# STIFEL, NICOLAUS & COMPANY, INCORPORATED X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: STIFEL, NICOLAUS & COMPANY, INCORPORATED - Form: X-17A-5 - Filed: 2022-02-25 - Accession: 0001193125-22-054578 - CIK: 94403 - File #: 8-01447 Original filing: https://www.sec.gov/Archives/edgar/data/94403/000119312522054578/d189553dfull.pdf --- {0}------------------------------------------------ Consolidated Statement of Financial Condition December 31, 2021 (With Report of Independent Registered Public Accounting Firm) (This Statement of Financial Condition was filed pursuant to Rule 17a-5(e)(3) as a public document.) {1}------------------------------------------------ Consolidated Statement of Financial Condition December 31, 2021 | Statement of Financial Condition | Page | |---------------------------------------------------------|------| | Report of Independent Registered Public Accounting Firm | | | Consolidated Statement of Financial Condition | 2 | | Notes to Consolidated Statement of Financial Condition | ന | {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) Ernst & Young LLP 300 First Stamford Place Stamford, CT 06902 Tel: +1 203 674 3000 ey.com # Report of Independent Registered Public Accounting Firm To the Stockholder and Board of Directors of Stifel, Nicolaus & Company, Incorporated # Opinion on the Financial Statement We have audited the accompanying consolidated statement of financial condition of Stifel, Nicolaus & Company, Incorporated (the "Company") as of December 31, 2021 and the related notes (the "consolidated financial statement"). In our opinion, the consolidated financial statement presents fairly, in all material respects, the financial position of the Company at December 31, 2021, in conformity with U.S. generally accepted accounting principles. # Basis for Opinion This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2008. February 25, 2022 {3}------------------------------------------------ # Consolidated Statement of Financial Condition December 31, 2021 | (in thousands, except share and per share amounts) | | | |----------------------------------------------------------------------------------|----|-----------| | Assets | | | | Cash and cash equivalents | ಕಾ | 587,869 | | Cash segregated for regulatory purposes | | 185,539 | | Receivables: | | | | Brokerage clients, net | | 1,147,891 | | Brokers, dealers and clearing organizations | | 478,360 | | Securities purchased under agreements to resell | | 503,520 | | Financial instruments owned, at fair value | | 892,738 | | Investments, at fair value | | 24,367 | | Operating lease right-of-use assets, net | | 620,206 | | Deferred tax assets, net | | 71,949 | | Loans and advances to financial advisors and other employees, net | | 49,780 | | Goodwill and intangible assets, net | | 368,195 | | Due from Parent and affiliates, net | | 85,312 | | Other assets | | 394,259 | | Total assets | S | 5,409,985 | | Liabilities and stockholder's equity | | | | Payables: | | | | Brokerage clients | S | 910,066 | | Brokers, dealers and clearing organizations | | 302,387 | | Drafts | | 114,347 | | Securities sold under agreements to repurchase | | 350,694 | | Financial instruments sold, but not yet purchased, at fair value | | 653,124 | | Accrued compensation | | 577,809 | | Accounts payable and accrued expenses | | 764,609 | | Due to Parent and affiliates, net | | 175,090 | | Total liabilities | | 3,848,126 | | Stockholder's equity | | | | Common stock - par value \$1; authorized 30,000 shares; outstanding 1,000 shares | | 1 | | Additional paid-in-capital | | 1,073,157 | | Retained earnings | | 488,701 | | Total stockholder's equity | | 1,561,859 | | Total liabilities and stockholder's equity | S | 5,409,985 | See accompanying Notes to Consolidated Statement of Financial Condition. {4}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # NOTE 1 - Nature of Operations and Basis of Presentation ## Nature of Operations Stifel, Nicolaus & Company, Incorporated ("Stifel"), is principally engaged in brokerage, securities trading, investment banking, investment advisory, and related financial services. We provide securities brokerage services, including the sale of equities, mutual fixed income products, insurance, and banking products to our clients. We are a wholly-owned subsidiary of Stifel Financial Corp. (the "Parent"). We are a registered broker-dealer and investment advisor under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a member of the New York Stock Exchange, Inc. and the Financial Industry Regulatory Authority, Inc. ("FINRA"). We are an introducing broker registered with the Commodity Futures Trading Commission and a member of the National Futures Association. ## Basis of Presentation The consolidated statement of financial condition includes Stifel and its wholly-owned subsidiaries. Unless otherwise indicated, the terms "we," "our," or "our company" in this report refer to Stifel, Nicolaus & Company, Incorporated and its wholly-owned subsidiaries. The accompanying consolidated statement of financial condition has been prepared in conformity with U.S. generally accepted accounting principles, ("U.S. GAAP"), which require management to make certain estimates and assumptions that affect the reported amounts. Management believes that the estimates used in preparing our company's consolidated statement of financial condition is reasonable. Actual results could differ from those estimates. # Consolidation Policies The consolidated statement of financial condition includes the accounts of Stifel and its subsidiaries. All material inter-company accounts and transactions have been eliminated. We have investments or interests in other entities for which we must evaluate whether to consolidate by determining whether we have a controlling financial interest or are considered to be the primary beneficiary. Under our current consolidation policy, we consolidate those entities where to direct the activities of the entity that most significantly impact the entity's economic performance and the obligation to absorb losses of the rights to receive benefits from the entity that could potentially be significant to the entity. We determine whether we are the primary beneficiary of a variable interest entity ("VIE") by performing an analysis of the VIE's control structure, expected benefits and losses and expected residual returns. This analysis includes a review of, among other factors, the VIE's capital structure, contractual terms, which interests create or absorb benefits or losses, variability, related party relationships, and the design of the VE. We reassess our evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary of a VIE on an ongoing basis based on current facts and circumstances. See Note 16 for additional information on VIEs. ## NOTE 2 - Summary of Significant Accounting Policies ## Cash and Cash Equivalents Cash equivalents include money market mutual funds and highly liquid investments, other than those used for trading purposes, with original maturities of three months or less. Due to the short-term nature of these instruments, carrying value approximates their fair value. # Cash Segregated for