees, travel and entertainment expense, and FDIC insurance.

INCOME BEFORE INCOME TAXES

For the year ended December 31, 2021, income before income taxes increased 26.0% to $915.0 million from $725.9 million in 2020. Profit margins (income before income taxes as a percent of net revenues) have increased to 35.2% for the year ended December 31, 2021, from 33.1% in 2020. The improved profit margin is a result of strong revenue growth and our continued expense discipline, as well as a change in the composition of revenue (higher net interest income).

Year Ended December 31, 2020, Compared With Year Ended December 31, 2019

NET REVENUES

For the year ended December 31, 2020, Global Wealth Management net revenues increased 2.8% to $2.2 billion from $2.1 billion in 2019. The increase in net revenues for the year ended December 31, 2020, over 2019, is primarily attributable to the growth in asset management revenues and higher transactional revenues and other income, partially offset by a decrease in net interest income and investment banking.

Commissions – For the year ended December 31, 2020, commission revenues increased 7.5% to $513.2 million from $477.4 million in 2019. The increase is primarily attributable to an increase in equities trading and private placement commissions over 2019.

Principal transactions – For the year ended December 31, 2020, principal transactions revenues increased 1.0% to $174.1 million from $172.3 million in 2019. The increase is primarily attributable to strong client engagement and market volatility.

Transactional revenues – For the year ended December 31, 2020, transactional revenues increased 5.8% to $687.3 million from $649.7 million in the comparable period in 2019. The increase is primarily attributable to higher trading volumes during 2020, driven by market volatility, as a result of the economic uncertainty created by the COVID-19 pandemic.

Asset management – For the year ended December 31, 2020, asset management revenues increased 8.2% to $917.4 million from $848.0 million in 2019. Asset management revenues increased from 2019, reflecting higher asset levels and strong fee-based asset flows. Fee-based account revenues are primarily billed based on asset values at the end of the prior quarter.

The value of assets in fee-based accounts at December 31, 2020, increased 10.4% to $129.4 billion from $117.2 billion at December 31, 2019.

Interest revenue– For the year ended December 31, 2020, interest revenue decreased 24.3% to $516.9 million from $682.7 million in 2019. The decrease is primarily driven by the impact of lower interest rates. Please refer to “Net Interest Income – Stifel Bancorp” below for a further discussion of the changes in net interest income.

Investment banking – Investment banking decreased 5.0% to $36.0 million for the year ended December 31, 2020, from $37.9 million in 2019. Please refer to “Investment banking” in the Institutional Group segment discussion for information on the changes in investment banking revenues.

Other income – For the year ended December 31, 2020, other income increased 97.2% to $71.2 million from $36.1 million in 2019. The increase is primarily attributable to the gain recognized on the sale of Ziegler Capital Management, LLC in the first quarter of 2020 and an increase in loan origination fees, partially offset by investment losses.

Interest expense – For the year ended December 31, 2020, interest expense decreased 69.3% to $38.0 million from $123.8 million in 2019. The decrease is primarily driven by the impact of lower interest rates. Please refer to “Net Interest Income – Stifel Bancorp” below for a further discussion of the changes in net interest income.

40

NON-INTEREST EXPENSES

For the year ended December 31, 2020, Global Wealth Management non-interest expenses increased 9.0% to $1.5 billion from $1.3 billion in 2019.

Compensation and benefits – For the year ended December 31, 2020, compensation and benefits expense increased 8.8% to $1.1 billion from $1.0 billion in 2019. The increase is primarily attributable to higher variable compensation expense as a result of strong revenue growth over 2019. Compensation and benefits expense as a percentage of net revenues was 52.0% for the year ended December 31, 2020, compared to 49.1% in 2019. The increase was primarily attributable to the change in the composition of revenues as compared to 2019.

Occupancy and equipment rental – For the year ended December 31, 2020, occupancy and equipment rental expense increased 2.5% to $122.9 million from $119.9 million in 2019. The increase is primarily attributable to higher occupancy costs as a result of an increase in locations and higher data processing costs associated with an increase in business activity.

Communications and office supplies – For the year ended December 31, 2020, communications and office supplies expense increased 1.7% to $58.2 million from $57.2 million in 2019. The increase is primarily attributable to higher communication and quote equipment expenses and shipping costs associated with the continued growth of our business.

Commissions and floor brokerage – For the year ended December 31, 2020, commissions and floor brokerage expense increased 11.7% to $22.3 million from $19.9 million in 2019. The increase is primarily attributable to higher volume-related expenses, including brokerage trading costs, reflecting an increase in activity levels.

Provision for credit losses – For the year ended December 31, 2020, provision for credit losses increased 236.2% to $33.5 million from $10.0 million in 2020. The provision for credit losses was impacted by growth in the loan portfolio and the impact of accounting for credit losses under the CECL standard, which was heightened by the impact of COVID-19 on the broader economic environment.

Other operating expenses – For the year ended December 31, 2020, other operating expenses decreased 1.7% to $89.5 million from $91.1 million in 2019. The decrease is primarily attributable to significantly lower travel, entertainment, and conference-related expenses. The decrease was partially offset by higher professional fees and insurance costs.

INCOME BEFORE INCOME TAXES

For the year ended December 31, 2020, income before income taxes decreased 7.6% to $725.9 million from $786.0 million in 2019. Profit margins (income before income taxes as a percent of net revenues) decreased to 33.1% for the year ended December 31, 2020, from 36.9% in 2019. Profit margins were negatively impacted by the composition of net revenues compared to 2019. The impact caused by lower net interest income was partially offset by the growth of our asset management revenues and transactional revenues.

41

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

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended"],["","","December 31, 2021","","","December 31, 2020"],["","","Average Balance","","","Interest Income/ Expense","","","Average Interest Rate","","","Average Balance","","","Interest Income/ Expense","","","Average Interest Rate"],["Assets:"],["Interest-bearing cash and federal funds sold","","$","820,424","","","$","1,149","","","","0.14","%","","$","687,087","","","$","2,002","","","","0.29","%"],["U.S. government agencies","","","2,960","","","","63","","","","2.15","","","","4,990","","","","96","","","","1.93"],["State and municipal securities (tax-exempt) (1)","","","2,384","","","","47","","","","1.97","","","","8,829","","","","188","","","","2.13"],["Mortgage-backed securities","","","1,027,372","","","","15,331","","","","1.49","","","","888,018","","","","16,352","","","","1.84"],["Corporate fixed income securities","","","730,526","","","","21,056","","","","2.88","","","","633,778","","","","16,831","","","","2.66"],["Asset-backed securities","","","5,211,426","","","","93,361","","","","1.79","","","","4,761,860","","","","116,448","","","","2.45"],["Federal Home Loan Bank and other capital stock","","","45,087","","","","1,315","","","","2.92","","","","47,994","","","","1,536","","","","3.20"],["Loans (2)"],["Securities-based loans","","","2,353,621","","","","45,448","","","","1.93","","","","1,884,701","","","","45,219","","","","2.40"],["Commercial and industrial","","","5,089,712","","","","171,364","","","","3.37","","","","3,975,492","","","","132,547","","","","3.33"],["Residential real estate","","","4,557,592","","","","119,162","","","","2.61","","","","3,635,034","","","","104,689","","","","2.88"],["Commercial real estate","","","381,550","","","","12,444","","","","3.26","","","","406,576","","","","16,904","","","","4.16"],["Home equity lines of credit","","","79,387","","","","2,266","","","","2.85","","","","63,288","","","","1,988","","","","3.14"],["Construction and land","","","557,406","","","","18,015","","","","3.23","","","","474,714","","","","16,684","","","","3.51"],["Other","","","37,835","","","","805","","","","2.13","","","","36,910","","","","952","","","","2.58"],["Loans held for sale","","","350,355","","","","8,582","","","","2.45","","","","452,749","","","","12,830","","","","2.83"],["Total interest-earning assets (3)","","$","21,247,637","","","$","510,408","","","","2.40","%","","$","17,962,020","","","$","485,266","","","","2.70","%"],["Cash and due from banks","","","27,096","","","","","","","","","","14,705"],["Other non-interest-earning assets","","","348,801","","","","","","","","","","264,368"],["Total assets","","$","21,623,534","","","","","","","","","$","18,241,093"],["Liabilities and stockholders\u2019 equity:"],["Deposits:"],["Money market","","$","18,340,673","","","$","2,897","","","","0.02","%","","$","15,260,033","","","$","5,614","","","","0.04","%"],["Time deposits","","","58,549","","","","1,108","","","","1.89","","","","221,479","","","","4,975","","","","2.25"],["Demand deposits","","","827,532","","","","505","","","","0.06","","","","698,107","","","","3,678","","","","0.53"],["Savings","","","631","","","","\u2014","","","","\u2014","","","","37,080","","","","283","","","","0.76"],["Federal Home Loan Bank advances","","","54,972","","","","164","","","","0.30","","","","283,128","","","","3,667","","","","1.30"],["Other borrowings","","","1,269","","","","119","","","","9.37","","","","1,490","","","","109","","","","7.37"],["Total interest-bearing liabilities (3)","","$","19,283,626","","","$","4,793","","","","0.02","%","","$","16,501,317","","","$","18,326","","","","0.11","%"],["Non-interest-bearing deposits","","","608,825","","","","","","","","","","288,222"],["Other non-interest-bearing liabilities","","","176,185","","","","","","","","","","101,948"],["Total liabilities","","$","20,068,636","","","","","","","","","$","16,891,487"],["Stockholders\u2019 equity","","","1,554,898","","","","","","","","","","1,349,606"],["Total liabilities and stockholders\u2019 equity","","$","21,623,534","","","","","","","","","$","18,241,093"],["Net interest income/spread","","","","","$","505,615","","","","2.38","%","","","","","$","466,940","","","","2.59","%"],["Net interest margin","","","","","","","","","2.38","%","","","","","","","","","2.60","%"]]
[[/GREPCENT_TABLE]]

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

(2)
Loans on nonaccrual status are included in average balances.

