STIFEL FINANCIAL CORP. - 1999 Annual Report

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IEYnanuTKkBuk3iCKL3JeHJVpYvdEwqmOnWRWQg5CrvuCov+brOp9zuy80YLM2sp PW9iCBROIo7znY4E0CLwrw== /in/edgar/work/0000720672-00-500009/0000720672-00-500009.txt : 20001016 0000720672-00-500009.hdr.sgml : 20001016 ACCESSION NUMBER: 0000720672-00-500009 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20001013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STIFEL FINANCIAL CORP CENTRAL INDEX KEY: 0000720672 STANDARD INDUSTRIAL CLASSIFICATION: [6211 ] IRS NUMBER: 431273600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-09305 FILM NUMBER: 739871 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL PLAZA STREET 2: 501 N BROADWAY CITY: ST. LOUIS STATE: MO ZIP: 63102-2102 BUSINESS PHONE: 314-342-2000 MAIL ADDRESS: STREET 1: ONE FINANCIAL PLAZA STREET 2: 501 N BROADWAY CITY: ST. LOUIS STATE: MO ZIP: 63102-2102 10-K405/A 1 r10k.txt FORM 10-K405/A; FOR THE YEAR ENDED 12/31/99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number 1-9305 STIFEL FINANCIAL CORP. ----------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 43-1273600 - - - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 501 N. Broadway St. Louis, Missouri 63102-2102 - - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number,including area code 314-342-2000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class On Which Registered - - - -------------------------------------- ---------------------------- Common Stock, Par Value $.15 per share New York Stock Exchange Chicago Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Chicago Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days. Yes[x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K [x] Aggregate market value of voting stock held by non-affiliates of the registrant at March 8, 2000 was $74,709,865. Shares of Common Stock outstanding at March 8, 2000: 7,254,247 shares, par value $.15 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the year ended December 31, 1999 are incorporated by reference in Part II hereof. Portions of the Company's Proxy Statement filed with the SEC in connection with the Company's Annual Meeting of Stockholders to be held April 26, 2000 are incorporated by reference in Part III hereof. Exhibit Index located on pages 22 and 23. PART I ITEM 1. BUSINESS Stifel Financial Corp. ("Financial" or the "Company"), a Delaware corporation and a holding company for Stifel Nicolaus & Company, Incorporated ("Stifel Nicolaus") and other subsidiaries, was organized in 1983. Stifel Nicolaus is the successor to a partnership founded in 1890. Unless the context requires otherwise, the term "Company" as used herein means Financial and its subsidiaries. On January 12, 2000, the Company completed the merger of Hanifen, Imhoff Inc. ("HII"), a Denver-based investment banking firm. The transaction is being accounted for as a purchase and provides for a tax-free exchange of approximately 517,000 shares of the Company for all of the outstanding shares of HII. In connection with the transaction, certain key associates of HII executed employment agreements containing non-compete provisions and restrictions on the sale of the stock received in the merger and were awarded options in the Company. HII also has offices located in Omaha, Nebraska and Winter Park, Florida. The merger added 59 investment bankers, research analysts, institutional sales associates, and traders to the capital markets segment, as well as 23 administrative and technical support associates. The Company offers securities-related financial services through its wholly-owned operating subsidiaries, Stifel Nicolaus, Century Securities Associates, Inc., and Pin Oak Capital, Ltd. These subsidiaries provide brokerage, trading, investment banking, investment advisory, and related financial services primarily to customers throughout the United States from 63 locations. The Company's customers include individuals, corporations, municipalities and institutions. Although the Company has customers throughout the United States, its major geographic area of concentration is in the Midwest. Financial Information The amounts of each of the principal sources of revenue, the net income and total assets of the Company for the years ended December 31, 1999, 1998 and 1997 are contained in Item 6. Selected Financial Data, herein. Financial Information for each segment of the Company is contained in Note O of the Consolidated Financial Statements incorporated by reference herein. Narrative Description of Business As of February 29, 2000, the Company employed 1,004 individuals. Stifel Nicolaus employed 986 of which 335 were employed as investment executives. In addition, 143 investment executives were affiliated with Century Securities Associates, Inc. ("CSA") as independent contractors. Through its broker-dealer subsidiaries, the Company provides securities services to approximately 125,000 client accounts. No single client accounts for a material percentage of the Company's total business. Private Client The Company provides securities transaction and financial planning services to its private clients through Stifel Nicolaus' branch system and its independent contractor firm, CSA. In 1998 and 1999 management made significant investments in personnel, technology, and market data platforms to grow the private client segment. Stifel Nicolaus Private Client Stifel Nicolaus has 59 private client branches located in 14 states, primarily in the Midwest. Its 335 Investment Executives provide a broad range of services and financial products to their clients. In most cases Stifel Nicolaus charges commissions on both stock exchange and over-the-counter transactions, in accordance with Stifel Nicolaus' commission schedule. In certain cases, varying discounts from the schedule are granted. In addition, Stifel Nicolaus distributes both taxable and tax exempt fixed-income products to its private clients, including municipal, corporate, government agency and mortgage backed bonds, preferred stock, and unit investment trusts. An increasing number of clients are electing asset based fee alternatives to the traditional commission schedule. In addition, Stifel Nicolaus distributes insurance and annuity products, and investment company shares. Stifel Nicolaus has dealer-sales agreements with numerous distributors of investment company shares. These agreements generally provide for dealer discounts ranging up to 5.75 percent of the purchase price, depending upon the size of the transaction. Century Securities Associates Inc. Private Client CSA has affiliations with 143 independent contractors in 23 branch offices and 98 satellite offices in 29 states. Under their contractual arrangements, these independent contractors may provide accounting services, real estate brokerage, insurance, or other business activities for their own account. However, all securities transactions must be transacted through CSA. CSA's independent contractors provide the same types of financial products and services to its private clients, as does Stifel Nicolaus. Independent contractors are responsible for all of their direct costs and are paid a larger percentage of commissions to compensate them for their added expenses. CSA is an introducing broker-dealer and as such clears its transactions through Stifel Nicolaus. Client transactions in securities for Stifel Nicolaus and CSA are effected on either a cash basis or margin basis. The customer deposits less than the full cost of the security when securities are purchased on a margin basis. The Company makes a loan for the balance of the purchase price. Such loans are collateralized by the securities purchased. The amounts of the loans are subject to the margin requirements of Regulation T of the Board of Governors of the Federal Reserve System, New York Stock Exchange, Inc. ("NYSE") margin requirements, and the Company's internal policies, which usually are more restrictive than Regulation T or NYSE requirements. In permitting customers to purchase securities on margin, the Company is subject to the risk of a market decline, which could reduce the value of its collateral below the amount of the customers' indebtedness. Capital Markets Capital markets include investment banking, corporate finance and public finance departments, research department, syndicate department, over-the-counter equity trading, and institutional sales and trading. Investment Banking - Corporate Finance The