Regulatory Purposes We are subject to Rule 15c3-3 under the Exchange Act, which requires our company to maintain cash or qualified securities in a segregated reserve account for the exclusive benefit of its clients. In accordance with Rule 15c3-3, our company has portions of its cash segregated for the exclusive benefit of clients at December 31, 2021. {5}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # Financial Assets with Collateral Maintenance Provisions Many of our company's financial assets measured at amortized cost basis are eligible for the collateral maintenance practical expedient under Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses. This practical expedient can be applied for financial assets with collateral maintenance provisions requiring the borrower to continually adjust the amount of the collateral securing the financial assets as a result of fair value changes in the collateral. In accordance with the practical expedient, when we reasonably expect that borrowers (or counterparties, as applicable) will replenish the collateral as required, there is no expectation of credit losses when the collateral's fair value is greater than the amortized cost of the financial asset. If the amortized cost exceeds the fair value of collateral, then credit losses are estimated only on the unsecured portion. For financial assets measured at amortized cost basis that are not eligible for the collateral maintenance practical expedient (and any unsecured amounts for instruments applying the practical expedient), we estimate expected credit losses over the life of the financial assets as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. We record the estimate of expected credit losses as an allowance for credit losses. For financial assets measured at an amortized cost basis, the allowance for credit as a valuation adjustment that is deducted from the asset's amortized cost basis. # Brokerage Client Receivables, Net Brokerage client receivables, primarily consisting of amounts due on cash and margin transactions and are generally collateralized by securities owned by clients. We apply the practical expedient based on collateral maintenance provisions in estimating an allowance for credit loans. When a brokerage client receivable is considered to be impaired, the amount of the impairment is generally measured based on the securities acting as collateral, which is measured based on current prices from independent sources such as listed market price quotations. The receivables are reported at their outstanding principal balance for doubtful accounts. Securities owned by customers, including those that collateralize margin or other similar transactions, are not reflected in the consolidated statement of financial condition. # Securities Borrowed and Securities Loaned Securities borrowed require our company to deliver cash to the lender for securities and are included in receivables from brokers, dealers, and clearing organizations in the consolidated statement of financial condition. For securities loaned, we generally receive collateral in the form of cash in an amount in excess of the market value of securities loaned. Securities loaned are included in payables to brokers, and clearing organizations in the consolidated statement of financial condition. We monitor the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary. We apply the practical expedient based on collateral maintenance provisions in evaluating an allowance for credit losses for securities borrowed receivables. Substantially all of these transactions are executed under master netting agreements, which gives us right of offset in the event of counterparty default; however, such receivables with the same counterparty are not set-off in the consolidated statement of financial condition. See Note 8 for additional information on financial assets and liabilities that are subject to offset. ## Securities Purchased Under Agreements to Resell and Repurchase Agreements Securities purchased under agreements to resell ("resale agreements") are collateralized financing transactions that are recorded at their contractual amounts plus accrued interest. We obtain control of collateral with a market value equal to or in excess of the principal amount loaned and accrued interest under resale agreements are shortterm in nature and are generally collateralized by U.S. government securities, U.S. government agency securities, and corporate bonds. We apply the practical expedient based on collateral maintenance provisions in evaluating an allowance for credit losses for resale agreements. We value collateral on a daily basis, with additional collateral obtained when necessary to minimize the risk associated with this activity. Securities sold under agreements to repurchase agreements") are collateralized financing transactions that are recorded at their contractual amounts plus accrued interest. We make delivery of securities sold under agreements to repurchase and monitor the value of collateral on a daily basis. When necessary, we will deliver additional collateral. {6}------------------------------------------------ #### - - ### !"#\$%\$# '()\*)+(\*,-)./0123)/. 4565789:5;5:<7=>?=>7>;=7@7885<87>A@=7B=@=<=5877:5;9::=>EB78=8F=>;@9A=>E?=>7>;=7@=>8<:965><8 DG>5AF=>C58<65><8F7>A?=>7>;=7@=>8<:965><88D@AFB9<>DD<588D@=A7<5A8<7<565>7>;=7@;D>A=<=D>F=>E?=>7>;=7@=>8<:965><87:5E5>5:7@@H8JD: >7<9:57>AEC7@9587II:DN=67<5?7=:C7@95K # OPQRSPTUVWQVRPRXYZ [J5?7=:C7@95D?7?=>7>;=7@=>8<:965><=8A5?=>5A7878858?5: 7@=7B=@=7>D:A5:@H<:7>87;<=D>B567:`5<87<7>;=7@=>8<:965><865789:5A7=>7;;D:A7>;5G=I9<8985A=>65789:=>E?7=:C7@95I9<87>A6=>=6=a58DB85:C7B@5=>I9<8BH:5j9=:=>EI9<8B5985A GJ5>7C7=@7B@5KLB85:C7B@5=>I9<87:5=>I9<8<8GD9@A985=>I:=;=>E67:`55A?:D6=>A5I5>A5><8D9:;58Kk>DB85:C7B@5=>I9<8:5?@5;8<8GD9@A985=>I:=;=>E?D:67<=D>7C7=@7B@5=>;58K[J5J=5:7:;JH=8B:D`5>ADG>=>8I7:5>;HD?=>I9<878?D@@DG8l m5C5@nop9D<5AI:=;58\9>7Aq98<5A\_7:57C7=@7B@5=>7;<=C567:`5<8?D:=A5><=;7@7885<8D:@=7B=@=<=5878D?=A5><=;7@78857>7;<=C567:`5E=>I9<87:5Dj9D<5AI:=;58=>7;<=C567:`5<8FGJ=;J7:55=A=:5;<@H DB85:C7B@578D?7<9:5D?7>;=7@=>8<:965><8=>;@9A58=>8<:965><8?D:GJ=;J j9D<5AI:=;587:57C7=@7B@5B9<<:7A5A@588?:5j95><@HFA5:=C7<=C5=>8<:965><8GJD85?7=:C7@95J7C5B55>A5:=C5A 98=>E76DA5@GJ5:5=>I9<8B5A5:=C5AI:=>;=I7@@H?:D6D: ;D::DBD:7<5ABHDB85:C7B@567:`5A=>8<:965><8ED7>;=7@=>8<:965><8FB5A=:5;<@HDB85:C5AK m5C5@tou>8<:965><8DI:=;=>EDB85:C7B=@=7>;=7@ =>8<:965><8AD>DA7:565789:5A98=>E67>7E565>I9<8=>7<=D>D??7=:C7@95:5j9=:58=E>=?=;7><67>7E565>K # SPTUPiQwhwxOQhPhXQPTyhfiRUgVhif 4J5>7C7=@7B@5FG5985DB85:C7B@567:`5A 78`I:=;58\_7>;=7@=>8<:965><8Ku>7>;=7@=>8<:965><8<:7>87;<5AD>:5;DE>=a5A 5N;J7>E58F8?D:;D6I@5<5A<:7>87;<=D>8?:D6E5D>GJ=;J7>;=7@=>8<:965><=8I:=>;=I7@@H<:7A5AK r89B8<7><=7@I5:;5><7E5D?7>;=7@=>8<:965><87:5B785AD>DB85:C7B@567:`5A I:=;=>EI7:765<5:8;7>C7:H?:D6I:DA9;<AI:=;=>ED:67:`5< I7:765<5:8=>7I:DA9;<67HB5985AE8=E>=?=;7>;5:<7=>67:`5<8F DB85:C7B@567:`5D<7C7=@7B@5?D:7@@I:DA9;<8F7>A?7=:C7@95=8A5<5:6=>5A98=>E <5;J>=j9587II:DI:=7<5?D:57;JI7:<=;9@7:I:DA9;=j958=>CD@C58D65A5E:55D?q9AE65><985A=>65789:=>E7>;=7@=>8<:965><8E5>5:7@@H;D::5@7<58EDB85:C7B=@=EDB85:C7B=@=96B5:D??7;;@9A=>E7>;=7@=>8<:965>7>;=7@=>8<:965><=8>5GA>DA87;<=D>Kz=>7>;=7@=>8<:965><8G=B565789:5A?:D6 7;<=C5@Hj9D<5AI:=;58E5>5:7@@HG=@@J7C57J=EJ5:A5E:55D?I:=;=>EDB85:C7B=@=A7@5885:A5E:55D?q9AE65><985A =>65789:=>E?7=:C7@95K{D>C5:85@HF?