(3)
Please refer to the Net Interest Income table included in “Results of Operations” for additional information on our company’s average balances and operating interest and expenses.

42

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31, 2019"],["","","Average Balance","","","Interest Income/ Expense","","","Average Interest Rate"],["Assets:"],["Interest-bearing cash and federal funds sold","","$","462,400","","","$","10,693","","","","2.31","%"],["U.S. government agencies","","","3,466","","","","91","","","","2.63"],["State and municipal securities (tax-exempt) (1)","","","39,976","","","","870","","","","2.18"],["Mortgage-backed securities","","","1,308,128","","","","29,248","","","","2.24"],["Corporate fixed income securities","","","818,135","","","","24,565","","","","3.00"],["Asset-backed securities","","","4,520,783","","","","176,247","","","","3.90"],["Federal Home Loan Bank and other capital stock","","","53,609","","","","2,626","","","","4.90"],["Loans (2)"],["Securities-based loans","","","1,935,722","","","","77,669","","","","4.01"],["Commercial and industrial","","","3,365,939","","","","158,771","","","","4.72"],["Residential real estate","","","3,006,243","","","","92,204","","","","3.07"],["Commercial real estate","","","363,737","","","","20,726","","","","5.70"],["Home equity lines of credit","","","47,818","","","","2,270","","","","4.75"],["Construction and land","","","234,778","","","","12,236","","","","5.21"],["Other","","","128,697","","","","2,945","","","","2.29"],["Loans held for sale","","","229,265","","","","13,027","","","","5.68"],["Total interest-earning assets (3)","","$","16,518,696","","","$","624,188","","","","3.78","%"],["Cash and due from banks","","","46,356"],["Other non-interest-earning assets","","","381,824"],["Total assets","","$","16,946,876"],["Liabilities and stockholders\u2019 equity:"],["Deposits:"],["Money market","","$","12,830,875","","","$","51,172","","","","0.40","%"],["Time deposits","","","1,154,180","","","","28,010","","","","2.43"],["Demand deposits","","","645,814","","","","10,171","","","","1.57"],["Savings","","","270,786","","","","6,460","","","","2.39"],["Federal Home Loan Bank advances","","","448,333","","","","7,872","","","","1.76"],["Other borrowings","","","1,663","","","","126","","","","7.58"],["Total interest-bearing liabilities (3)","","$","15,351,651","","","$","103,811","","","","0.68","%"],["Non-interest-bearing deposits","","","138,001"],["Other non-interest-bearing liabilities","","","144,013"],["Total liabilities","","$","15,633,665"],["Stockholders\u2019 equity","","","1,313,211"],["Total liabilities and stockholders\u2019 equity","","$","16,946,876"],["Net interest income/spread","","","","","$","520,377","","","","3.10","%"],["Net interest margin","","","","","","","","","3.15","%"]]
[[/GREPCENT_TABLE]]

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

(2)
Loans on nonaccrual status are included in average balances.

(3)
Please refer to the Net Interest Income table included in “Results of Operations” for additional information on our company’s average balances and operating interest and expenses.

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

For the year ended December 31, 2021, interest revenue for Stifel Bancorp of $510.4 million was generated from weighted-average interest-earning assets of $21.2 billion at a weighted-average interest rate of 2.40%. For the year ended December 31, 2020, interest revenue for Stifel Bancorp of $485.3 million was generated from weighted-average interest-earning assets of $18.0 billion at a weighted-average interest rate of 2.70%. For the year ended December 31, 2019, interest revenue for Stifel Bancorp of $624.2 million was generated from weighted-average interest-earning assets of $16.5 billion at a weighted-average interest rate of 3.78%. Interest-earning assets principally consist of commercial and industrial, residential, and securities-based loans, investment securities, and interest-bearing cash and federal funds sold.

43

For the year ended December 31, 2021, interest expense for Stifel Bancorp of $4.8 million was incurred from weighted-average interest-bearing liabilities of $19.3 billion at a weighted-average interest rate of 0.02%. For the year ended December 31, 2020, interest expense for Stifel Bancorp of $18.3 million was incurred from weighted-average interest-bearing liabilities of $16.5 billion at a weighted-average interest rate of 0.11%. For the year ended December 31, 2019, interest expense for Stifel Bancorp of $103.8 million was incurred from weighted-average interest-bearing liabilities of $15.4 billion at a weighted-average interest rate of 0.68%. Interest expense represents interest on customer money market accounts, time deposits, Federal Home Loan Bank advances, and other borrowings.

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2021 Compared to Year Ended December 31, 2020","","","Year Ended December 31, 2020 Compared to Year Ended December 31, 2019"],["","","Increase (decrease) due to:","","","Increase (decrease) due to:"],["","","Volume","","","Rate","","","Total","","","Volume","","","Rate","","","Total"],["Interest income:"],["Interest-bearing cash and federal funds sold","","$","509","","","$","(1,362",")","","$","(853",")","","$","3,573","","","$","(12,264",")","","$","(8,691",")"],["U.S. government agencies","","","(46",")","","","13","","","","(33",")","","","13","","","","(8",")","","","5"],["State and municipal securities (tax-exempt)","","","(126",")","","","(15",")","","","(141",")","","","(665",")","","","(17",")","","","(682",")"],["Mortgage-backed securities","","","4,903","","","","(5,924",")","","","(1,021",")","","","(8,323",")","","","(4,573",")","","","(12,896",")"],["Corporate fixed income securities","","","2,710","","","","1,515","","","","4,225","","","","(5,112",")","","","(2,622",")","","","(7,734",")"],["Asset-backed securities","","","12,598","","","","(35,685",")","","","(23,087",")","","","9,984","","","","(69,783",")","","","(59,799",")"],["Federal Home Loan Bank and other capital stock","","","(90",")","","","(131",")","","","(221",")","","","(253",")","","","(837",")","","","(1,090",")"],["Loans"],["Securities-based loans","","","1,060","","","","(831",")","","","229","","","","(1,997",")","","","(30,453",")","","","(32,450",")"],["Commercial and industrial","","","37,502","","","","1,315","","","","38,817","","","","42,373","","","","(68,597",")","","","(26,224",")"],["Residential real estate","","","22,725","","","","(8,252",")","","","14,473","","","","17,625","","","","(5,140",")","","","12,485"],["Commercial real estate","","","(990",")","","","(3,470",")","","","(4,460",")","","","2,950","","","","(6,772",")","","","(3,822",")"],["Home equity lines of credit","","","434","","","","(156",")","","","278","","","","6,167","","","","(6,449",")","","","(282",")"],["Construction and land","","","2,472","","","","(1,141",")","","","1,331","","","","6,528","","","","(2,080",")","","","4,448"],["Other","","","25","","","","(172",")","","","(147",")","","","(2,427",")","","","434","","","","(1,993",")"],["Loans held for sale","","","(2,655",")","","","(1,593",")","","","(4,248",")","","","8,495","","","","(8,692",")","","","(197",")"],["","","$","81,031","","","$","(55,889",")","","$","25,142","","","$","78,931","","","$","(217,853",")","","$","(138,922",")"],["Interest expense:"],["Deposits:"],["Money market","","$","6,487","","","$","(9,204",")","","$","(2,717",")","","$","33,991","","","$","(79,549",")","","$","(45,558",")"],["Time deposits","","","(3,184",")","","","(683",")","","","(3,867",")","","","(21,092",")","","","(1,943",")","","","(23,035",")"],["Demand deposits","","","842","","","","(4,015",")","","","(3,173",")","","","900","","","","(7,393",")","","","(6,493",")"],["Savings","","","(141",")","","","(142",")","","","(283",")","","","(3,454",")","","","(2,723",")","","","(6,177",")"],["Federal Home Loan Bank advances","","","(1,792",")","","","(1,711",")","","","(3,503",")","","","(2,456",")","","","(1,749",")","","","(4,205",")"],["Other borrowings","","","(10",")","","","20","","","","10","","","","(14",")","","","(3",")","","","(17",")"],["","","$","2,202","","","$","(15,735",")","","$","(13,533",")","","$","7,875","","","$","(93,360",")","","$","(85,485",")"]]
[[/GREPCENT_TABLE]]

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

II. Investment in Debt Securities

The maturities and related weighted-average yields of our debt securities not carried at fair value at December 31, 2021, are as follows (in thousands, except rates):

[[GREPCENT_TABLE]]
[["","","Within 1 Year","","","1-5 Years","","","5-10 Years","","","After 10 Years","","","Total"],["Asset-backed securities","","$","\u2014","","","$","2,825","","","$","2,282,162","","","$","3,063,571","","","$","5,348,558"],["Weighted-average yield (1)","","","0.0","%","","","2.24","%","","","1.75","%","","","1.90","%","","","1.84","%"]]
[[/GREPCENT_TABLE]]

(1)
The weighted-average yield is computed using the expected maturity of each security weighted based on the amortized cost of each security.