investment banking corporate finance group consists of 24 professionals, located in St. Louis, Cleveland, and Denver, and is involved in public and private equity and preferred underwritings for corporate clients, merger and acquisition advisory services, fairness opinions, and evaluations. Stifel Nicolaus focuses on small and mid-cap companies, located primarily in the Midwest. Research Department The research department consists of 17 analysts located in St. Louis and Denver who publish research on over 175 companies. Proprietary research reports are provided to private and institutional clients at no charge and are supplemented by research purchased from outside vendors. Syndicate Department The syndicate department coordinates the marketing, distribution, pricing, and stabilization of the Company's lead- and co-managed underwritings. In addition, the syndicate department coordinates the firm's syndicate and selling group activities managed by other investment banking firms. Over-the-Counter Equity Trading The Company trades as principal in the over-the-counter market. It acts as both principal and agent to facilitate the execution of customers' orders. The Company makes a market in various securities of interest to its customers through buying, selling and maintaining an inventory of these securities. At February 29, 2000, Stifel Nicolaus made a market in 213 equity issues in the over-the-counter market. The Company does not engage in a significant amount of trading for its own account. Institutional Sales Institutional sales is comprised of institutional equity sales, fixed income sales, and taxable and tax-exempt trading departments located in St. Louis and Denver. The institutional equity sales group provides equity products to its institutional accounts in both the primary and secondary markets. Primary equity issues are generally underwritten by Stifel Nicolaus' investment banking corporate finance group. At February 29, 2000, the institutional equity sales department maintained relationships with over 1,070 institutional accounts. Stifel Nicolaus buys fixed income products, both tax-exempt and taxable products, primarily municipal bonds, corporate, government agency, and mortgage back bonds for its own account, maintains an inventory of these products and resells from that inventory to its institutional accounts. The institutional fixed income sales group maintained relationships with over 1,500 accounts at February 29, 2000. Investment Banking-Public Finance Investment banking public finance consists of 25 professionals with its principal offices in St. Louis and Denver. Stifel Nicolaus acts as an underwriter and dealer in bonds issued by states, cities, and other political subdivisions and may act as manager or participant in offerings managed by other firms. The majority of the Company's municipal bond underwritings are originated through its St. Louis and Denver offices. Other Segments In addition to its private client segment and capital markets segment, the Company has an investment advisory firm which provides investment advisory services to individuals, fiduciary, and corporate clients. Revenues are derived based upon assets under management. Pin Oak Capital, Ltd. is registered as an investment advisor in five states and had assets under management of approximately $176,442,000 at December 31, 1999. Stifel Nicolaus clears transactions for the Company's independent contractor, CSA, and two other introducing broker-dealers. Revenues and costs associated with clearing these transactions are also included in "other segments." Competition The Company competes with other securities firms, some of which offer their customers a broader range of brokerage services, have substantially greater resources, and may have greater operating efficiencies. In addition, the Company faces increasing competition from other financial institutions, such as commercial banks, online service providers, and other companies offering financial services. The Financial Modernization Act, signed into law in late 1999, lifts restrictions on banks and insurance companies to provide financial services once dominated by securities firms. In addition, recent consolidation in the financial services industry may lead to increased competition from larger, more diversified organizations. Some of these firms generally charge lower commission rates to their customers without offering services such as portfolio valuation, investment recommendations and research. Trading on the Internet has increased significantly. Online brokerage customers account for more than one-third of trading in U.S. equities. The number of online accounts doubled in 1999 and is expected to quadruple in the next three years. During 1999 the Company continued to invest in and provide support for technologically advanced equipment and software for the Private Client Group, including web-based access to customer accounts and development of online trading to be launched in early 2000. Management relies on the expertise acquired in its market area over its 109-year history, its personnel, and its equity capital to operate in the competitive environment. Regulation The securities industry in the United States is subject to extensive regulation under federal and state laws. The Securities and Exchange Commission ("SEC") is the federal agency charged with the administration of the federal securities laws. Much of the regulation of broker-dealers, however, has been delegated to self-regulatory organizations, principally the National Association of Securities Dealers, Inc., the Municipal Securities Rulemaking Board, and the national securities exchanges, such as the NYSE. These self-regulatory organizations adopt rules (which are subject to approval by the SEC) which govern the industry and conduct periodic examinations of member broker-dealers. Securities firms are also subject to regulation by state securities commissions in the states in which they are registered. The regulations to which broker-dealers are subject cover all aspects of the securities business, including sales practices, trade practices among broker-dealers, capital structure of securities firms, record keeping, and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory organizations, and changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers. The SEC and the self-regulatory organizations may conduct administrative proceedings, which can result in censures, fines, suspension or expulsion of a broker- dealer, its officers or employees. The principal purpose of regulation and discipline of broker-dealers is the protection of customers and the securities markets rather than the protection of creditors and stockholders of broker-dealers. As a broker-dealer and member of the NYSE, Stifel Nicolaus is subject to the Uniform Net Capital Rule (Rule 15c3-1) promulgated by the SEC, which provides that a broker-dealer doing business with the public shall not permit its aggregate indebtedness (as defined) to exceed 15 times its net capital (as defined) or, alternatively, that its net capital shall not be less than two percent of aggregate debit balances (primarily receivables from customers and broker-dealers) computed in accordance with the SEC's Customer Protection Rule (Rule 15c3-3). The Uniform Net Capital Rule is designed to measure the general financial integrity and liquidity of a broker-dealer and the minimum net capital deemed necessary to meet the broker-dealer's continuing commitments to its customers and other broker-dealers. Both methods allow broker-dealers to increase their commitments to customers only to the extent their net capital is deemed adequate to support an increase. Management believes that the alternative method, which is utilized by most full-service securities firms, is more directly related to the level of customer business. Therefore, Stifel Nicolaus computes its net capital under the alternative method. Under SEC rules, a broker-dealer may be required to reduce its business and restrict withdrawal of subordinated capital if its net capital is less than four percent of aggregate debit balances and may be prohibited from expanding its business and declaring cash dividends if its net capital is less than five percent of aggregate debit balances. A broker-dealer that fails to comply with the Uniform Net Capital Rule may be subject to disciplinary actions by the SEC and self-regulatory agencies, such as the NYSE, including