=>7>;=7@=>8<:965><8:7:5@H<:7A5AD:>D5:7@@HJ7C5@588FD:>DF I:=;=>EDB85:C7B=@=A7J=EJ5:A5E:55D?q9AE65><985A=>65789:=>E?7=:C7@95K|55}D<5~?D:7AA=<=D>7@=>?D:67<=D> D >JDGG5C7@95D9:?=>7>;=7@=>8<:9 65><8K {7}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # Investments The fair value of marketable investments is generally based on either quoted market or dealer prices. The fair value of non-marketable securities is based on management's estimate using the best information available, which generally consists of quoted market prices for similar securities and internally developed discounted cash flow models. Investments in the consolidated statement of financial condition contain investments in securities that are marketable and securities that are not readily marketable. These investments are not included in our inventory and represent the acquiring and disposing of debt or equity instruments for our benefit and not for resale to our customers. ## Goodwill and Intangible Assets, Net Goodwill represents the cost of acquired businesses in excess of the related net assets acquired. Goodwill is not amortized, but is reviewed for imparment annually or whenever indications of imparment exist. Impairment exists when the carrying amount of goodwill exceeds its implied fair value, resulting in an impairment charge for the excess. In testing for the potential impairment of goodwill, we estimate the fair value of our reporting unit (generally defined as the business for which financial information is available and reviewed regularly by management), and compares it to its carrying value. If the estimated fair value of a reporting unit is less than its carrying value, we are required to estimate the fair value of all assets and liabilities of the reporting unit, including goodwill. If the carrying value of the reporting unit's goodwill is greater than the estimated fair value, an impairment charge is recognized for the excess. Our company's annual goodwill impairment testing was completed as of December 31, 2021, with no impairment charges. 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 group may not be fully recoverable. See Note 6 for further discussion. # Loans and Advances to Financial Advisors and Other Employees, Net We offer transition pay, principally in the form of upfront loans, to financial advisors and certain key revenue producers as part of our company's overall growth strategy. These loans are generally forgiven over a five-to ten-year period if the individual satisfies certain conditions, usually based on continued employment and certain performance standards. We monitor and compare individual financial advisor production to each loan issued to ensure future recoverability. In the event that the financial advisor is no longer affiliated with us, any unpaid balance of such loan becomes immediately due and payable to us. In determining the allowance for doubtful accounts related to former employees, management primarily considers our historical collection experience as well as other factors, including amounts due at termination, the reasons for the terminated relationship, and the former financial advisor's overall financial position. When the review of these factors indicates that further collection activity is highly unlikely, the outstanding balance of such loan is written-off and the corresponding allowance is reduced. The aging of this receivable balance is not a determinative factor in computing our allowance for doubtful accounts, as concerns regarding the recoverability of these loans primarily arise in the financial advisor is no longer affiliated with us. We present the outstanding balance of loans to financial advisors in our consolidated statement of financial condition, net of the allowance for doubtful accounts. Our allowance for doubtful accounts was \$9.1 million at December 31, 2021. # Legal Loss Allowances We have established reserves for potential losses that are probable and reasonably estimable that may result from pending and potential legal actions, investigations, and regulatory proceedings. In many cases, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount or range of any potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developed before a loss or range of loss can reasonably be estimated. We have, after consultation with outside legal counsel and consideration of facts currently known by management, recorded estimated losses to the extent we believe certain claims are probable of loss and the amount of the loss can be reasonably estimated. These reserves are included in accounts payable and accrued expenses in the consolidated statement of financial condition. {8}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 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. Factors considered by management in estimating our liability is the loss and damages sought by the claimant/plaintiff, the merits of the amount of loss in the client's account, the possibility of wrongdoing on the part of the associate of our company, the total cost of defending the litigation, the likelihood of a successful defense against the claim, and the potential for fines and penalties from regulatory agencies. Results of litigation and arbitration are inherently uncertain, and management's assessment of risk associated therewith is subject to change as the proceedings evolve. # Operating Leases Our company enters into operating leases for real estate, office equipment and other assets, substantially all of which are used in connection with its operations. The determination of whether an arrangement qualifies as a lease occurs at the inception of the arrangement. We recognize, for leases longer than one year, a right-of-use asset representing the right to use the underlying asset for the lease liability representing the obligation to make payments. The lease term is generally determined based on the contractual maturity of the lease. For leases where our company has the option to terminate or extend the lease, an assessment of the likelihood of exercising the option is incorporated into the determination of the lease term. Such assessment is initially performed at the inception of the lease and is updated if events occur that impact the original assessment. An operating lease right-of-use asset is initially determined based on the operating lease liability, adjusted for initial direct costs, lease incentives and amounts paid at or prior to lease commencement. This amount is then amortized over the lease term. We account for lease and non-lease components separately. At December 31, 2021, the right-of-use assets are included in operating lease right-of-use assets, net with the corresponding lease liabilities included in accounts payable and accrued expenses in the consolidated statement of financial condition. See Note 9 for information about operating leases. # Stock-Based Compensation We participate in an incentive stock award plan sponsored by the Parent that provides for the granting of stock options, stock appreciation rights, restricted stock, performance awards, stock units, and debentures to our associates. See Note 12 for a further discussion of stock-based compensation plans. # Income Taxes We are included in the consolidated federal and certain state income tax returns filed by the Parent. Our portion of the consolidated current income tax liability is computed on a separate return basis pursuant to a tax sharing agreement and our stand-alone tax liability or receivable is included in the consolidated statement of financial condition. We generally compute income taxes using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial statement carrying amounts and the tax basis of our company's assets and liabilities. We establish a valuation allowance for deferred tax assets if it is more likely than not that these items will either expire before we are able their benefits, or that future deductibility is uncertain. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the tax benefits recognized in the consolidated statement of financial condition from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. See Note 15 for further information regarding income taxes. # Recently Adopted Accounting Guidance ## Income Taxes In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which is intended to simplify various aspects related to accounting for income taxes. This accounting update removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We prospectively adopted the accounting update on January 1, 2021. The adoption of the accounting update did not have a material impact on our consolidated statement of financial condition. {9}------------------------------------------------ #### - - ### !"#\$%\$# ### -!,!,- |


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- ### !"#\$%\$# '()\*+,-\*(,+ ./012341/32567781963:68706;<1=784678;>8/5;<916<538?/@7631215<783812ABCDEFGH5?7=?76311I<83>215<783812H6/9 J6776/32KL?7=?76311I<83>215<783812H8/5;<9198/?3M178/3M136N;1N1;?JH671=784678;>06;<19N6219?/I06;<19N6219<=?/?<71R=153638?/2?:822<1771914=38?/26/9 <28/S8/317/6;9825?467O13:9131748/6N;1:68706;<16/9A88G3M1VCW?:3M18/012341/3:655?8/S 8/012341/3263:68706;<1K Y<75?4=6/>Z28/012341/328/:::8/01238/6N7?6976/S1?:8/9<237812J?7;9J8918/6067813>?:283<638?/2H8/5;<98/S ;10176S19N<>?<32H7156=836;8T638?/2HS7?J3M8/012341/32H6/998237122198/012341/32K\M1=7806311I<83>:5;?219@1/9:]28/012341/32671S1/176;;>/?31;8S8N;1:?771914=38?/K^82378N<38?/2 J8;;N171518019:7?43M121:8/S622132671;8I<896319?7982378N<319K \M1S1/176;6/9;848319=673/172M8=8/31712328/8/012341/3=673/172M8=2J171=784678;>06;<19N6219<=?/VCW2 71518019:7?43M879@=673>:8/S8/012341/3263:68706;<1N6219?/:68706;<1=?;858121236N;82M19N>46/6S141/3?:3M18/S:8/S:71I<8713M1:2?<7512Ka?J1017H8/2?418/236/512H5<771/306;<638?/8/:?74638?/:?78;;8I<89 215<783812?7215<7838128/467O1323M63671/?365380146>/?3N16068;6N;1:7?46/>3M879@=673>2?<751?7:5?/5;<913M633M106;<638?/23M636716068;6N;1:7?43M879@=673>2?<7512671/?371;86N;1K./3M1218/236/512H:=17:?744?91;@N62196/6;>3856;06;<638?/23M6346>N1<219626/8/=<33?06;<13M1218/012341/32K bc(d(ecdf'(+,gh-\*(,+ijfklmh,nj,o\*,phgeqd+\*k \_8/6/586;8/237<41/322?;9N<3/?3=<75M6219671715?791963:68706;<1N6219?/I;8I<898/237<41/32J83MI5?/2823?:1I<83>215<783812H;823198/653801467O132K\M121215<78381267171=?731962 P101;QK .:IH8/237<41/32JM?21:68706;<1M62N11/9178019<28/S64?91;JM1718/=<323?3M14?91;671987153;>?N21706N;1 8/3M1467O13H?756/N19178019=78/58=6;;>:7?4?75?77?N?76319N>?N21706N;1467O139636H6/98/237<41/323M63671:687 06;<19<28/S?3M17:8/6/586;8/237<41/32H3M1=676413172?:JM85M56/N1987153;>?N217019KP101;s:8/6/586;8/237<41/32 8/5;<914?73S6S1@N65O19215<783812H:8R198/5?41215<7838128/:71I<1/3;>376919HrKEKS?017/41/36S1/5>215<783812H6/9 ?3M17215<783812HJM85M=784678;>5?/ 2823?:2?01718S/91N3215<783812K {11}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 The following table summarizes the valuation of our financial instruments by pricing observability levels as of December 31, 2021 (in thousands): | | | Total | | Level 1 | | Level 2 | | Level 3 | |---------------------------------------------------------|---|---------|----|---------|------|---------|-------|---------| | Assets: | | | | | | | | | | Financial instruments owned: | | | | | | | | | | U.S. government securities | S | 10.774 | S | 10.774 | S | | S | | | U.S. government agency securities | | 87,990 | | | | 87,990 | | | | Agency mortgage-backed securities | | 324,087 | | | | 324,087 | | | | Asset-backed securities | | 106,405 | | | | 42,864 | | 63,541 | | Corporate securities: | | | | | | | | | | Fixed income securities | | 216,258 | | 183 | | 216,075 | | | | Equity securities | | 8,491 | | 8,208 | | 28 | | 225 | | State and municipal securities | | 123,680 | | | | 123.680 | | | | Other (1) | | 15,053 | | | | 15,053 | | | | Total financial instruments owned | | 892,738 | | 19,165 | | 809,807 | | 63.766 | | Investments: | | | | | | | | | | Auction rate securities | | 13,032 | | | | | | 13,032 | | Other (2) | | 2,500 | | 2.408 | | 45 | | 47 | | Investments measured at NAV | | 8,835 | | | | | | | | Total investments | | 24,367 | | 2,408 | | 45 | | 13.079 | | | S | 917,105 | ಕಾ | 21,573 | ಕಾ | 809,852 | સ્ત્ર | 76,845 | | Liabilities: | | | | | | | | | | Financial instruments sold, but not yet purchased: | | | | | | | | | | U.S. government securities | S | 300,717 | S | 300,717 | S | | S | | | U.S. government agency securities | | 37,395 | | | | 37,395 | | | | Agency mortgage-backed securities | | 156,619 | | | | 156,619 | | | | Fixed income corporate securities | | 153,852 | | | | 153.852 | | | | Other (3) | | 4,541 | | 1,771 | | 2,770 | | | | Total financial instruments sold, but not yet purchased | S | 653,124 | S | 302,488 | ಲ್ಲಿ | 350,636 | સ્ત્ર | | (1) Includes non-agency mortgage-backed securities and sovereign debt. (2) Includes corporate equity securities and warrants. (3) Includes sovereign debt and corporate equity securities. The following table summarizes the changes in fair value carrying values associated with Level 3 financial instruments during the year ended December 31, 2021 (in thousands): | | | Financial Instruments Owned | | | | Investments | | | | | |------------------------------|---|-----------------------------|--|-----------------------------------|---|----------------------------|--|---------|--|--| | | | Asset-Backed
Securities | | Corporate
Equity
Securities | | Auction-Rate