44

III. Loan Portfolio

The following table presents the maturities of each major loan category in Stifel Bancorp’s loan portfolio held for investment for the periods indicated (in thousands):

[[GREPCENT_TABLE]]
[["","","Within 1 Year","","","1-5 Years","","","5-15 years","","","Over 15 Years","","","Total"],["Commercial and industrial","","$","3,234,615","","","$","3,083,796","","","$","1,010,597","","","$","16,745","","","$","7,345,753"],["Residential real estate","","","\u2014","","","","486","","","","556,458","","","","4,925,082","","","","5,482,026"],["Securities-based loans","","","2,756,020","","","","121,819","","","","2,319","","","","\u2014","","","","2,880,158"],["Construction and land","","","144,487","","","","366,597","","","","\u2014","","","","\u2014","","","","511,084"],["Commercial real estate","","","108,127","","","","271,598","","","","27,838","","","","2,284","","","","409,847"],["Home equity lines of credit","","","12,348","","","","1,999","","","","68,161","","","","\u2014","","","","82,508"],["Other","","","32,105","","","","\u2014","","","","\u2014","","","","6","","","","32,111"],["","","$","6,287,702","","","$","3,846,295","","","$","1,665,373","","","$","4,944,117","","","$","16,743,487"]]
[[/GREPCENT_TABLE]]

The sensitivity of loans with maturities in excess of one year at December 31, 2021, is as follows (in thousands):

[[GREPCENT_TABLE]]
[["Variable or adjusted-rate loans"],["Commercial and industrial","","$","3,732,538"],["Residential real estate","","","3,991,093"],["Securities-based loans","","","113,210"],["Construction and land","","","178,648"],["Commercial real estate","","","152,763"],["Home equity lines of credit","","","70,160"],["Other","","","\u2014"],["","","$","8,238,412"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Fixed-rate loans"],["Commercial and industrial","","$","378,600"],["Residential real estate","","","1,490,933"],["Securities-based loans","","","10,928"],["Construction and land","","","187,949"],["Commercial real estate","","","148,957"],["Home equity lines of credit","","","\u2014"],["Other","","","6"],["","","$","2,217,373"]]
[[/GREPCENT_TABLE]]

The following table presents the Company’s credit ratios, as well as the component of the ratio’s calculation, for the periods indicated (in thousands, except percentages):

[[GREPCENT_TABLE]]
[["","","As of and for the year ending December 31,"],["","","2021","","","2020","","","2019"],["Allowance for credit losses to total loans outstanding","","","0.71","%","","","1.22","%","","","0.99","%"],["Allowance for credit losses","","$","118,562","","","$","135,295","","","$","96,118"],["Retained loans outstanding","","$","16,743,487","","","$","11,170,813","","","$","9,752,616"],["Nonaccrual loans to total loans outstanding","","","0.10","%","","","0.11","%","","","0.15","%"],["Nonaccrual loans","","$","17,193","","","$","12,395","","","$","14,373"],["Retained loans outstanding","","$","16,743,487","","","$","11,170,813","","","$","9,752,616"],["Allowance for credit losses to nonaccrual loans","","6.90x","","","10.92x","","","6.69x"],["Allowance for credit losses","","$","118,562","","","$","135,295","","","$","96,118"],["Nonaccrual loans","","$","17,193","","","$","12,395","","","$","14,373"]]
[[/GREPCENT_TABLE]]

45

The following table presents net charge-offs to average loans outstanding by major loan category for the year ended December 31, 2021 (in thousands, except percentages):

[[GREPCENT_TABLE]]
[["Commercial and industrial","","","0.10","%"],["Net charge-off during the period","","$","5,232"],["Average amount outstanding","","$","5,089,712"],["Residential real estate","","","0.00","%"],["Net charge-off during the period","","$","\u2014"],["Average amount outstanding","","$","4,557,592"],["Securities-based loans","","","0.00","%"],["Net charge-off during the period","","$","\u2014"],["Average amount outstanding","","$","2,353,621"],["Construction and land","","","0.00","%"],["Net charge-off during the period","","$","\u2014"],["Average amount outstanding","","$","557,406"],["Commercial real estate","","","0.00","%"],["Net charge-off during the period","","$","\u2014"],["Average amount outstanding","","$","381,550"],["Home equity lines of credit","","","0.00","%"],["Net charge-off during the period","","$","\u2014"],["Average amount outstanding","","$","79,387"],["Other","","","0.00","%"],["Net charge-off during the period","","$","\u2014"],["Average amount outstanding","","$","37,835"],["Total retained loans","","","0.04","%"],["Net charge-off during the period","","$","5,232"],["Average amount outstanding","","$","13,057,103"]]
[[/GREPCENT_TABLE]]

Allocation of the Allowance for Loan Losses

The following is a breakdown of the allowance for loan losses by each major loan category at December 31, 2021 and 2020 (in thousands, except rates):

[[GREPCENT_TABLE]]
[["","","December 31, 2021","","","December 31, 2020"],["","","Balance","","","Percent (1)","","","Balance","","","Percent (1)"],["Commercial and industrial","","$","53,529","","","","43.9","%","","$","67,222","","","","38.5","%"],["Residential real estate","","","28,560","","","","32.7","","","","16,300","","","","35.4"],["Construction and land","","","8,536","","","","3.1","","","","17,275","","","","4.5"],["Securities-based loans","","","4,006","","","","17.2","","","","2,015","","","","17.3"],["Commercial real estate","","","3,934","","","","2.4","","","","8,580","","","","3.3"],["Home equity lines of credit","","","511","","","","0.5","","","","374","","","","0.7"],["Other","","","268","","","","0.2","","","","263","","","","0.3"],["","","$","99,344","","","","100.0","%","","$","112,029","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

(1)
Loan category as a percentage of total loan portfolio.

A loan is determined to be impaired usually when principal or interest becomes 90 days past due or when collection becomes uncertain. At the time a loan is determined to be impaired, the accrual of interest and amortization of deferred loan origination fees is discontinued (“nonaccrual status”) and any accrued and unpaid interest income is reversed.

Please refer to the section entitled “Critical Accounting Policies and Estimates” herein regarding our policies for establishing loan loss reserves, including placing loans on nonaccrual status.

46

IV. Deposits

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

[[GREPCENT_TABLE]]
[["","","December 31, 2021","","","December 31, 2020","","","December 31, 2019"],["","","Average Balance","","","Average Interest Rate","","","Average Balance","","","Average Interest Rate","","","Average Balance","","","Average Interest Rate"],["Non-interest bearing demand deposits","","$","608,825","","","*","","","$","288,222","","","*","","","$","138,001","","","*"],["Interest-bearing demand deposits","","","827,532","","","","0.06","%","","","698,107","","","","0.53","%","","","645,814","","","","1.57","%"],["Money Market and Savings deposits","","","18,341,304","","","","0.02","%","","","15,297,113","","","","0.04","%","","","13,101,661","","","","0.44","%"],["Time deposits","","","58,549","","","","1.89","%","","","221,479","","","","2.25","%","","","1,154,180","","","","2.43","%"],["Other","","","56,241","","","","0.50","%","","","284,618","","","","1.33","%","","","449,996","","","","1.78","%"]]
[[/GREPCENT_TABLE]]

* Not applicable.