censures, fines, suspension, or expulsion. In computing net capital, various adjustments are made to net worth to exclude assets which are not readily convertible into cash and to state conservatively the other assets such as a firm's position in securities. Compliance with the Uniform Net Capital Rule may limit those operations of a firm such as Stifel Nicolaus which requires the use of its capital for purposes of maintaining the inventory required for a firm trading in securities, underwriting securities, and financing customer margin account balances. Stifel Nicolaus had net capital of approximately $31.9 million at December 31, 1999, which was approximately 8.98 percent of aggregate debit balances and approximately $24.8 million in excess of required net capital. ITEM 2. PROPERTIES The headquarters and administrative offices of the Company, Stifel Nicolaus and CSA are located in downtown Saint Louis, Missouri. Pin Oak is located in New York, New York. Stifel Nicolaus has a branch office system located in 14 states, primarily in the Midwest. The Company has a total of 63 locations in 17 states. All offices of the Company are located in leased premises. The Company's management believes that at the present time the facilities are suitable and adequate to meet its needs and that such facilities have sufficient productive capacity and are appropriately utilized. The Company also leases communication and other equipment. Aggregate annual rental expense, for office space and equipment, for the year ended December 31, 1999 was approximately $4,728,000. Further information about the lease obligations of the Company is provided in Note D of the Notes To Consolidated Financial Statements incorporated by reference herein. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in several lawsuits relating principally to its securities business. Some of these lawsuits and arbitrations claim substantial amounts, including punitive damages. One such claim involves a lawsuit filed on October 5, 1995 by The Oklahoma Turnpike Authority ("OTA") in the District Court of Oklahoma County, State of Oklahoma, along with DeWayne VonFeldt and Robert Cochran, two former employees of the Company; Sakura Global Capital and Steven Strauss; Pacific Matrix and Jeff Feld. The OTA suit seeks $6.5 million in compensatory damages and an unspecified amount of punitive damages. The OTA suit alleges that an undisclosed fee paid to the Company by a third party for the placement of a forward purchase contract in an advance refunding escrow for the proceeds of the 1992 OTA $608 million municipal bond refinancing should have been paid to the OTA. Although the ultimate outcome of this and other actions cannot be ascertained at this time, management, based on its understanding of the facts and after consultation with outside counsel, does not believe the ultimate resolution of these matters will have a materially adverse effect on the Company's consolidated financial condition and results of operations. However, depending upon the period of resolution, such effects could be material to the financial results of an individual operating period. It is reasonably possible that certain of these lawsuits and arbitrations could be resolved in the next year, and management does not believe such resolutions will result in losses materially in excess of the amounts previously provided. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT The following information is furnished pursuant to General Instruction G (3) of Form 10-K with respect to the executive officers of Financial: Year First Appointed as Positions or Offices Executive Officer Name Age with the Company of the Company - ------------------------------------------------------------------------------- George H. Walker III 69 Chairman of the Board of 1978 Financial and Stifel Nicolaus Ronald J. Kruszewski 41 President and Chief Executive Officer 1997 of Financial and Stifel Nicolaus James M. Zemlyak 40 Vice President, Treasurer and 1999 Chief Financial Officer of Financial and Senior Vice President and Chief Financial Officer of Stifel Nicolaus Charles R. Hartman 56 Vice President and Secretary of 1996 Financial and General Counsel, Senior Vice President and Secretary of Stifel Nicolaus Scott B. McCuaig 50 Vice President of Financial and 1998 Director of Retail Sales & Marketing of Stifel Nicolaus Walter F. Imhoff 68 Managing Director of Stifel Nicolaus 1998 The following are brief summaries of the business experience during the past five years of each of the executive officers of the Company. George H. Walker III joined Stifel Nicolaus in 1976, became Chief Executive Officer of Stifel Nicolaus in December 1978, and became Chairman of Stifel Nicolaus in July 1982. From the time of the organization of Financial, Mr. Walker has served as its Chairman of the Board and, until October 26, 1992, Mr. Walker served as its President and Chief Executive Officer. Ronald J. Kruszewski was appointed President and Chief Executive Officer of the Company and Stifel Nicolaus in September 1997. Prior to joining the Company, Mr. Kruszewski served as Managing Director and Chief Financial Officer of Baird Financial Corporation and Managing Director of Robert W. Baird & Co. Incorporated. James M. Zemlyak joined Stifel Nicolaus in February 1999. He is Vice President, Treasurer and Chief Financial Officer of Financial and Senior Vice President and Chief Financial Officer of Stifel Nicolaus and a member of the Board of Directors of Stifel Nicolaus. Prior to joining the Company, Mr. Zemlyak served as Managing Director and Chief Financial Officer of Baird Financial Corporation from 1997 to 1999 and Senior Vice President and Chief Financial Officer of Robert W. Baird & Co. Incorporated from 1994 to 1997. Charles R. Hartman joined Stifel Nicolaus in June 1994. He is Vice President and Secretary of Financial and General Counsel, Senior Vice President and Secretary of Stifel Nicolaus. Prior to joining Stifel Nicolaus, Mr. Hartman was the Regional Counsel for the Securities and Exchange Commission in Los Angeles, California from April 1982 to June 1994. Scott B. McCuaig joined Stifel Nicolaus in January 1998. He is Vice President of Financial and the Director of Retail Sales & Marketing of Stifel Nicolaus. Prior to joining Stifel Nicolaus, Mr. McCuaig was a Managing Director, head of marketing and regional sales manager of Robert W. Baird & Co. Incorporated. Walter F. Imhoff joined Stifel Nicolaus in January 2000. He is Managing Director of Stifel Nicolaus. Prior to joining Stifel Nicolaus, Mr. Imhoff served as Chairman, President and Chief Executive Officer of Hanifen, Imhoff, Inc., a regional broker dealer, from 1979. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS a.) Market Information The common stock of Financial is traded on the New York Stock Exchange and Chicago Stock Exchange under the symbol "SF." The high/low sales prices for Financial's Common Stock for each full quarterly period for the two most recent calendar years are as follows: High and Low Stock Price By Quarter -------------------------------------------------------------- 1999 1998 Quarter High - Low High - Low -------------------------------------------------------------- First $ 10 11/16 - 9 $ 16 3/16 - 12 1/16 Second 10 11/16 - 8 15/16 17 5/8 - 13 11/16 Third 9 3/4 - 8 15/16 15 11/16 - 9 1/8 Fourth 11 7/8 - 8 15/16 11 1/2 - 8 3/4 -------------------------------------------------------------- The Company from time-to-time uses funds generated from operations to purchase the Company's common stock throughout the calendar year. The Company's Board of Directors authorized the repurchase of up to 250,000 shares on July 28, 1999, and an additional 600,000 common shares on December 10, 1999 to be used to satisfy share obligations for employee benefit plans and for general corporate purposes. b.) Holders The approximate number of stockholders of record on March 8, 2000 was 3,000. c.) Dividends Dividends paid were as follows: Record Payment Cash Stock Date Date Dividend Dividend - - - ---------------------------------------------------- 02/12/98 02/26/98 $0.03 5% 05/12/98 05/28/98 $0.03 - - 08/06/98 08/20/98 $0.03 - - 11/05/98 11/19/98 $0.03 - - 02/11/99 02/25/99 $0.03 5% 05/11/99 05/27/99 $0.03 - - 08/11/99 08/25/99 $0.03 - - 11/10/99 11/24/99 $0.03 - - A regular quarterly cash dividend of $0.03 per share was established on November 30, 1993. ITEM 6. SELECTED FINANCIAL DATA Stifel Financial Corp. and Subsidiaries Financial Summary