Securities | | Other | | | | Balance at January 1, 2021 | | 9 | | | | 12,933 | | | | | | Unrealized gains/(losses) | | (2) | | | | 124 | | (1,000 | | | | Realized gains | | 463 | | | | | | | | | | Purchases | | 68,104 | | 225 | | | | 3.000 | | | | Sales | | | | | | | | (2,000) | | | | Redemptions | | (4,963) | | | | (25) | | | | | | Transfers into Level 3 | | | | | | | | 47 | | | | Transfers out of Level 3 | | (70) | | | | | | | | | | Net change | | 63,532 | | 225 | | 09 | | 47 | | | | Balance at December 31, 2021 | S | 63.541 | | 225 | S | 13,032 | | 47 | | | The results included in the table above are only a component of the overall investment strategies of our company. The table above does not present Level 1 or Level 2 valued assets or liabilities. {12}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 The fair value of certain Level 3 assets was determined using various methodologies as appropriate, including thirdparty pricing vendors and broker quotes. These inputs are evaluated for reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analyses, consideration of current market environment and other analytical procedures. The fair value for our ARS was determined using an income approach based on an internally developed discounted cash flow model. The discounted cash flow model utilizes two significant unobservable inputs: discount rate and workout period. Significant increases in any of these inputs in isolation would result in a significantly lower fair value. On an ongoing basis, management verifies the fair value by reviewing the appropriateness of the discounted cash flow model and its significant inputs. # Financial Instruments Not Measured at Fair Value There are certain financial instruments included in our consolidated statement of financial condition that are not measured at fair value on a recurring basis, but nevertheless are recorded at amounts that value due to their liquid or short-term nature. These financial assets and cash equivalents, cash and cash equivalents, cash segregated for regulatory purposes, receivables from brokerage clients, receivables from brokers, dealers and clearing organizations, payables from brokerage clients, payables from brokers, and clearing organizations, which are classified as Level 1, securities purchased under agreements to resell, which are classified as Level 1 and Level 2, and securities sold under agreements to repurchase, which are classified as Level 1 and Level 2. # NOTE 5 - Financial Instruments Owned and Financial Instruments Sold, But Not Yet Purchased The components of financial instruments owned and financial instruments sold, but not yet purchased at December 31, 2021 are as follows (in thousands): | Financial instruments owned: | | | |----------------------------------------------------|---|---------| | U.S. government securities | ಿ | 10,774 | | U.S. government agency securities | | 87,990 | | Agency mortgage-backed securities | | 324,087 | | Asset-backed securities | | 106,405 | | Corporate securities: | | | | Fixed income securities | | 216,258 | | Equity securities | | 8,491 | | State and municipal securities | | 123,680 | | Other (1) | | 15,053 | | | | 892,738 | | Financial instruments sold, but not yet purchased: | | | | U.S. government securities | S | 300,717 | | U.S. government agency securities | | 37,395 | | Agency mortgage-backed securities | | 156,619 | | Fixed income corporate securities | | 153,852 | | Other (2) | | 4.541 | | | S | 653,124 | (1) Includes non-agency mortgage-backed securities and sovereign debt. (2) Includes sovereign debt and corporate equity securities. At December 31, 2021, financial instruments owned in the amount of \$358.3 million were pledged as collateral for our repurchase agreements and short-term borrowings. Our financial instruments owned are presented on a trade-date basis in the consolidated statement of financial condition. Financial instruments sold, but not yet purchased represent obligations of our company to deliver the specified security at the contracted price, thereby creating a liability to purchase the security in the market at prevailing prices in future periods. We are obligated to acquire the securities sold short at prevailing market prices in future periods, which may exceed the amount reflected in the consolidated statement of financial condition. {13}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # NOTE 6 – Goodwill and Intangible Assets At December 31, 2021, the carrying amount of goodwill was \$344.9 million and is included in goodwill and intangible assets, net in the consolidated statement of financial condition. The carrying amount of intangible assets is presented in the following table (in thousands): | Balance at January 1, 2021 | 26.843 | |------------------------------|---------| | Amortization | (3.544) | | Balance at December 31, 2021 | 23,299 | Amortizable intangible assets consist of acquired customer relationships, trade name, and non-compete agreements that are amortized to expense over their contractual or determined useful lives. Intangible assets subject to amortization as of December 31, 2021 were as follows (in thousands): | | | Gross
Carrying Value | | Accumulated
Amortization | | Net | | |------------------------|---|-------------------------|---|-----------------------------|---|--------|--| | Customer relationships | S | 53,593 | A | 33,070 | a | 20,523 | | | Trade name | | 8.780 | | 6.829 | | 1 .951 | | | Non-compete agreements | | 1,500 | | 675 | | 825 | | | | | 63,873 | | 40,574 | | 23.299 | | The weighted-average remaining lives of the following intangible assets at December 31, 2021 are: customer relationships, 7.7 years; trade name, 3.2 years; and non-compete agreements, 2.8 years. # NOTE 7 - Short-Term Borrowings Our short-term financing is generally obtained through short-term bank line financing on an uncommitted, secured basis, securities lending arrangements, 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 statement 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 million with four unaffiliated 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 generally utilized to finance certain fixed income securities. At December 31, 2021, we had no outstanding balances on our uncommitted secured lines of credit. In May 2021, the Parent 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 Parent. Stifel may borrow up to \$500.0 million under the Credit Facility, depending on the amount of outstanding borrowings of 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. In July 2021, the Parent and Stifel entered into a committed, secured (the "Agreement") with Stifel Bank & Trust, a wholly owned subsidiary of the Parent. Under the Agreement, Stifel Bank & Trust provides our company and the Parent with a \$150.0 million revolving credit facility. The Agreement expires in July 2022. The borrowings are collateralized by company-owned securities and receivables. The interest rates on borrowings under the Agreement are variable and based on LIBOR, as adjusted. There were no borrowings outstanding on the Agreement as of December 31, 2021. {14}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # NOTE 8 - Disclosures About Offsetting Assets and Liabilities The following table provides information about financial assets that are subject to offset as of December 31, 2021 (in thousands): | | Securities | | Resale | | | |-------------------------------------------------------------------|---------------|----------|-----------------|--|----------| | | Borrowing (1) | | Agreements (2) | | Total | | Gross amounts of recognized assets | A | 239.629 | 503,520 \$
S | | 743,149 | | Gross amounts offset in the statement of financial condition | | | | | | | Net amounts presented in the statement of financial condition | | 239.629 | 503,520 | | 743.149 | | Gross amounts not offset in the statement of financial condition: | | | | | | | Amounts available for offset | | (40.259) | (38.497) | | (78,756) | | Available collateral | | 187,763) | (463,414) | | (651,177 | | Net amount | | 11,607 | 1.609