Results of Operations – Institutional Group

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change","","","As a Percentage of Net Revenues for the Year Ended December 31,"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019","","","2021","","","2020","","","2019"],["Revenues:"],["Commissions","","$","242,009","","","$","247,380","","","$","190,093","","","","(2.2",")%","","","30.1","%","","","11.2","%","","","15.6","%","","","15.7","%"],["Principal transactions","","","373,689","","","","414,202","","","","232,453","","","","(9.8",")","","","78.2","","","","17.4","","","","26.2","","","","19.1"],["Transactional revenues","","","615,698","","","","661,582","","","","422,546","","","","(6.9",")","","","56.6","","","","28.6","","","","41.8","","","","34.8"],["Capital raising","","","661,088","","","","488,152","","","","331,527","","","","35.4","","","","47.2","","","","30.7","","","","30.8","","","","27.3"],["Advisory","","","856,083","","","","428,132","","","","447,979","","","","100.0","","","","(4.4",")","","","39.8","","","","27.1","","","","36.9"],["Investment banking","","","1,517,171","","","","916,284","","","","779,506","","","","65.6","","","","17.5","","","","70.5","","","","57.9","","","","64.2"],["Interest","","","20,734","","","","16,837","","","","24,139","","","","23.1","","","","(30.2",")","","","1.0","","","","1.1","","","","2.0"],["Other income (1)","","","11,313","","","","376","","","","12,101","","","n/m","","","","(96.9",")","","","0.5","","","","0.0","","","","1.0"],["Total revenues","","","2,164,916","","","","1,595,079","","","","1,238,292","","","","35.7","","","","28.8","","","","100.6","","","","100.8","","","","102.0"],["Interest expense","","","12,477","","","","11,932","","","","24,275","","","","4.6","","","","(50.8",")","","","0.6","","","","0.8","","","","2.0"],["Net revenues","","","2,152,439","","","","1,583,147","","","","1,214,017","","","","36.0","","","","30.4","","","","100.0","","","","100.0","","","","100.0"],["Non-interest expenses:"],["Compensation and benefits","","","1,251,595","","","","942,769","","","","736,298","","","","32.8","","","","28.0","","","","58.1","","","","59.6","","","","60.6"],["Occupancy and equipment rental","","","71,204","","","","68,457","","","","53,533","","","","4.0","","","","27.9","","","","3.3","","","","4.3","","","","4.4"],["Communication and office supplies","","","89,963","","","","88,054","","","","74,149","","","","2.2","","","","18.8","","","","4.2","","","","5.6","","","","6.1"],["Commissions and floor brokerage","","","33,675","","","","33,691","","","","24,078","","","n/m","","","","39.9","","","","1.6","","","","2.1","","","","2.0"],["Other operating expenses","","","147,065","","","","124,891","","","","150,289","","","","17.8","","","","(16.9",")","","","6.8","","","","7.9","","","","12.4"],["Total non-interest expenses","","","1,593,502","","","","1,257,862","","","","1,038,347","","","","26.7","","","","21.1","","","","74.0","","","","79.5","","","","85.5"],["Income before income taxes","","$","558,937","","","$","325,285","","","$","175,670","","","","71.8","%","","","85.2","%","","","26.0","%","","","20.5","%","","","14.5","%"]]
[[/GREPCENT_TABLE]]

(1)
Includes asset management revenues.

Year Ended December 31, 2021, Compared With Year Ended December 31, 2020

NET REVENUES

For the year ended December 31, 2021, Institutional Group net revenues increased 36.0% to a record $2.2 billion from $1.6 billion in 2020. The increase in net revenues was primarily attributable to an increase in advisory and capital-raising revenues, partially offset by a decrease in transactional revenues. The segment’s performance continues to benefit from strong market activity, recent investments in our business, and contributions from Canada and Europe.

Commissions – For the year ended December 31, 2021, commission revenues decreased 2.2% to $242.0 million from $247.4 million in 2020.

47

Principal transactions – For the year ended December 31, 2021, principal transactions revenues decreased 9.8% to $373.7 million from $414.2 million in 2020.

Transactional revenues – For the year ended December 31, 2021, institutional transactional revenues decreased 6.9% to $615.7 million from $661.6 million in 2020.

For the year ended December 31, 2021, fixed income transactional revenues decreased 10.8% to $361.0 million from $404.8 million in 2020. The decrease is primarily attributable to lower volumes as well as tighter credit spreads, partially offset by revenues from the Vining Sparks acquisition.

For the year ended December 31, 2021, equity transactional revenues decreased 0.8% to $254.7 million from $256.8 million in 2020. The decrease is primarily attributable to declines in cash equities driven by lower volatility and volumes, partially offset by an increase in trading gains.

Investment banking – For the year ended December 31, 2021, investment banking revenues increased 65.6% to a record $1.5 billion from $916.3 million in 2020. The increase is primarily attributable to increases in advisory revenues as well as increases in equity and fixed income capital-raising revenues.

For the year ended December 31, 2021, capital-raising revenues increased 35.4% to $661.1 million from $488.2 million in 2020.

For the year ended December 31, 2021, equity capital markets capital-raising revenues increased 41.9% to $434.2 million from $306.0 million in 2020. The increase in equity capital-raising revenues is primarily attributable to an increase in deals compared to 2020.

For the year ended December 31, 2021, fixed income capital markets capital-raising revenues increased 24.6% to $226.9 million from $182.1 million in 2020. The increase is primarily attributable to an increase in our public finance business. In addition, there has been an increase in our corporate debt issuance business.

For the year ended December 31, 2021, advisory revenues increased 100.0% to $856.1 million from $428.1 million in 2020. The growth is primarily attributable to an increase in completed advisory transactions and private placement fees.

Interest income – For the year ended December 31, 2021, interest income increased 23.1% to $20.7 million from $16.8 million in 2020. The increase is primarily attributable to higher leveraged finance activity.

Other income – For the year ended December 31, 2021, other income increased to $11.3 million from $0.4 million in 2020. The increase is primarily attributable to improved investment gains over 2020.

Interest expense – For the year ended December 31, 2021, interest expense increased 4.6% to $12.5 million from $11.9 million in 2020. The increase is primarily driven by higher interest charges related to expanded trade clearance activity in Europe.

NON-INTEREST EXPENSES

For the year ended December 31, 2021, Institutional Group non-interest expenses increased 26.7% to $1.6 billion from $1.3 billion in 2020.

Compensation and benefits – For the year ended December 31, 2021, compensation and benefits expense increased 32.8% to $1.3 billion from $942.8 million in 2020. The increase is primarily attributable to higher variable compensation expense as a result of strong revenue growth over 2020.

Compensation and benefits expense as a percentage of net revenues was 58.1% for the year ended December 31, 2021, compared to 59.6% in 2020. The decrease is primarily attributable to lower compensable revenues.

Occupancy and equipment rental – For the year ended December 31, 2021, occupancy and equipment rental expense increased 4.0% to $71.2 million from $68.5 million in 2020. The increase is attributable to higher data processing and furniture and equipment costs, partially offset by lower occupancy costs.

Communications and office supplies – For the year ended December 31, 2021, communications and office supplies expense increased 2.2% to $90.0 million from $88.1 million in 2020. The increase is primarily attributable to higher communication and quote equipment expenses associated with the continued growth of our business.

Commissions and floor brokerage – For the year ended December 31, 2021, commissions and floor brokerage of $33.7 million remained consistent with 2020. An increase in processing expenses was offset by lower ECN trading costs.

Other operating expenses – For the year ended December 31, 2021, other operating expenses increased 17.8% to $147.1 million from $124.9 million in 2020. The increase is primarily attributable to higher conference-related expenses, investment banking transaction expenses, professional fees, and travel and entertainment expenses, partially offset by lower settlement costs.

48

INCOME BEFORE INCOME TAXES

For the year ended December 31, 2021, income before income taxes for the Institutional Group segment increased 71.8% to $558.9 million from $325.3 million in 2020. Profit margins (income before income taxes as a percentage of net revenues) have increased to 26.0% for the year ended December 31, 2021, from 20.5% in 2020 as a result of strong revenue growth and our continued expense discipline.

Year Ended December 31, 2020, Compared With Year Ended December 31, 2019

NET REVENUES

For the year ended December 31, 2020, Institutional Group net revenues increased 30.4% to $1.6 billion from $1.2 billion in 2019. The increase in net revenues for the year ended December 31, 2020, was primarily attributable to an increase in transactional revenues and capital-raising revenues, partially offset by a decrease in advisory revenues and other income.

Commissions – For the year ended December 31, 2020, commission revenues increased 30.1% to $247.4 million from $190.1 million in 2019. The increase is primarily attributable to the growth in equities commissions and increased market volatility from 2019.

Principal transactions – For the year ended December 31, 2020, principal transactions revenues increased 78.2% to $414.2 million from $232.5 million in 2019. The increase is primarily attributable to strong client engagement and market volatility, as well as an increase in trading gains over 2019.

Transactional revenues – For the year ended December 31, 2020, institutional transactional revenues increased 56.6% to $661.6 million from $422.5 million in 2019.

For the year ended December 31, 2020, fixed income transactional revenues increased 58.1% to $404.8 million from $256.0 million in 2019. For the year ended December 31, 2020, equity transactional revenues increased 54.1% to $256.8 million from $166.6 million in 2019. The increases are primarily attributable to higher trading volumes during 2020, driven by market volatility, as a result of the economic uncertainty created by the COVID-19 pandemic and an increase in trading gains.

Investment banking – For the year ended December 31, 2020, investment banking revenues increased 17.5% to $916.3 million from $779.5 million in 2019. The increase is primarily attributable to an increase in capital-raising revenues, partially offset by a decrease in advisory revenues.