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management's Discussion and Analysis of Financial Condition and Results of Operations, included on pages 16 through 21 of the Annual Report of the Registrant to its Stockholders for the year ended December 31, 1999, is incorporated herein by reference. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. Quantitative and Qualitative Disclosure About Market Risk, included on page 21 of the Annual Report of the Registrant to its Stockholders for the year ended December 31, 1999, is incorporated herein by reference. ITEM 8. Financial Statements and Supplementary Data. The following consolidated financial statements included in the Annual Report of the Registrant to its Stockholders for the year ended December 31, 1999, is incorporated herein by reference. Statement Annual Report Reference ----------------------------------------------------------------------------- Consolidated Statements of Financial Condition -- December 31, 1999 and December 31, 1998................. 22 - 23 Consolidated Statements of Operations -- Years ended December 31, 1999, December 31, 1998 and December 31, 1997................................... 24 Consolidated Statements of Stockholders' Equity -- Years ended December 31, 1999, December 31, 1998 and December 31, 1997.................................. 25 Consolidated Statements of Cash Flows -- Years ended December 31, 1999, December 31, 1998 and December 31, 1997.................................. 26 - 27 Notes to Consolidated Financial Statements.............. 28 - 40 Independent Auditors' Report..................... 41 Selected Quarterly Financial Data, included on page 42 of the Annual Report of the Registrant to its Stockholders for the year ended December 31, 1999, is incorporated herein by reference. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III ITEM 10. Directors and Executive Officers of the Registrant. Information regarding directors is contained in "Election of Directors," included in the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference. Information regarding the executive officers, as of March 24, 2000, is contained in "Item 4a. Executive Officers of the Registrant," hereof. There is no family relationship between any of the directors or named executive officers. Information regarding compliance with Section 16 of the Securities Exchange Act of 1934, as amended, is contained in "Section 16(a) Beneficial Ownership Reporting Compliance," included in the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 11. Executive Compensation. Information regarding executive compensation is contained in "Executive Compensation," included in the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. Information regarding security ownership of certain beneficial owners and management is contained in "Voting Securities and Principal Holders Thereof," included in the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 13. Certain Relationships and Related Transactions. Information regarding certain relationships and related transactions is contained in "Certain Relationships and Related Transactions," included in the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Consolidated Financial Statements; Incorporated herein by reference, are listed in Item 8 hereof. (2) Consolidated Financial Statement Schedules: Page ---- Independent Auditors' Report..................................16 Schedule I-Condensed Financial Information of Registrant.....17-19 Schedule II-Valuation and Qualifying Accounts.................20 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (3) Exhibits: See Exhibit Index on pages 22 and 23 hereof. (b) Reports on Form 8-K: There were no reports on Form 8-K during the fourth quarter ended December 31, 1999. SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Louis, State of Missouri, on the 24th day of March 2000. STIFEL FINANCIAL CORP. (Registrant) By /s/ Ronald J. Kruszewski ----------------------------- Ronald J. Kruszewski (Principal Executive Officer) /s/ James M. Zemlyak ----------------------------- James M. Zemlyak (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant on March 24, 2000, in the capacities indicated. /s/ George H. Walker III Chairman of the Board - - - ------------------------ George H. Walker III /s/ Ronald J. Kruszewski President, Chief Executive - - - ------------------------ Officer, and Director Ronald J. Kruszewski /s/ Bruce A. Beda Director - - - ------------------------ Bruce A. Beda /s/ Charles A. Dill Director - - - ------------------------ Charles A. Dill /s/ Richard F. Ford Director - - - ------------------------ Richard F. Ford /s/ John J. Goebel Director - - - ------------------------ John J. Goebel /s/ Stuart I. Greenbaum Director - - - ------------------------ Stuart I. Greenbaum /s/ Robert E. Lefton Director - - - ------------------------ Robert E. Lefton /s/ James M. Oates Director - - - ------------------------ James M. Oates [Deloitte & Touche LLP letterhead] Independent Auditors' Report To the Board of Directors and Stockholders of Stifel Financial Corp. St. Louis, Missouri: We have audited the consolidated financial statements of Stifel Financial Corp. and Subsidiaries as of December 31, 1999 and December 31, 1998, and for each of the three years in the period ended December 31, 1999, and have issued our report thereon dated March 10, 2000; such consolidated financial statements and report are included in your 1999 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of Stifel Financial Corp. and Subsidiaries, listed in Item 14. These consolidated financial statement schedules are the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP March 10, 2000 St. Louis, Missouri SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS STIFEL FINANCIAL CORP. Dec. 31, Dec. 31, 1999 1998 ----------- ----------- ASSETS Cash $ 9,155 $ 9,155 Due from subsidiaries (a) 1,496,035 3,795,026 Investment in subsidiaries (a) 59,607,151 52,684,827 Office equipment and leasehold improvements,less allowances for depreciation and amortization of $11,275,888 and $11,869,688, respectively 7,537,667 5,195,917 Investments, at cost 2,055,045 1,462,239 Goodwill, net of amortization of $737,815 and $645,955, respectively 1,631,327 1,723,187 Other assets 759,018 2,075,975 ----------- ----------- TOTAL ASSETS $73,095,398 $66,946,326 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Due to subsidiaries (a) $ 1,667,781 $ 4,773,926 Obligation under capital lease 1,067,636 847,769 Long-term debt 10,370,000 5,370,000 Other liabilities 931,269 978,417 ----------- ----------- TOTAL LIABILITIES 14,036,686 11,970,112 Stockholders' Equity: Capital stock 1,106,633 1,082,521 Additional paid-in capital 43,573,499 41,867,576 Retained earnings 24,546,476 18,291,104 ----------- ----------- 69,226,608 61,241,201 Less treasury stock, at cost 6,984,167 2,161,886 Less unearned employee stock ownership plan shares 2,813,483 3,021,862 Less unamortized expense of restricted stock awards, at cost 370,246 1,081,239 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 59,058,712 54,976,214 ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $73,095,398 $66,946,326 =========== =========== (a) Eliminated in consolidation. See Notes to Consolidated Financial Statements (Item 8) SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued) CONDENSED STATEMENTS OF OPERATIONS STIFEL FINANCIAL CORP. Years Ended December 31, 1999 1998 1997 Revenues: Lease $ 2,598,206 $ 1,762,434 $ 1,202,248 Other 923,039 523,138 95,015 ----------- ----------- ----------- 3,521,245 2,285,572 1,297,263 Expenses: Depreciation and amortization 2,690,033 1,853,837 1,294,108 Professional fees 176,140 410,039 290,554 Miscellaneous 799,400 492,273 194,419 ----------- ----------- ----------- 3,665,573 2,756,149 1,779,081 ----------- ----------- ----------- Loss before income taxes (144,328) (470,577) (481,818) Benefit for income taxes (52,882) (226,522) (201,150) Loss before equity in net income of subsidiaries (91,446) (244,055) (280,668) Equity in net income of subsidiaries 7,256,612 5,489,482 5,951,674 ----------- ----------- ----------- NET INCOME $ 7,165,166 $ 5,245,427 $ 5,671,006 =========== =========== =========== See Notes to Consolidated Financial Statements (Item 8) SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued) CONDENSED STATEMENTS OF CASH FLOWS STIFEL FINANCIAL CORP.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS STIFEL FINANCIAL CORP. AND SUBSIDIARIES