6 | | 13,216 | (1) Securities borrowing transactions are included in receivables from brokers, and clearing organizations in the consolidated statement of financial condition. See Note 3 in the notes to our consolidated statement of financial conditional information on receivables from brokers, dealers, and clearing organizations. (2) A vailable collateral includes securities received by our company from the counterparty. These securities are not included in the consolidated statement of financial condition unless there is an event of default. The fair value of securities received as collateral was \$501.8 million at December 31, 2021. The following table provides information about financial liabilities that are subject to offset as of December 31, 2021 (in thousands): | | | Securities
Lending (3) | Repurchase | Total | |-------------------------------------------------------------------|---|---------------------------|----------------|-----------| | | | | Agreements (4) | | | Gross amounts of recognized liabilities | | (149,219) \$ | (350,694) \$ | (499,913) | | Gross amounts offset in the statement of financial condition | | | | | | Net amounts presented in the statement of financial condition | | (149,219) | (350,694) | (499,913) | | Gross amounts not offset in the statement of financial condition: | | | | | | Amounts available for offset | | 40,259 | 38.497 | 78,756 | | Collateral pledged | | 108,955 | 312,197 | 421,152 | | Net amount | 6 | (5) જે | | (5) | (3) Securities lending transactions are included in payables to brokers, and clearing organizations in the consolidated statement of financial condition. See Note 3 in the notes to our consolidated statement of financial conditional information on payables to brokers, dealers, and clearing organizations. (4) Collateral pledged includes the fair value of securities pledged by our company to the counter party. These securities are included in the consolidated statement of financial condition unless we default. Collateral pledged by our company to the counter party includes U.S. government agency securities, and corporate fixed income securities with market values of \$356.9 million. For financial statement purposes, we do not offset our repurchase agreements or securities or securities lending transactions because the conditions for netting as specified by U.S. GAAP are not met. Our repurchase agreements, securities borrowing and securities lending transacted under master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the transaction. Although not offset in the consolidated statement of financial condition, these transactions are included in the preceding table. {15}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # NOTE 9-Commitments, Guarantees and Contingencies ### Broker-Dealer Commitments and Guarantees In the normal course of business, we enter into underwriting commitments. Settlement of transactions relating to such underwriting commitments, which were open at December 31, 2021, had no material effect on the consolidated statement of financial condition. We provide guarantees to securities clearinghouses and exchanges under the standard membership agreements, such that members are required to guarantee the performance of other the agreement, if another member becomes unable to satisfy its obligations to the clearinghouses, other members would be required to meet shortfalls. Our company's liability under these agreements is not quantifiable and may exceed the cash and securities it has posted as collateral. However, the potential requirement for our company to make payments is considered remote. Accordingly, no liability has been recognized for these arrangements. As a part of our fixed income public finance operations, we enter into forward commitments to purchase agency mortgage-backed securities. In order to hedge the market interest rate risk to which we would otherwise be exposed between the date of the commitment and date of the mortgage-backed securities, we enter into to be announced ("TBA") security contracts with investors for generic mortgage-backed securities at specific rates and prices to be delivered on settlement dates in the future. We may be subject to loss if the timing of, or the actual amount of, the mortgage-backed security differs significantly from the term and notional amount of the TBA security contract to which we entered. These TBA securities and related purchase commitments are accounted for at fair value of the TBA securities, included in financial instruments owned in the consolidated statement of financial condition, and the estimated fair value of the purchase commitments at December 31, 2021 was \$156.6 million. We also provide guarantees to securities clearinghouses and exchanges under their standard membership agreement, which requires members to guarantee the performance of other the agreement, if another member becomes unable to satisfy its obligations to the clearinghouse, other members would be required to meet shortfalls. Our liability under these agreements is not quantifiable and may exceed the cash and securities we have posted as collateral. However, the potential requirement for us to make payments is considered remote. Accordingly, no liability has been recognized for these arrangements. # Concentration of Credit Risk We provide investment, capital-raising and related services to a diverse group of domestic customers, including governments, corporations, and individual investors. Our company's exposure to credit risk associated with the non-performance of customers in fulfilling their contractual obligations pursuant to securities transactions can be directly impacted by volatile securities markets, credit markets, and regulatory changes. This exposure is measured on an individual customer basis and on a group basis for customers that share similar attributes. To reduce the potential for risk concentrations, counterparty credit limits have been implemented for certain products and are continually monitored in light of changing customer and market conditions. As of December 31, 2021, we did not have significant concentrations of credit risk with any one customer or counterparty, or any group of customers or counterparties. ## Operating leases Our operating leases primarily relate to office equipment with remaining lease terms of 1 to 14 years. At December 31, 2021, operating lease right-of-use assets were \$620.2 million and lease liabilities, included in accounts payable and accrued expenses in the consolidated statement of financial condition, were \$659.0 million. See Note 14 for a discussion of leases with related parties. The table below summarizes other information related to our operating leases as of and for the year ended December 31, 2021 (in thousands, except percentages): | Operating lease cash flows | 82.543 | |------------------------------------------------------------------------------|------------| | Right-of-use assets obtained in exchange for new operating lease liabilities | 40.937 | | Weighted-average remaining lease term | 12.1 years | | Weighted-average discount rate | | The weighted-average discount rate represents our company's incremental borrowing rate at the lease inception date. {16}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 The table below presents information about operating lease liabilities as of December 31, 2021 (in thousands): 2022 79.360 | Total operating lease liabilities | S | 658.995 | |-------------------------------------|---|-----------| | Imputed interest | | (188.028) | | Total undiscounted lease payments . | | 847.023 | | Thereafter | | 462,788 | | 2026 | | 74,023 | | 2025 | | 75.497 | | 2024 | | 76.916 | | 2023 | | 78.439 | | | | | # NOTE 10 - Legal Proceedings Our company is named in and subject to various proceedings and claims arising primarily from our securities business activities, including lawsuits, arbitration claims, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. Our company is also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding our business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. We are contesting allegations in these claims, and we believe that there are meritorious defenses in each of these lawsuits, and regulatory investigations. In view of the number and diversity of claims against our company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, we cannot state with certainty what the eventual outcome of pending litigation or other claims will be. We have established reserves for potential losses that are probable and reasonably estimable that may result from pending and potential legal actions, investigations, and regulatory proceedings. In many cases, however, it is inherently difficult to determine whether any loss is probable or to estimate the amount or range of any potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developed before a loss or range of loss can reasonably be estimated. In our opinion, based on currently available information, review with outside legal counsel, and consideration of amounts provided for in our consolidated statement of financial condition with respect to these matters including the matter described below, the ultimate resolution of these matters will not have a material adverse impact on our financial position. However, resolution of one or more of these matters may have a material effect on our financial position in any future period, depending upon the ultimate resolution of those matters. For matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a resorve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, based on currently available information, we believe that such losses will not have a material effect on our consolidated statement of financial condition. # Karegnondi Water Authority We have been named as a defendant in a United States District of Michigan, Southern Division, litigation in connection with the underwriting of bonds to finance the Karegnondi Water Authority ("KWA") pipeline, a new water pipeline intended to serve Flint, Michigan, and surrounding areas. The lawsuit is filed against JP Morgan Chase, as senior manager, and our company and Wells Fargo, as co-managers, who underwrote the bonds for the KWA in 2014. The complaint alleges novel claims against the underwriter defendants, including conspiracy and professional negligence. We intend to defend vigorously against the allegations. {17}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`\_`&DE/73<6/4B3154390L ^'&aG`>599506DE75B7E3?a&Gbc0L3882/834/?36<^YdaGd>59950656/OB/??0L0;2>565>;>2/C;52/<6/4 B 315439G #### -#\$(,+e!! ,! f7/F32/64>3564356?3656B/645=/?40BJ193636<3E/39473BB;>;9345061936RS47/F936TU4734120=536B/3E32136:Q?3??0B534/?GM40BJ3E3232J/4=39;/3447/<34/0L82364Gf7/1/6?345061936?32/3<>565?4/2/<@:47/P0>1/6?34506P0>>544//0L47/g032<0LH52/B402?0L 47/F32/64DE75B773?47/3;470254:40564/212/447/1936?D56/40E70>3E323:@/82364/<;656/47/4/2>?0L/3B73E32565?42345=/3??0B534/?DE7/2/@:3B/24356 1/2B/6438/0L47/5256B/645=/B0>1/6?345065?3:/9/B4401/6?34506GH/L/22/<3E321/6?34506B0?4?32/3>0245[/<063?4235874K956/@3?5?0=/247/=/?45681/250>5??506?GI??451;934/<@:47/F936D47/L5636B5393<=5?02?E599>5??506?Gf7/>36<3402:>5??506?5640?40BJ;654?0L47/F32/64G ]63<<54506DB/243562/=/6;/120<;B/2?D;106A0565680;2B0>136:D>3:2/B/5=/?40BJ;654?0L47/F32/645695/;0L 4236?54506B3?713:>/64?GH/L/22/1/6?345062/934/<4047/?/3E32136:E7073=/>/4B/24356?/2=5B/2/C;52/>/64?>3:13245B5134/5647/M45L/9\5636B539 P021GF20L54M732568a\_&RJUF936R47/Sa\_&RJUF936TUGI??0B534/?32/1/2>544/5434506?5>10?/<@:43O93E40 >3J/12/K43OB06425@;4506?4047/a\_&RJUF936G./>3:>34B7B/243563??0B534/B06425@;4506?02>3J/3<<5450639 B06425@;4506?4047/a\_&RJUF9363447/<5?B2/45060L47/F32/64G #### -#"{|}~ ! ]647/602>39B0;2?/0L@;?56/??DE//O/B;4/D?/449/D36/236<120125/432:?/B;2545/?4236?3B4506?G f7/?/3B45=545/?/O10?/0;2B0>136:400LLK@3936B/?7//425?J5647//=/644734B;?40>/2?02047/213245/?L35940?345?L: 47/520@95834506?G ]63BB02<36B/E54756<;?42:123B45B/D?/B;2545/?4236?3B4506?8/6/2399:?/449/E547564E0@;?56/??<3:?3L4/2423/202@20J/2L359403:@/2/C;52/<401;2B73?/02?/99?/B;2545/? 34;6L3=023@9/>32J/4125B/?G &' .//64/25640?/B;2545/?4236?3B4506?473456=09=/L02E32/64G356?0290??/?0647/?/4236?3B4506?32/ 2/B0865[/<063423/64?85=/25?/40>32J/425?JG;2 /O10?;2/40>32J/425?J5?56L9;/6B/<@:>36:L3B402?D56B9;<568>32J/4=09345954:DB7368/?56564/2/?4234/?D36<4:1/36< ?5[/0L47/56<5=5<;39?/B;254:G {18}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 We borrow and lend securities to facilitate the settlement process and finance transactions, utilizing customer margin securities held as collateral. We monitor the adequacy of collateral levels on a daily basis. We periodically borrow from banks on a collateralized basis utilizing firm and customer margin securities in compliance with SEC rules. Should the counterparty fail to return customer securities pledged, we are subject to the risk of acquiring the securities at prevailing market prices in order to satisfy our customer obligations. We control our exposure to credit risk by continually monitoring our counterparties' positions, and where deemed necessary, we may require a deposit of additional collateral and/or a reduction or diversification of positions. Our company sells securities it does not currently own (short sales) and is obligated to subsequently purchase such securities at prevailing market prices. We are exposed to risk of loss if securities prices increase prior to closing the transactions. We control our exposure to price risk from short sales through daily review and setting position and trading limits. We manage our risks associated with the aforementions through position and credit limits, and the continuous monitoring of collateral is required from customers and other counterparties when appropriate. We have accepted collateral in connection with resale agreements, securities borrowed transactions, and customer margin loans. Under many agreements, we are permitted to sell or repledge these securities held as collateral and use these securities to enter into securities lending arrangements or to deliver to counterparties to cover short positions. At December 31, 2021, the fair value of securities accepted as collateral where we are permitted to sell or repledge