For the year ended December 31, 2020, advisory revenues decreased 4.4% to $428.1 million from $448.0 million in 2019. Advisory revenues were negatively impacted by the decrease in industry-wide completed mergers and acquisitions transactions, which was driven by an increase in market volatility and the economic slow-down in 2020.

For the year ended December 31, 2020, capital-raising revenues increased 47.2% to $488.2 million from $331.5 million in 2019.

For the year ended December 31, 2020, equity capital markets capital-raising revenues increased 49.7% to $306.0 million from $204.4 million in 2019. The increase in equity capital-raising revenues is primarily attributable to an increase in deals compared to 2019.

For the year ended December 31, 2020, fixed income capital markets capital-raising revenues increased 43.3% to $182.1 million from $127.1 million in 2019. The increase is primarily attributable to an increase in the municipal bond origination business. Fixed income capital-raising revenues increased from a year ago as clients accessed the market to benefit from the lower rate environment and to raise additional liquidity.

Interest income – For the year ended December 31, 2020, interest income decreased 30.2% to $16.8 million from $24.1 million in 2019. The decrease is primarily driven by the impact of lower interest rates and lower inventory levels.

Other income – For the year ended December 31, 2020, other income decreased 96.9% to $0.4 million from $12.1 million in 2019.

Interest expense – For the year ended December 31, 2020, interest expense decreased 50.8% to $11.9 million from $24.3 million in 2019. The decrease is primarily driven by the impact of lower interest rates and lower inventory levels.

NON-INTEREST EXPENSES

For the year ended December 31, 2020, Institutional Group non-interest expenses increased 21.1% to $1.3 billion from $1.0 billion in 2019.

Compensation and benefits – For the year ended December 31, 2020, compensation and benefits expense increased 28.0% to $942.8 million from $736.3 million in 2019. Compensation and benefits expense as a percentage of net revenues was 59.6% for the year ended December 31, 2020, compared to 60.6% in 2019.

Occupancy and equipment rental – For the year ended December 31, 2020, occupancy and equipment rental expense increased 27.9% to $68.5 million from $53.5 million in 2019. The increase is primarily attributable to higher occupancy costs as a result of an increase in locations and higher data processing costs associated with an increase in business activity.

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Communications and office supplies – For the year ended December 31, 2020, communications and office supplies expense increased 18.8% to $88.1 million from $74.1 million in 2019. The increase is primarily attributable to higher communication and quote equipment expenses associated with the continued growth of our business.

Commissions and floor brokerage – For the year ended December 31, 2020, commissions and floor brokerage expense increased 39.9% to $33.7 million from $24.1 million in 2019. The increase is primarily attributable to higher volume-related expenses, including brokerage trading costs, reflecting an increase in activity levels.

Other operating expenses – For the year ended December 31, 2020, other operating expenses decreased 16.9% to $124.9 million from $150.3 million in 2019. The decrease is primarily attributable to significantly lower travel, entertainment, and conference-related expenses. These decreases were partially offset by an increase in net provisions for litigation matters, higher investment banking transaction expenses, reflecting an increase in activity levels, and an increase in professional fees.

INCOME BEFORE INCOME TAXES

For the year ended December 31, 2020, income before income taxes for the Institutional Group segment increased 85.2% to $325.3 million from $175.7 million in 2019. Profit margins (income before income taxes as a percentage of net revenues) increased to 20.5% for the year ended December 31, 2020, from 14.5% in 2019 as a result of strong revenue growth and our continued expense discipline.

Results of Operations – Other Segment

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

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Net revenues","","$","(14,188",")","","$","(21,912",")","","$","(7,546",")","","","35.3","%","","","(190.4",")%"],["Non-interest expenses:"],["Compensation and benefits","","","198,399","","","","198,041","","","","195,389","","","","0.2","","","","1.4"],["Other operating expenses","","","194,222","","","","180,056","","","","159,557","","","","7.9","","","","12.8"],["Total non-interest expenses","","","392,621","","","","378,097","","","","354,946","","","","3.8","","","","6.5"],["Loss before income taxes","","$","(406,809",")","","$","(400,009",")","","$","(362,492",")","","","1.7","%","","","10.3","%"]]
[[/GREPCENT_TABLE]]

The other segment includes expenses related to the Company’s acquisition strategy and the investments made in the Company’s infrastructure and control environment.

The expenses relating to the Company’s acquisition strategy are primarily attributable to integration-related activities, signing bonuses, amortization of restricted stock awards, debentures, and promissory notes issued as retention, additional earn-out expense, and amortization of intangible assets acquired. These costs were directly related to acquisitions of certain businesses and are not representative of the costs of running the Company’s ongoing business.

The following shows the expenses that are part of the other segment related to acquisitions.

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Non-interest expenses:"],["Compensation and benefits","","$","26,092","","","$","30,259","","","$","32,367","","","","(13.8",")%","","","(6.5",")%"],["Other operating expenses","","","39,069","","","","30,054","","","","32,171","","","","30.0","","","","(6.6",")"],["Total non-interest expenses","","$","65,161","","","$","60,313","","","$","64,538","","","","8.0","%","","","(6.5",")%"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2021, compensation and benefits expense decreased 13.8% to $26.1 million from $30.3 million in 2020. The decrease is primarily attributable to lower amortization of promissory notes and restricted stock awards.

For the year ended December 31, 2021, other operating expenses increased 30.0% to $39.1 million from $30.1 million in 2020. The increase is primarily attributable to the recognition of additional earn-out expense related to prior acquisitions that have performed better than expected.

The expenses not associated with the activities described above in the other segment are as follows:

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[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,","","","Percentage Change"],["","","2021","","","2020","","","2019","","","2021 vs. 2020","","","2020 vs. 2019"],["Non-interest expenses:"],["Compensation and benefits","","$","172,307","","","$","167,782","","","$","163,022","","","","2.7","%","","","2.9","%"],["Other operating expenses","","","155,153","","","","150,002","","","","127,386","","","","3.4","","","","17.8"],["Total non-interest expenses","","$","327,460","","","$","317,784","","","$","290,408","","","","3.0","%","","","9.4","%"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2021, compensation and benefits expense increased 2.7% to $172.3 million from $167.8 million in 2020. The increase is primarily attributable to higher bonus expense as a result of the Company’s performance in 2021.

For the year ended December 31, 2021, other operating expenses increased 3.4% to $155.2 million from $150.0 million in 2020. The increase is primarily attributable to higher advertising and telecommunication equipment expense due to the continued growth of the Company.

Analysis of Financial Condition

Our company’s consolidated statements of financial condition consist primarily of cash and cash equivalents, receivables, financial instruments owned, bank loans, investments, goodwill, loans and advances to financial advisors, bank deposits, and payables. Total assets of $34.0 billion at December 31, 2021, were up 28.0% over December 31, 2020. Our broker-dealer subsidiary’s gross assets and liabilities, including financial instruments owned, stock loan/borrow, receivables and payables from/to brokers, dealers, and clearing organizations and clients, fluctuate with our business levels and overall market conditions.

As of December 31, 2021, our liabilities were comprised primarily of deposits of $23.3 billion at Stifel Bancorp, accounts payable and accrued expenses of $1.1 billion, senior notes, net of debt issuance costs, of $1.1 billion, payables to customers of $971.9 million at our broker-dealer subsidiaries, and accrued employee compensation of $932.8 million. To meet our obligations to clients and operating needs, we had $11.7 billion of cash or assets readily convertible into cash at December 31, 2021.

Cash Flow

Cash and cash equivalents decreased $315.9 million to $2.0 billion at December 31, 2021, from $2.3 billion at December 31, 2020. Operating activities provided cash of $872.1 million primarily due to net income recognized in 2021 adjusted for non-cash activities and an increase in operating liabilities, net of liabilities assumed, partially offset by an increase in assets, net of assets acquired. Investing activities used cash of $7.0 billion due to the growth of the loan portfolio, investment securities purchases, fixed asset purchases, and cash used to fund acquisitions, partially offset by proceeds from the sale and maturity of securities in our investment portfolio. Financing activities provided cash of $5.8 billion primarily due to an increase in bank deposits and proceeds from preferred stock issuance, partially offset by repurchases of our common stock, the redemption of our Series A preferred stock, tax payments related to shares withheld for stock-based compensation, and dividends paid on our common and preferred stock.

Liquidity and Capital Resources

The Company’s senior management establishes the liquidity and capital policies of our company. The Company’s senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity and interest rate sensitivity of our company’s asset and liability position.