EXHIBIT INDEX Stifel Financial Corp. and Subsidiaries Annual Report on Form 10-K Year Ended December 31, 1999 Exhibit Number Description 3. (a)(1) Restated Certificate of Incorporation of Financial filed with the Secretary of State of Delaware on June 1, 1983, incorporated herein by reference to Exhibit 3.1 to Financial's Registration Statement on Form S-1, as amended (Registration File No. 2-84232) filed July 19, 1983. (a)(2) Amendment to Restated Certificate of Incorporation of Financial filed with the Secretary of State of Delaware on May 11, 1987, incorporated herein by reference to Exhibit (3)(a)(2) to Financial's Annual Report on Form 10-K (File No. 1- 9305) for the year ended July 31, 1987. (a)(3) Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of Financial filed with the Secretary of State of Delaware on July 10, 1987, incorporated herein by reference to Exhibit (3)(a)(3) to Financial's Annual Report on Form 10-K (File No. 1- 9305) for the year ended July 31, 1987. (a)(4) Amendment to Restated Certificate of Incorporation of Financial filed with the Secretary of State of Delaware on November 28, 1989, incorporated herein by reference to Exhibit (3)(a)(4) to Financial's Annual Report on Form 10-K (File No. 1- 9305) for the year ended July 27, 1990. (b) Amended and Restated By-Laws of Financial, incorporated herein by reference to Exhibit 3(b)(1) to Financial's Annual Report on Form 10-K (File No. 1- 9305) for fiscal year ended July 30, 1993. 4. (a) Preferred Stock Purchase Rights of Financial, incorporated herein by reference to Financial's Registration Statement on Form 8-A (File No. 1-9305) filed July 30, 1996. 10. (a)(1) Employment Agreement with George H. Walker III dated August 21, 1987, incorporated herein by reference to Exhibit 10(c) to Financial's Annual Report on Form 10-K (File No. 1-9305) for the fiscal year ended July 31, 1987.* (a)(2) First Amendment to Employment Agreement with George H. Walker III, incorporated herein by reference to Exhibit 10(a)(2) to Financial's Annual Report on Form 10-K (File No. 1- 9305) for the fiscal year ended July 31, 1992. * (b) Form of Indemnification Agreement with directors dated as of June 30, 1987, incorporated herein by reference to Exhibit 10.2 to Financial's Current Report on Form 8-K (date of earliest event reported - June 22, 1987) filed July 14, 1987. (c) 1983 Incentive Stock Option Plan of Financial, incorporated herein by reference to Exhibit 4(a) to Financial's Registration Statement on Form S-8 (Registration File No. 2-94326) filed November 14, 1984. * (d) 1985 Incentive Stock Option Plan of Financial, incorporated herein by reference to Exhibit 28C to Financial's Registration Statement on Form S-8, as amended (Registration File No. 33-10030) filed November 7, 1986. * (e) 1987 Non-qualified Stock Option Plan of Financial, incorporated herein by reference to Exhibit 10(h) to Financial's Annual Report on Form 10- K (File No. 1-9305) for the fiscal year ended July 31, 1987. * (f) Amendment to 1983 Incentive Stock Option Plan, 1985 Incentive Stock Option Plan and 1987 Non- Qualified Stock Option Plan, incorporated herein by reference to Exhibit 10(f) to Financial's Annual Report on Form 10-K (File No. 1-9305) for the fiscal year ended July 28, 1989. * (g) Dividend Reinvestment and Stock Purchase Plan of Financial, incorporated herein by reference to Financial's Registration Statement on Form S-3 (Registration File No. 33-53699) filed May 18, 1994. (h) Amended and Restated 1997 Incentive Plan of Financial, incorporated herein by reference to Financial's Registration Statement on Form S-8 (Registration File No. 333-84717) filed on August 6, 1999.* (i) 1998 Employee Stock Purchase Plan of Financial, incorporated herein by reference to Financial's Registration Statement on Form S-8 (Registration File No. 333-37807) filed October 14, 1998. * (j)(1) Employment Letter with Ronald J. Kruszewski, incorporated herein by reference to Exhibit 10(l) to Financial's Annual Report on Form 10- K (File No. 1-9305) for the year ended December 31, 1997. * (j)(2) Stock Unit Agreement with Ronald J. Kruszewski, incorporated herein by reference to Exhibit 10(j) 2 to Financial's Annual Report on Form 10-K (File No. 1-9305) for the year ended December 31, 1998. * (k) 1999 Executive Incentive Performance Plan of Financial,incorporated herein by reference to Annex B of Financial's Proxy Statement for the 1999 Annual Meeting of Stockholders filed March 26, 1999. * 13. Annual Report to Stockholders for the year ended December 31, 1999, filed herewith. Except for those portions of pages expressly incorporated by reference, the 1999 Annual Report to Stockholders is not deemed filed as part of this Annual Report on Form 10-K. 21. List of Subsidiaries of Financial, filed herewith. 23. Consent of Independent Auditors, filed herewith. 27. 1999 Financial Data Schedule BD, filed herewith. * Management contract or compensatory plan or arrangement. EX-13 2 r10k-13.htm ANNUAL REPORT TO STOCKHOLDERS STIFEL FINANCIAL CORP. - 1999 Annual Report Business Environment