the securities was \$2.2 billion and the fair value of the collateral that had been sold or repledged was \$350.7 million. # NOTE 14 - Related Party Transactions We have a sweep arrangement with Stifel Bancorp, an affiliate of our company, whereby a portion of available funds in customer brokerage accounts are automatically transferred by our company into money market deposit accounts, of which Stifel Bancorp retains a portion as deposits. Stifel Bancorp held \$21.3 billion of our brokerage clients' deposits at December 31, 2021. We serve as a carrying broker-dealer and clear security transactions on a fully disclosed basis for several of our affiliates. These affiliates include Keefe, Bruyette & Woods, Inc., Stifel Nicolaus Europe Limited, and Stifel Independent Advisors, LLC. At December 31, 2021 amounts due to affiliates for these services was \$69.8 million and is included in payables to brokers, dealers and clearing organizations in the consolidated statement of financial condition. At December 31, 2021, the amount due from Parent of \$69.7 million primarily consists of required quarterly estimated income tax payments made to the Parent above the year-end tax liability owed. This overpayment will reduce future estimated taxes due to the Parent. At December 31, 2021, the amount due from affiliates of \$15.6 million primarily consists of operating expenses that were paid by our company on behalf of affiliates. These receivables are included in due from Parent and affiliates, net in the consolidated statement of financial condition. At December 31, 2021, the amount due to Parent of \$165.9 million primarily consist of amounts due for reimbursement of stock unit conversions. The amount due to affiliates of \$9.2 million at December 31, 2021 consists primarily of operating expenses that were paid on our company's behalf by certain affiliates. These payables are included in due to Parent and affiliates, net in the consolidated statement of financial condition. We have an intercompany loan with the Parent, at a rate equal to the Prime Rate plus 0.25%. Our peak borrowing on the intercompany loan was \$260.0 million during the year ended December 31, 2021. There was no outstanding balance on the loan at December 31, 2021. We have a committed, secured Credit Agreement with Stifel Bank & Trust. At December 31, 2021, we had no advances on our revolving credit facility and were in compliance with all covenants. See Note 7 for further discussion on our short-term borrowings. During the year ended December 31, 2021, our Board of Directors authorized and we paid dividends of \$240.0 million to the Parent. {19}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # NOTE 15 - Income Taxes The tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities as of December 31, 2021 (in thousands): | Deferred tax assets: | | | |------------------------------------|------|-----------| | Lease liabilities | ਦਿੱਤ | 161,041 | | Deferred compensation | | 72,141 | | Accrued expenses | | 22,810 | | Receivable reserves | | 4,613 | | Net operating loss carryforwards | | 3,201 | | Unrealized loss on investments | | 396 | | Other | | 420 | | Total deferred tax assets | | 264,622 | | Valuation allowance | | (25) | | | | 264,597 | | Deferred tax liabilities: | | | | Operating lease right-of-use asset | | (158,992) | | Goodwill and other intangibles | | (30,438) | | Prepaid expenses | | (3,218) | | | | (192,648) | | Net deferred tax asset | S | 71,949 | We believe the realization of the net deferred tax asset is more likely than not based upon anticipated future taxable income. Our net deferred tax asset at December 31, 2021 includes net operating loss carryforwards of \$45.3 million, which expire between 2026 and 2037. The current state income tax receivable, included in other assets in the consolidated statement of financial condition, is \$0.3 million as of December 31, 2021. Federal income tax payments are made on our behalf by the Parent. See Note 14 for further discussion of related party transactions. We are included in the consolidated federal and certain state income tax returns filed by the Parent. We file separate income tax returns in certain local jurisdictions. Certain consolidated state returns are not subject to examination by tax authorities for taxable years before 2014. # NOTE 16 - Variable Interest Entities Our involvement with VIEs arises primarily from the following activities: purchases of securities in connection with our trading and secondary market-making activities; and fees from various investment vehicles. ## Partnership Interests We have formed several non-consolidated investment funds with third-party investors that are typically organized as limited liability companies ("LCs") or limited partnerships. These partnerships and LLCs have net assets of \$384.5 million at December 31, 2021. For those funds where we act as the general partner, our company's economic interest is generally limited to managements as stipulated by the fund operating agreements. We have generally provided the third-party investors with rights to terminate the funds or to remove us as the general partner. We have concluded that we are not the primary beneficiary of these VIEs, and therefore, we do not consolidate these entities. # Debt Investments In connection with the Company's secondary trading and market-making activities, it buys and sells asset-backed securities, which are issued by third-party securitization special purpose entities ("SPEs") and are generally considered variable interests in VIEs. The carrying amount of our debt investments was \$63.5 million at December 31, 2021. Our exposure to loss is limited to the total of our carrying value. These investment vehicles have net assets of \$16.5 million at December 31, 2021, primarily consisting of aircraft, aircraft engine-related assets, and debt. We have no other involvement with the related SPEs and therefore do not consolidate these entities. {20}------------------------------------------------ # Notes to Consolidated Statement of Financial Condition December 31, 2021 # NOTE 17 - Subsequent Events We evaluate subsequent events that have occurred after the statement of financial condition date but before the financial statements were available to be issued. There are two types of subsequent events: ( ) recognized, or those that provide additional evidence about conditions that existed at the statement of financial condition, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence about conditions that did not exist at the statement of financial condition but arose after that date. We have evaluated subsequent events through February 25, 2022, the date the accompanying consolidated statement of financial condition was issued. Based on the evaluation, we did not identify any recognized subsequent events that would have required adjustment to the consolidated statement of financial condition; however, we identified the following nonrecognized event: # Dividends to Stifel Financial Corp. During 2022, our Board of Directors authorized and we paid dividends of \$95.0 million to the Parent. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.