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

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

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As of December 31, 2021, we had $34.0 billion in assets, $11.7 billion of which consisted of cash or assets readily convertible into cash as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2021","","","2020"],["Cash and cash equivalents","","$","1,963,326","","","$","2,279,274"],["Receivables from brokers, dealers, and clearing organizations","","","574,256","","","","549,492"],["Securities purchased under agreements to resell","","","579,866","","","","217,930"],["Financial instruments owned at fair value","","","1,065,216","","","","682,744"],["Available-for-sale securities at fair value","","","2,113,893","","","","2,230,297"],["Held-to-maturity securities at amortized cost","","","5,348,558","","","","4,117,384"],["Investments","","","34,340","","","","42,429"],["Total cash and assets readily convertible to cash","","$","11,679,455","","","$","10,119,550"]]
[[/GREPCENT_TABLE]]

As of December 31, 2021 and 2020, the amount of collateral by asset class is as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","December 31, 2021","","","December 31, 2020"],["","","Contractual","","","Contingent","","","Contractual","","","Contingent"],["Cash and cash equivalents","","$","132,158","","","$","\u2014","","","$","155,081","","","$","\u2014"],["Financial instruments owned at fair value","","","385,528","","","","385,528","","","","190,955","","","","190,955"],["Investment portfolio (AFS & HTM)","","","\u2014","","","","1,849,152","","","","\u2014","","","","1,764,421"],["","","$","517,686","","","$","2,234,680","","","$","346,036","","","$","1,955,376"]]
[[/GREPCENT_TABLE]]

Liquidity Available From Subsidiaries

Liquidity is principally available to our company from Stifel and Stifel Bancorp.

Stifel is required to maintain net capital equal to the greater of $1 million or two percent of aggregate debit items arising from client transactions. Covenants in the Company’s committed financing facilities require the excess net capital of Stifel, our principal broker-dealer subsidiary, to be above a defined amount. At December 31, 2021, Stifel’s excess net capital exceeded the minimum requirement, as defined. There are also limitations on the amount of dividends that may be declared by a broker-dealer without FINRA approval. See Note 18 of the Notes to Consolidated Financial Statements for more information on the capital restrictions placed on our broker-dealer subsidiaries.

Stifel Bancorp may pay dividends to the parent company without prior approval by its regulator as long as the dividend does not exceed the sum of Stifel Bancorp’s current calendar year and the previous two calendar years’ retained net income and Stifel Bancorp maintains its targeted capital to risk-weighted assets ratios.

Although we have liquidity available to us from our other subsidiaries, the available amounts are not as significant as the amounts described above and, in certain instances, may be subject to regulatory requirements.

Capital Management

We have an ongoing authorization from the Board of Directors to repurchase our common stock in the open market or in negotiated transactions. At December 31, 2021, the maximum number of shares that may yet be purchased under this plan was 10.8 million. We utilize the share repurchase program to manage our equity capital relative to the growth of our business and help to meet obligations under our employee benefit plans.

Liquidity Risk Management

Our businesses are diverse, and our liquidity needs are determined by many factors, including market movements, collateral requirements, and client commitments, all of which can change dramatically in a difficult funding environment. During a liquidity crisis, credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms (e.g., interest rates, collateral provisions, and tenor) or availability of other types of secured financing may change. We manage liquidity risk by diversifying our funding sources across products and among individual counterparties within those products. These liquidity risk management practices have allowed us to effectively manage the market stress from the COVID-19 pandemic.

As a holding company, whereby all of our operations are conducted through our subsidiaries, our cash flow and our ability to service our debt, including the notes, depend upon the earnings of our subsidiaries. Our subsidiaries are separate and distinct legal entities. Our subsidiaries have no obligation to pay any amounts due on the notes or to provide us with funds to pay our obligations, whether by dividends, distributions, loans, or other payments.

Our liquidity requirements may change in the event we need to raise more funds than anticipated to increase inventory positions, support more rapid expansion, develop new or enhanced services and products, acquire technologies, respond to acquisition opportunities, expand our recruiting efforts, or respond to other unanticipated liquidity requirements. We primarily rely on financing activities and

52

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

The availability of outside financing, including access to the capital markets and bank lending, depends on a variety of factors, such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services sector, and our credit rating. Our cost and availability of funding may be adversely affected by illiquid credit markets and wider credit spreads. As a result of any future concerns about the stability of the markets generally and the strength of counterparties specifically, lenders may from time to time curtail, or even cease to provide, funding to borrowers.

Our liquidity management policies are designed to mitigate the potential risk that we may be unable to access adequate financing to service our financial obligations without material business impact. The principal elements of our liquidity management framework are: (a) daily monitoring of our liquidity needs at the holding company and significant subsidiary level, (b) stress testing the liquidity positions of Stifel and our bank subsidiaries, and (c) diversification of our funding sources.

Monitoring of liquidity – Senior management establishes our liquidity and capital policies. These policies include senior management’s review of short- and long-term cash flow forecasts, review of monthly capital expenditures, the monitoring of the availability of alternative sources of financing, and the daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of capital to our business units consider, among other factors, projected profitability and cash flow, risk, and impact on future liquidity needs. Our treasury department assists in evaluating, monitoring, and controlling the impact that our business activities have on our financial condition, liquidity, and capital structure, as well as maintains our relationships with various lenders. The objectives of these policies are to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.

Liquidity stress testing (Firmwide) – A liquidity stress test model is maintained by the Company that measures liquidity outflows across multiple scenarios at the major operating subsidiaries and details the corresponding impact to our holding company and the overall consolidated firm. Liquidity stress tests are utilized to ensure that current exposures are consistent with the Company’s established liquidity risk tolerance and, more specifically, to identify and quantify sources of potential liquidity strain. Further, the stress tests are utilized to analyze possible impacts on the Company’s cash flows and liquidity position. The outflows are modeled over a 30-day liquidity stress timeframe and include the impact of idiosyncratic and macro-economic stress events.

The assumptions utilized in the Company’s liquidity stress tests include, but are not limited to, the following:

•
No government support

•
No access to equity and unsecured debt markets within the stress horizon

•
Higher haircuts and significantly lower availability of secured funding

•
Additional collateral that would be required by trading counter-parties, certain exchanges, and clearing organizations related to credit rating downgrades

•
Client cash withdrawals and inability to accept new deposits

•
Increased demand from customers on the funding of loans and lines of credit

At December 31, 2021, the Company maintained sufficient liquidity to meet current and contingent funding obligations as modeled in its liquidity stress test model.

Liquidity stress testing (Stifel Bancorp) – Our bank subsidiaries perform three primary stress tests on its liquidity position. These stress tests are based on the following company-specific stresses: (1) the amount of deposit run-off that they could withstand over a one-month period of time based on their on-balance sheet liquidity and available credit, (2) the ability to fund operations if all available credit were to be drawn immediately, with no additional available credit, and (3) the ability to fund operations under a regulatory prompt corrective action. The goal of these stress tests is to determine their ability to fund continuing operations under significant pressures on both assets and liabilities.

Under all stress tests, our bank subsidiaries consider cash and highly liquid investments as available to meet liquidity needs. In its analysis, our bank subsidiaries consider agency mortgage-backed securities, corporate bonds, and commercial mortgage-backed securities as highly liquid. In addition to being able to be readily financed at modest haircut levels, our bank subsidiaries estimate that each of the individual securities within each of the asset classes described above could be sold into the market and converted into cash within three business days under normal market conditions, assuming that the entire portfolio of a given asset class was not simultaneously liquidated. At December 31, 2021, available cash and highly liquid investments comprised approximately 19% of Stifel Bancorp’s assets, which was well in excess of its internal target.

In addition to these stress tests, management performs a daily liquidity review. The daily analysis provides management with all major fluctuations in liquidity. The analysis also tracks the proportion of deposits that Stifel Bancorp is sweeping from its affiliated

53

broker-dealer, Stifel. On a monthly basis, liquidity key performance indicators and compliance with liquidity policy limits are reported to the Board of Directors. Our bank subsidiaries have not violated any internal liquidity policy limits.

Funding Sources

The Company pursues a strategy of diversification of secured and unsecured funding sources (by product and by investor) and attempts to ensure that the tenor of the Company’s liabilities equals or exceeds the expected holding period of the assets being financed. The Company funds its balance sheet through diverse sources. These sources may include the Company’s equity capital, long-term debt, repurchase agreements, securities lending, deposits, committed and uncommitted credit facilities, Federal Home Loan Bank advances, and federal funds agreements.

Cash and Cash Equivalents – We held $2.0 billion of cash and cash equivalents at December 31, 2021, compared to $2.3 billion at December 31, 2020. Cash and cash equivalents provide immediate sources of funds to meet our liquidity needs.

Securities Available-for-Sale – We held $2.1 billion in available-for-sale investment securities at December 31, 2021, compared to $2.2 billion at December 31, 2020. As of December 31, 2021, the weighted-average life of the investment securities portfolio was approximately 1.4 years. These investment securities provide increased liquidity and flexibility to support our company’s funding requirements.

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

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

As of December 31, 2021, we had $23.3 billion in deposits compared to $17.4 billion at December 31, 2020. Our core deposits are primarily comprised of money market deposit accounts, non-interest-bearing deposits, and CDs.

Short-term borrowings – Our short-term financing is generally obtained through short-term bank line financing on an uncommitted, secured basis, securities lending arrangements, repurchase agreements, advances from the Federal Home Loan Bank, term loans, and committed bank line financing on an unsecured basis. We borrow from various banks on a demand basis with company-owned and customer securities pledged as collateral. The value of customer-owned securities used as collateral is not reflected in the consolidated statements of financial condition. We also have an unsecured, committed bank line available.