Stifel Financial Corp. (the "Parent"), through its wholly owned subsidiaries, principally Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"), collectively referred to as "the Company," is principally engaged in retail brokerage, securities trading, investment banking, investment advisory, and related financial services throughout the United States. Although the Company has offices throughout the United States, its major geographic area of concentration is in the Midwest. The Company's principal customers are individual investors, with the remaining client base composed of corporations, municipalities, and institutions.

Many factors affect the Company's results of operations, including changes in economic conditions, inflation, volatility of securities prices and interest rates, trading volume of securities, demand for investment banking services, political events, and competition from other financial institutions. As these factors are outside the control of the Company and a significant portion of the Company's expenses are relatively fixed, results of operations can vary significantly from period to period.

The Company faces increasing competition from other financial institutions, such as commercial banks, online service providers, and other companies offering financial services. The Financial Modernization Act, signed into law in late 1999, lifts restrictions on banks and insurance companies to provide financial services once dominated by securities firms. In addition, recent consolidation in the financial services industry may lead to increased competition from larger, more diversified organizations. At present, the Company is unable to predict the extent of these changes and their impact on the Company's results of operations.

The securities industry continues to benefit from the longest peacetime economic expansion, as evidenced by the growth in trading volumes of the two major stock exchanges - the New York Stock Exchange (NYSE) and NASDAQ. Since 1990, the volume increased 414% and 698%, respectively. During 1999, the major market indices - the NASDAQ composite, the Dow Jones Industrial Average, and the Standard & Poor's 500 - increased 86%, 25%, and 20%, respectively.

Trading on the Internet has increased significantly. Online brokerage customers account for more than one-third of trading in U.S. equities. The number of online accounts doubled in 1999 and is expected to quadruple in the next three years.

During 1999, the Company continued to build upon the foundation of growth and regional expansion of its Private Client Group, which began in 1998, with the opening of 11 new offices and the addition of 102 investment executives and independent contractors. In addition, the Company made several strategic moves to position itself for continued expansion with the sale of Todd Investment Advisors ("Todd"), the opening of investment banking offices in Cleveland, Ohio, and St. Louis, Missouri, the realignment of its research department, and the agreement to merge with Hanifen, Imhoff Inc. ("HII"), a Denver-based investment banking firm. The merger will add approximately 56 investment bankers, research analysts, institutional sales associates, and traders to the capital markets segment, as well as approximately 30 administrative and technical support associates.

Additionally, the Company continued to invest in and provide support for technologically advanced equipment and software for the Private Client Group during 1999, including web-based access to customer accounts and development of online trading to be launched in early 2000.

The following summarizes the changes in the major categories of revenues and expenses for the respective periods.

Year Ended Year Ended

Increase (Decrease) December 31, December 31, December 31, December 31,

1999 vs. 1998 1998 vs. 1997

Dollars in thousands Amount Percentage Amount Percentage

Revenues:

Commissions $11,934 21% $ 6,966 14%

Principal
   transactions ( 1,811) ( 7) 6,002 29

Investment
   banking ( 4,256) (27) (12,713) ( 45)

Interest 1,636 9 ( 2,508) ( 12)

Other revenues 6,402 33 3,722 24

$13,905 10% $14,469 1%

Expenses:

Compensation and
   benefits $5,852 7% $5,510 6%

Communication
   and office supplies 522 6 1,475 21

Occupancy and
   equipment rental 2,270 24 1,440 18

Interest 299 3 ( 3,193) ( 25)

Commissions and
   floor brokerage 34 1 24 1

Other operating
   expenses 2,544 23 ( 2,595) ( 19)

$11,521 9% $2,301 2%


	Year Ended			Year Ended
Increase (Decrease)	December 31,		December 31,	December 31,		December 31,
	1999	vs.	1998	1998	vs.	1997
Dollars in thousands	Amount		Percentage	Amount		Percentage

Revenues:
Commissions	$11,934		21%	$ 6,966		14%
Principal transactions	( 1,811)		( 7)	6,002		29
Investment banking	( 4,256)		(27)	(12,713)		( 45)
Interest	1,636		9	( 2,508)		( 12)
Other revenues	6,402		33	3,722		24

	$13,905		10%	$14,469		1%

Expenses:
Compensation and benefits	$5,852		7%	$5,510		6%
Communication and office supplies	522		6	1,475		21
Occupancy and equipment rental	2,270		24	1,440		18
Interest	299		3	( 3,193)		( 25)
Commissions and floor brokerage	34		1	24		1
Other operating expenses	2,544		23	( 2,595)		( 19)

	$11,521		9%	$2,301		2%


	*(in thousands)*	*December 31, 1999*	*December 31, 1998*

*Assets*	Cash and cash equivalents	$16,861	$12,835

	Cash segregated for the exclusive benefit of customers	181	177

	Receivable from brokers and dealers:
	Securities failed to deliver	1,732	1,481
	Deposits paid for securities borrowed	33,029	12,653
	Settlement balances with clearing organizations	7,276	9,812

		42,037	23,946

	Receivable from customers, net of allowance for doubtful accounts of $556 and $446, respectively	313,034	213,709

	Securities owned, at fair value:
	U.S. Government obligations	4,287	4,282
	State and municipal obligations	12,260	27,946
	Corporate obligations	4,801	2,025
	Corporate stocks	7,342	4,379

		28,690	38,632

	Memberships in exchanges, at cost	470	513
	Office equipment and leasehold improvements, at cost, net of allowances for depreciation and amortization of $11,370 and
	$12,361, respectively	7,597	5,315
	Goodwill, net of accumulated amortization of $738 and $1,721, respectively	1,631	3,874
	Notes receivable from and advances to officers and employees, net of allowance for doubtful receivables from former employees
	of $701 and $482, respectively	7,934	6,460
	Deferred tax asset	2,958	3,213
	Other assets	31,717	26,331

	TOTAL ASSETS	$453,110	$335,005


	*(in thousands, except share amounts)*	*December 31, 1999*	*December 31, 1998*

*Liabilities and*	Short-term borrowings from banks	$122,950	$62,890
*Stockholders'*
*Equity*	Payable to brokers and dealers:
	Securities failed to receive	4,037	1,545
	Deposits received from securities loaned	143,023	103,224

		147,060	104,769

	Payable to customers	33,643	37,306
	Securities sold, but not yet purchased, at fair value	2,036	998
	Drafts payable	18,065	18,210
	Accrued employee compensation	18,277	18,320
	Obligations under capital leases	1,068	848
	Accounts payable and accrued expenses	15,984	16,117
	Long-term debt	34,968	20,570

	Total Liabilities	394,051	280,028

	Stockholders' equity:
	Preferred stock - $1 par value; authorized
	3,000,000 shares; none issued
	Common stock - $.15 par value; authorized 10,000,000
	shares; issued 7,376,176 and 7,219,335 shares,
	respectively	1,107	1,084
	Additional paid-in capital	43,573	41,867
	Retained earnings	24,546	18,291

		69,226	61,242

	Less:
	Treasury stock, at cost
	724,055 and 222, 743 shares, respectively	6,984	2,162
	Unamortized expense of restricted stock awards	370	1,081
	Unearned employee stock ownership plan shares,
	at cost, 219,601 and 235,866 shares, respectively	2,813	3,022

	Total stockholder's Equity	59,059	54,977

	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$453,110	$335,005

See Notes to Consolidated Financial Statements.


		*Years Ended December 31,*

*(In thousands, except per share amounts)*		*1999*	*1998*	*1997*

*Revenues*	Commissions	$ 68,663	$ 56,729	$ 49,763
	Principal transactions	24,654	26,465	20,463
	Investment banking	11,507	15,763	28,476
	Interest	20,525	18,889	21,397
	Other	25,844	19,442	15,720

		151,193	137,288	135,819

*Expenses*	Employee compensation and benefits	92,819	86,967	81,817
	Communications and office supplies	8,911	8,389	6,914
	Occupancy and equipment rental	11,819	9,549	8,109
	Interest	10,097	9,798	12,991
	Commissions and floor brokerage	2,838	2,804	2,780
	Other operating expenses	13,736	11,192	13,787

		140,220	128,699	126,398

	Income before income taxes	10,973	8,589	9,421
	Provision for income taxes	3,808	3,344	3,750

	Net income	$ 7,165	$ 5,245	$ 5,671

*Earning Per Common*	Net Income per share:
*Share and Share*	Basic earnings per share	$ 1.08	$ 0.77	$ 1.01
*Equivalents*	Diluted earnings per share	$ 1.03	$ 0.73	$ 0.88

See Notes to Consolidated Financial Statements


*(in thousands, except share amounts)*	Common Stock _______________________ Shares Amounts		*Additional Paid-in Capital*	*Retained Earnings*	Treasury Stock and Unearned Employee Stock Ownership Plan Shares Amount		*Unamortized Expense of Restricted Stock Awards*	*Total*

Balance at January, 1997	4,767,715	$ 715	$ 21,403	$ 16,733	( 135,455)	$( 892)	$( 207)	$ 37, 752

Cash dividends - common stock ($.12 per share)				( 609)				( 609)
Purchase of treasury shares					(276,331)	(2,926)		( 2,926)
Employee benefit plans			( 82)		158,740	1,098		1,016
Stock options exercised			( 274)		49,467	375		101
Restricted stock awards			( 196)		42,168	349	(153)	- -
Amortization of restricted stock awards							175	175
Shares issued	1,592,707	239	11,832					12,071
Dividend reinvestment			1		794	7		8
Net income for the year				5,671				5,671
5% stock dividend	317,801	48	4,322	( 4,370)	( 8,031)			- -
Employee stock ownership plan					(236,250)	( 3,178)		( 3,178)

Balance at December 31, 1997	6,678,223	1,002	37,006	17,425	(404,898)	(5,167)	( 185)	50,081

Cash dividends - common stock ($.12 per share)				( 828)				( 828)
Purchase of treasury shares					(211,717)	( 2,160)		( 2,160)
Employee benefit plans	20,903	3	( 267)		173,351	2,082		1,818
Stock Options exercised	94,676	14	367		7,099	63		444
Restricted stock awards	82,000	12	1,262		( 1,576)	( 11)	(1,263)	- -
Amortization of restricted stock awards							367	367
Dividend reinvestment			1		972	9		10
Net income for the year				5,245				5,245
5% stock dividend	343,533	53	3,498	( 3,551)	( 21,840)			- -

Balance at December 31, 1998	7,219,335	1,084	41,867	18,291	(458,609)	(5,184)	(1,081)	54,977

Cash dividends - common stock ($ .12 per share)				( 853)				( 853)
Purchase of treasury shares					(576,165)	(5,437)		( 5,437)
Employee benefit plans	156,841	23	2,278	( 57)	19,837	231		2,475
Stock options exercised			( 572)		106,346	1,019		447
Restricted stock awards, net forfeitures					(35,807)	( 433)	433	- -
Amortization of restricted stock awards							278	278
Dividend reinvestment					742	7		7
Net income for the year				7,165				7,165

Balance at December 31, 1999	7,376,176	$ 1,107	$ 43,573	$ 24,546	(943,656)	$(9,797)	( 370)	$ 59,059

See Notes to Consolidated Financial Statements


		Operating Leases ________________________________________________________
*Year Ending December 31,*	*Capital Leases*	*Lease Commitments*	*Minimum Payments Under Related Sublease*	*Future Minimum Rental Commitment*

2000	$ 630	$ 5,249	$( 106)	$ 5,143
2001	330	4,861	( 50)	4,811
2002	201	4,057	( 17)	4,040
2003	- -	3,684	- -	3,684
2004	- -	2,734	- -	2,734
Thereafter	- -	12,313	- -	12,313

Minimum Commitments	$1,161	$32,898	$( 173)	$32,725
Less Interest	93 _____
Net Present Value of Capital Lease Obligations	$1,068

The summary of the status of the Company's fixed stock option plans as of December 31, 1999, 1998, 1997, and changes during the years ending on those dates is presented below:

	1999 _____________________		1998 _____________________		1997 _____________________
*Fixed Options*	*Shares*	*Weighted-Average Exercise Price*	*Shares*	*Weighted-Average Exercise Price*	*Shares*	*Weighted-Average Exercise Price*

Outstanding at beginning of year	769,084	$8.78	764,617	$7.49	477,857	$5.10

Granted	296,393	9.67	169,050	11.70	396,995	9.75
Exercised	( 106,346)	5.51	( 106,864)	4.60	( 54,537)	5.10
Forfeited	( 151,246)	11.21	( 55,812)	9.42	( 44,289)	4.83
Expired	- -	- -	( 1,907)	4.26	( 11,409)	6.26

Outstanding at end of year	807,885	$ 9.32	769,084	$ 8.78	764,617	$ 7.49

Options exercisable at year-end	351,987		384,475		360,180
Weighted-average fair value of options granted during the year	$3.92		$4.78		$4.07

The following table summarizes information about fixed stock options outstanding at December 31, 1999:

	Options Outstanding ___________________________________________________			Options Exercisable ______________________________
Range of Exercise Prices	Number Outstanding at 12/31/99	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price	Number Exercisable at 12/31/99	Weighted-Average Exercise Price

$ 3.73 - $5.61	175,433	5.44	$ 5.2191	172,032	$ 5.2145
6.26 - 9.58	214,744	8.81	9.0684	30,650	7.2485
9.76 - 10.69	139,050	9.47	9.9688	11,865	10.0190
10.83 - 10.84	165,347	7.75	10.8276	107,651	10.8276
11.07 - 15.31	113,311	8.30	13.2108	29,789	13.9112

$ 3.73 - $15.31	807,885	7.90	$ 9.3285	351,987	$ 8.0063

The Company's provision (benefit) for income taxes consists of:

	*Years Ended December 31,*

	*1999*	*1998*	*1997*

Current:
Federal	$3,165	$1,600	$ 3,760
State	388	381	897

	$3,553	$1,981	$ 4,657

Deferred:
Federal	$ 227	$1,100	$( 732)
State	28	263	( 175)