Our uncommitted secured lines of credit at December 31, 2021, totaled $880.0 billion with four banks and are dependent on having appropriate collateral, as determined by the bank agreements, to secure an advance under the line. The availability of our uncommitted lines is subject to approval by the individual banks each time an advance is requested and may be denied. Our peak daily borrowing on our uncommitted secured lines was $135.0 million during the year ended December 31, 2021. There are no compensating balance requirements under these arrangements. Any borrowings on secured lines of credit are day-to-day and are generally utilized to finance certain fixed income securities. At December 31, 2021, we had no outstanding balances on our uncommitted secured lines of credit.

Federal Home Loan advances are floating-rate advances. The weighted average interest rates during the year ended December 31, 2021, on these advances was 0.30%. The advances are secured by Stifel Bancorp’s residential mortgage loan portfolio and investment portfolio. The interest rates reset on a daily basis. Stifel Bancorp has the option to prepay these advances without penalty on the interest reset date. At December 31, 2021, there were no Federal Home Loan advances.

Unsecured borrowings – On May 27, 2021, the Company and Stifel entered into an unsecured revolving credit facility agreement (the “Credit Facility”). The Credit Facility has a maturity date of May 2026, and the lenders include a number of financial institutions. This committed unsecured borrowing facility provides for maximum borrowings of up to $500.0 million, with a sublimit of $200.0 million for the Company. Stifel may borrow up to $500.0 million under the Credit Facility, depending on the amount of outstanding borrowings of the Company. The interest rates on borrowings under the Credit Facility are variable and based on LIBOR, as adjusted. There were no borrowings outstanding on the Credit Facility as of December 31, 2021.

We can draw upon this line as long as certain restrictive covenants are maintained. Under the Credit Facility, we are required to maintain compliance with a minimum consolidated tangible net worth covenant, as defined, and a maximum consolidated total capitalization ratio covenant, as defined. In addition, Stifel, our broker-dealer subsidiary, is required to maintain compliance with a minimum regulatory excess net capital percentage covenant, as defined, and our bank subsidiaries are required to maintain their status as well-capitalized, as defined.

54

Our revolving credit facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, and judgment defaults. At December 31, 2021, we had no advances on the Credit Facility and were in compliance with all covenants and currently do not expect any covenant violations.

Federal Home Loan Bank Advances and other secured financing – Stifel Bancorp has borrowing capacity with the Federal Home Loan Bank of $4.2 billion at December 31, 2021, and $64.5 million in federal funds agreements for the purpose of purchasing short-term funds should additional liquidity be needed. At December 31, 2021, there were no outstanding Federal Home Loan Bank advances. Stifel Bancorp is eligible to participate in the Federal Reserve’s discount window program; however, Stifel Bancorp does not view borrowings from the Federal Reserve as a primary means of funding. The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the Federal Reserve, and is secured by securities. Stifel Bancorp has borrowing capacity of $1.2 billion with the Federal Reserve’s discount window at December 31, 2021. Stifel Bancorp receives overnight funds from excess cash held in Stifel brokerage accounts, which are deposited into a money market account. These balances totaled $21.3 billion at December 31, 2021. At December 31, 2021, there was $27.9 billion in client money market and FDIC-insured product balances.

Public Offering of Senior Notes – On July 15, 2014, we sold in a registered underwritten public offering, $300.0 million in aggregate principal amount of 4.25% senior notes due July 2024 (the “2014 Notes”). Interest on the 2014 Notes is payable semi-annually in arrears. We may redeem the 2014 Notes in whole or in part, at our option, at a redemption price equal to 100% of their principal amount, plus a “make-whole” premium and accrued and unpaid interest, if any, to the date of redemption. In July 2016, we issued an additional $200.0 million in aggregate principal amount of 4.25% senior notes due 2024. In July 2014, we received a BBB- rating on the 2014 Notes.

On October 4, 2017, we completed the pricing of a registered underwritten public offering of $200.0 million in aggregate principal amount of 5.20% senior notes due October 2047. Interest on the senior notes is payable quarterly in arrears in January, April, July, and October. On or after October 15, 2022, we may redeem some or all of the senior notes at any time at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued interest thereon to the redemption date. On October 27, 2017, we completed the sale of an additional $25.0 million aggregate principal amount of Notes pursuant to the over-allotment option. In October 2017, we received a BBB- rating on the notes.

On May 20, 2020, we sold in a registered underwritten public offering, $400.0 million in aggregate principal amount of 4.00% senior notes due May 2030. Interest on these senior notes is payable semi-annually in arrears in May and November. We may redeem the notes in whole or in part, at our option, at a redemption price equal to the greater of a) 100% of their principal amount or b) discounted present value at Treasury rate plus 50 basis points prior to February 15, 2030, and on or after February 15, 2030, at 100% of their principal amount, and accrued and unpaid interest, if any, to the date of redemption. In May 2020, we received a BBB- rating on the notes.

Public Offering of Preferred Stock – In July 2016, the Company completed an underwritten registered public offering of $150.0 million 6.25% Non-Cumulative Perpetual Preferred Stock, Series A. On August 20, 2021, the Company redeemed all of the outstanding Series A Preferred Stock.

In February 2019, the Company completed an underwritten registered public offering of $150.0 million 6.25% Non-Cumulative Perpetual Preferred Stock, Series B. In March 2019, we completed a public offering of an additional $10.0 million of Series B Preferred, pursuant to the over-allotment option.

In May 2020, the Company completed an underwritten registered public offering of $225.0 million 6.125% Non-Cumulative Perpetual Preferred Stock, Series C, which included the sale of $25.0 million of Series C Preferred pursuant to an over-allotment option.

On July 22, 2021, the Company completed an underwritten registered public offering of $300.0 million of 4.50% Non-Cumulative Perpetual Preferred Stock, Series D. When, as, and if declared by the board of directors of the Company, dividends will be payable at an annual rate of 4.50%, payable quarterly, in arrears. The Company may redeem the Series D preferred stock at its option, subject to regulatory approval, on or after August 15, 2026.

Credit Rating

We believe our current rating depends upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, our capital structure, our overall risk management, business diversification, and our market share and competitive position in the markets in which we operate. Deteriorations in any of these factors could impact our credit rating. A reduction in our credit rating could adversely affect our liquidity and competitive position, increase our incremental borrowing costs, limit our access to the capital markets, or trigger our obligations under certain financial agreements. As such, we may not be able to successfully obtain additional outside financing to fund our operations on favorable terms, or at all.

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

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Use of Capital Resources

On July 15, 2021, the Company purchased three commercial aircraft under lease to a domestic carrier, for a total purchase price of $145.9 million, which was funded from operating cash.

On August 20, 2021, the Company redeemed all of the outstanding 6.25% Non-Cumulative Perpetual Preferred Stock, Series A. The redemption price was $25.00 per depository share plus accrued and unpaid dividends to, but excluding, the date of redemption.

On November 1, 2021, the Company acquired Vining Sparks. Consideration for this acquisition consisted of cash from operations and shares of company common stock.

The Company’s Board of Directors approved a 100% increase in the quarterly dividend to $0.30 per common share starting in the first quarter of 2022.

During the year ended December 31, 2021, we repurchased $172.7 million, or 2.5 million shares, at an average price of $69.53 per share.

As part of our ongoing operations, we also enter into contractual arrangements that may require future cash payments, including certificates of deposit, lease obligations, and other contractual arrangements. See Notes 13 and 19 of the Notes to the Consolidated Financial Statements for information regarding our certificates of deposit and lease obligations, respectively. We have entered into investment commitments, lending commitments, and other commitments to extend credit for which we are unable to reasonably predict the timing of future payments. See Note 23 of the Notes to Consolidated Financial Statements for further information.

The following table summarizes the activity related to our company’s note receivable from January 1, 2020 to December 31, 2021 (in thousands):

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(1)
Notes issued in conjunction with the acquisition of Vining Sparks in 2021.

We have paid $180.7 million in the form of upfront notes to financial advisors for transition pay during the year ended December 31, 2021. As we continue to take advantage of the opportunities created by market displacement and as competition for skilled professionals in the industry increases, we may decide to devote more significant resources to attracting and retaining qualified personnel.

We utilize transition pay, principally in the form of upfront demand notes, to aid financial advisors, who have elected to join our firm, to supplement their lost compensation while transitioning their customers’ accounts to the Stifel platform. The initial value of the notes is determined primarily by the financial advisors’ trailing production and assets under management. These notes are generally forgiven over a five- to ten-year period based on production. The future estimated amortization expense of the upfront notes, assuming current-year production levels and static growth for the years ended December 31, 2022, 2023, 2024, 2025, 2026, and thereafter, is $137.8 million, $114.2 million, $98.3 million, $76.3 million, $67.5 million, and $159.9 million, respectively. These estimates could change if we continue to grow our business through expansion or experience increased production levels.