	$ 255	$1,363	$( 907)

	$3,808	$3,344	$3,750

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes for the following reasons:

	*Years Ended December 31,*

	*1999*	*1998*	*1997*

Federal tax computed at statutory rates	$3,731	$2,921	$ 3,203
State income taxes, net of federal income tax benefit	255	441	476
Sale of Todd Investment Advisors	( 386)	- -	- -
Other, net	208	( 18)	71

Provision for income taxes	$3,808	$3,344	$3,750


		*Years Ended December 31,*

	*(in thousands)*	*1999*	*1998*	*1997*

*Cash Flows*	Net income	$7,165	$5,245	$5,671
*From Operating*
*Activities*	Noncash items included in earnings:
	Depreciation and amortization	2,790	2,133	1,519
	Bonus notes amortization	1,992	1,717	1,178
	Deferred items	403	1,938	13
	Amortization of restricted stock awards, units, and stock benefits	854	595	172
	Gain on sale of subsidiary	( 1,496)	- -	- -

		11,708	11,628	8,553
	Decrease (increase) in operating receivables: Customers	(99,325)	4,592	16,915
	Brokers and dealers	(18,091)	11,277	(20,387)
	(Decrease) increase in operating payables: Customers	( 3,663)	( 1,933)	7,144
	Brokers and dealers	42,291	31,061	26,560
	Decrease (increase) in assets: Cash and U.S. Government securities segregated for the exclusive benefit of customers	( 4)	- -	305
	Securities owned	9,942	(19,420)	( 300)
	Notes receivable from officers and employees	( 3,466)	( 3,927)	( 2,409)
	Other assets	( 64)	( 3,225)	1,633
	(Decrease) increase in liabilities: Securities sold, not yet purchased	1,038	( 3,266)	1,035
	Drafts payable, accounts payable and accrued expenses, and accrued employee compensation	41	3,153	10,148

	Cash From Operating Activities	$(59,593)	$ 29,940	$ 49,197


		December 31, 1999	December 31, 1998

*Deferred Tax Asset*	Office equipment and leasehold improvements, principally book over tax depreciation	$ 298	$ 859
	Deferred compensation	1,427	1,400
	Deferred revenue	953	974
	Investments, principally due to valuation allowance	98	92
	Receivables from officers and employees, principally due to allowance for doubtful accounts	258	189
	Accruals not currently deductible	1,741	1,212
	Other	65	101

	Deferred Tax Asset	4,840	4,827

*Deferred Tax Liability*	Customer and employee receivable	(1,226)	(1,304)
	Intangible assets, principally tax over book amortization	(176)	(195)
	Investment fee revenue installment receivable	(480)	(115)

	Total Gross Deferred Tax Liability	(1,882)	(1,614)

	Net Deferred Tax Asset	$ 2,958	$ 3,213

The following table reflects a reconciliation between Basic EPS and Diluted EPS.

	Years Ended December 31, __________________________________________________________________________
	1999 _____________________			1998 _____________________			1997 _____________________
*Net Income*	Income (Numerator)	Shares (Denominator)	*Per Share Amount*	Income (Numerator)	Shares (Denominator)	*Per Share Amount*	Income (Numerator)	Shares (Denominator)	*Per Share Amount*

Basic Earnings Per Share
Income available to shareholders	$ 7,165	6,654,773	$ 1.08	$5,245	6,849,998	$ 0.77	$ 5,671	5,590,919	$ 1.01
Effect of Dilutive Securities
Employee benefits plans	- -	285,351	- -	- -	347,988	- -	- -	292,328	- -
Convertible debt	- -	- -	- -	- -	- -	- -	541	1,215,692	- -
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$ 7,165	6,940,124	$ 1.03	$5,245	7,197,986	$ 0.73	$6,212	7,089,939	$0.88


Quarterly Operating Results (Unaudited)

(In thousands, except per share amounts)	Revenue	Earnings Before Income Taxes	Net Income	Basic Earnings Per Share	Diluted Earnings Per Share

Year 1999 By Quarter

First	$37,017	$2,815	$1,787	$.26	$.25
Second	$37,835	$3,405	$2,244	$.33	$.32
Third	$35,513	$2,173	$1,431	$.22	$.21
Fourth	$40,828	$2,580	$1,703	$.26	$.25

Year 1998 By Quarter

First	$35,839	$3,418	$2,053	$.30	$.29
Second	$34,072	$2,100	$1,224	$.18	$.17
Third	$34,259	$1,561	$967	$.14	$.13
Fourth	$33,118	$1,510	$1,001	$.15	$.14


		Years Ended December 31,

	(In thousands, except per share amounts)	1999	1998	1997	1996	1995

Revenue	Commissions	$68,663	$56,729	$49,763	$43,900	$38,716
	Principal transactions	24,654	26,465	20,463	19,498	20,362
	Investment banking	11,507	15,763	28,476	16,253	12,121
	Interest	20,525	18,889	21,397	13,774	13,002
	Other	25,844	19,442	15,720	16,388	11,159

		151,193	137,288	135,819	109,813	95,360

Expenses	Employee compensation and benefits	$92,819	$86,967	$81,817	$66,765	$57,187
	Communications and office supplies	8,911	8,389	6,914	6,797	7,651
	Occupancy and equipment rental	11,819	9,549	8,109	7,958	8,512
	Interest	10,097	9,798	12,991	8,197	8,312
	Commissions and floor brokerage	2,838	2,804	2,780	2,641	2,319
	Other operating expenses	13,736	11,192	13,787	11,853	10,072

		140,220	128,699	126,398	104,211	94,053

	Income before income taxes	10,973	8,589	9,421	5,602	1,307
	Provision from income taxes	3,808	3,344	3,750	2,209	663

	Net Income	$7,165	$5,245	$5,671	$3,393	$644


Per Share Data	Basic earnings	$ 1.08	$ .77	$ 1.01	$ .66	$ .13
	Diluted earnings	$ 1.03	$ .73	$ .88	$ .59	$ .13
	Cash dividends	$ .12	$ .12	$ .12	$ .09	$ .12

Other Data	Total assets	$453,110	$335,005	$315,484	$301,344	$226,75
	Long-term obligations	$ 34,968	$ 20,570	$ 9,600	$ 10,000	$ 10,760
	Stockholders' equity	$ 59,059	$ 54,977	$ 50,081	$ 37,752	$ 34,795
	Net income as % average equity	12.55%	9.69%	13.29%	9.35%	1.87%
	Net income as % revenues	4.74%	3.82%	4.17%	3.09%	0.68%
	Average common shares and share equivalents used in determining earnings per share:
	Basic	6,655	6,850	5,591	5,150	5,079
	Diluted	6,940	7,198	7,099	6,816	5,152