We maintain an incentive stock plan and a wealth accumulation plan that provides for the granting of stock options, stock appreciation rights, restricted stock, performance awards, stock units, and debentures (collectively, “deferred awards”) to our associates. Historically, we have granted stock units to our associates as part of our retention program. A restricted stock unit or restricted stock award represents the right to receive a share of the Company’s common stock at a designated time in the future without cash payment by the associate and is issued in lieu of cash incentive, principally for deferred compensation and employee retention plans. The restricted stock units or restricted stock awards generally vest over the next one to ten years after issuance and are distributed at predetermined future payable dates once vesting occurs. Restricted stock awards are restricted as to sale or disposition. These restrictions lapse over the next one to five years.

At December 31, 2021, the total number of restricted stock units, Performance-based Restricted Stock Units (“PRSUs”), and restricted stock awards outstanding was 20.2 million, of which 17.5 million were unvested. At December 31, 2021, there was approximately $555.0 million of unrecognized compensation cost for deferred awards, which is expected to be recognized over a weighted-average period of 2.6 years.

The future estimated compensation expense of the deferred awards, assuming current year forfeiture levels and static growth for the years ended December 31, 2022, 2023, 2024, 2025, 2026, and thereafter, is $172.1 million, $138.1 million, $109.7 million, $71.8 million, $30.7 million, and $32.6 million, respectively. These estimates could change if our forfeitures change from historical levels.

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

At December 31, 2021, Stifel had net capital of $614.2 million, which was 41.7% of aggregate debit items and $584.8 million in excess of its minimum required net capital. At December 31, 2021, all of our broker-dealer subsidiaries’ net capital exceeded the minimum net capital required under the SEC rule. At December 31, 2021, SNEL’s capital and reserves were in excess of the financial resources requirement under the rules of the FCA. At December 31, 2021, our banking subsidiaries were considered well capitalized under the regulatory framework for prompt corrective action. At December 31, 2021, SNC’s net capital and reserves were in excess of the financial resources requirement under the rules of the IIROC. See Note 18 of the Notes to Consolidated Financial Statements for details of our regulatory capital requirements.

Critical Accounting Policies and Estimates

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

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

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

Valuation of Financial Instruments

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

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

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

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

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

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For investments in illiquid or privately held securities that do not have readily determinable fair values, the determination of fair value requires us to estimate the value of the securities using the best information available. Among the factors we consider in determining the fair value of investments are the cost of the investment, terms and liquidity, developments since the acquisition of the investment, the sales price of recently issued securities, the financial condition and operating results of the issuer, earnings trends and consistency of operating cash flows, the long-term business potential of the issuer, the quoted market price of securities with similar quality and yield that are publicly traded, and other factors generally pertinent to the valuation of investments. In instances where a security is subject to transfer restrictions, the value of the security is based primarily on the quoted price of a similar security without restriction but may be reduced by an amount estimated to reflect such restrictions. The fair value of these investments is subject to a high degree of volatility and may be susceptible to significant fluctuation in the near term, and the differences could be material.

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

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

Contingencies

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

Allowance for Credit Losses

The measurement of the allowance for credit losses, which includes the allowance for loan losses and the reserve for unfunded lending commitments, is based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets.

The expected credit losses on our loan portfolio are referred to as the allowance for loan losses and are reported separately as a contra-asset to loans on the consolidated statement of financial condition. The expected credit losses for unfunded lending commitments, including standby letters of credit and binding unfunded loan commitments, are reported on the consolidated statement of financial condition in accounts payable and accrued expenses. The provision for loan losses related to the loan portfolio and the provision for unfunded lending commitments are reported in the consolidated statement of operations in provision for credit losses.

For loans, the expected credit loss is typically estimated using quantitative methods that consider a variety of factors, such as historical loss experience derived from proxy data, the current credit quality of the portfolio, as well as an economic outlook over the life of the loan. The life of the loan for closed-ended products is based on the contractual maturity of the loan adjusted for any expected prepayments. The contractual maturity includes any extension options that are at the sole discretion of the borrower. For open-ended products, the expected credit loss is determined based on the maximum repayment term associated with future draws from credit lines.

In our loss forecasting framework, we incorporate forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets. These macroeconomic scenarios include variables that have historically been key drivers of increases and decreases in credit losses. These variables include, but are not limited to, unemployment rates, real estate prices, gross

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domestic product levels, corporate bond spreads, and long-term interest rate forecasts. To estimate losses for contractual periods that extend beyond the forecast horizon, we revert to an average historical loss experience. As any one economic outlook is inherently uncertain, we leverage multiple scenarios. The scenarios that are chosen each quarter and the amount of weighting given to each scenario depend on a variety of factors, including recent economic events, leading economic indicators, and industry trends. The reserve for unfunded lending commitments is estimated using the same scenarios, models, and economic data as the loan portfolio.

The allowance for loan losses includes adjustments for qualitative reserves based on our company’s assessment that may not be adequately represented in the quantitative methods or the economic assumptions described above. For example, factors that we consider include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and nonaccrual loans, the effect of external factors such as competition, and legal and regulatory requirements, among others. Further, we consider the inherent uncertainty in quantitative models that are built on historical data. As a result of the uncertainty inherent in the quantitative models, other quantitative and qualitative factors are considered in adjusting allowance amounts, including, but not limited to, the following: model imprecision, imprecision in macroeconomic scenario forecasts, or changes in the economic environment affecting specific portfolio segments that deviate from the macroeconomic forecasts. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Depending on changes in circumstances, future assessments of credit risk may yield materially different results from the prior estimates, which may require an increase or a decrease in the allowance for loan losses.

The allowance for credit losses can also be impacted by unanticipated changes in asset quality of the portfolio. In addition, while we have incorporated our estimated impact of COVID-19 on the economy into our allowance for credit losses, the ultimate impact of COVID-19 is still unknown, including how long economic activities will be impacted and what effect the unprecedented levels of government fiscal and monetary actions will have on the economy and our credit losses.

As described above, the process to determine the allowance for credit losses requires numerous estimates and assumptions, some of which require a high degree of judgment and are often interrelated. Changes in the estimates and assumptions can result in significant changes in the allowance for credit losses. Our process for determining the allowance for credit losses is further discussed in Note 2 of the Notes to Consolidated Financial Statements.

Income Taxes

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

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

Goodwill and Intangible Assets

Under the provisions of ASC Topic 805, “Business Combinations,” we record all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangible assets, at fair value. Determining the fair value of assets and liabilities requires certain estimates.

Goodwill for certain acquisitions is deductible for tax purposes. The amortization of goodwill for tax purposes creates a cash tax savings due to a reduction in the current taxes payable. We have recorded cash tax savings for the year ending December 31, 2021, of $8.2 million and anticipate cumulative future cash savings of $92.4 million as of result of the tax amortization of goodwill.

In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,” indefinite-life intangible assets and goodwill are not amortized. Rather, they are subject to impairment testing on an annual basis, or more often if events or circumstances indicate there may be impairment. This test involves assigning tangible assets and liabilities as well as identified intangible assets and goodwill to reporting units and comparing the fair value of each reporting unit to its carrying amount. If the fair value is less than the carrying amount, a further test is required to measure the amount of the impairment.

We test goodwill for impairment on an annual basis and on an interim basis when certain events or circumstances exist. We test for impairment at the reporting unit level, which is generally at the level of or one level below our company’s business segments. For both the annual and interim tests, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

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If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required. However, if we conclude otherwise, we are then required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques we believe market participants would use for each of the reporting units. Our annual goodwill impairment testing was completed as of October 1, 2021, with no impairment charges resulting from the annual impairment tests.

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

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

Recent Accounting Pronouncements

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

Off-Balance Sheet Arrangements

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

Dilution

As of December 31, 2021, there were 20,192,070 outstanding restricted stock units, PRSUs, and restricted stock awards. A restricted stock unit represents the right to receive a share of the Company’s common stock at a designated time in the future without cash payment by the associate and is issued in lieu of cash incentive, principally for deferred compensation and employee retention plans. The restricted stock units vest on an annual basis over the next one to ten years and are distributable, if vested, at future specified dates. Restricted stock awards are restricted as to sale or disposition. These restrictions lapse over the next one to five years. Of the outstanding restricted stock units, PRSUs, and restricted stock awards, 2,665,865 shares are currently vested and 17,526,205 are unvested. Assuming vesting requirements are met, the Company anticipates that 4,795,537 shares under these awards will be distributed in 2022, 3,637,324 will vest in 2023, 3,442,637 will vest in 2024, and the balance of 5,650,707 will be distributed thereafter.

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

It has been our practice historically to satisfy almost all tax withholding obligations on income associated with the grants by reducing the number of shares otherwise deliverable in connection with the awards. We anticipate that practice will continue, as recently our Compensation Committee made a determination to satisfy tax withholding obligations through the cancellation of shares subject to an award. In addition, the plan pursuant to which we issue restricted stock units and restricted stock awards permits us to elect to settle certain awards entirely in cash, and we may elect to do so as those awards vest and become deliverable.

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