Bank Loans

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Bank Loans

NOTE 8 – Bank Loans

The following table presents the balance and associated percentage of each major loan category in our bank loan portfolio at December 31, 2022 and 2021 (in thousands, except percentages):

	December 31, 2022						December 31, 2021
	Balance			Percent			Balance			Percent
Residential real estate	$	7,371,671			35.8	%	$	5,482,026			32.7	%
Commercial and industrial		4,897,176			23.8			4,208,950			25.2
Fund banking		4,182,641			20.3			3,136,803			18.7
Securities-based loans		2,724,551			13.2			2,880,158			17.2
Commercial real estate		675,599			3.3			409,847			2.4
Construction and land		593,191			2.9			511,084			3.1
Home equity lines of credit		107,136			0.5			82,508			0.5
Other		50,593			0.2			32,111			0.2
Gross bank loans		20,602,558			100.0	%		16,743,487			100.0	%
Unamortized loan discount, net		—						(150	)
Loans in process		(3,526	)					(10,134	)
Unamortized loan fees, net		(22,287	)					(6,012	)
Allowance for loan losses		(111,653	)					(99,344	)
Loans held for investment, net	$	20,465,092					$	16,627,847

At December 31, 2022 and 2021, Stifel Bancorp had loans outstanding to its executive officers and directors and executive officers and directors of certain affiliated entities in the amount of $86.4 million and $27.2 million, respectively.

At December 31, 2022 and 2021, we had loans held for sale of $156.9 million and $207.7 million, respectively. For the year ended December 31, 2022, we recognized a loss of $7.8 million, included in other income in the consolidated statements of operations, from the sale of originated loans, net of fees and costs. For the years ended December 31, 2021, and 2020, we recognized gains, included in other income in the consolidated statements of operations, of $29.8 million and $41.2 million, respectively, from the sale of originated loans, net of fees and costs.

During the year ended December 31, 2021, we sold $208.0 million in unpaid principal balance of loans. Based upon the terms of the sale, we recognized a $2.5 million gain, which is reflected in other income on the consolidated statements of operations.

At December 31, 2022 and 2021, loans, primarily consisting of residential and commercial real estate loans of $7.0 billion and $4.9 billion, respectively, were pledged at the Federal Home Loan Bank as collateral for borrowings.

Accrued interest receivable for loans and loans held for sale at December 31, 2022 and 2021, was $65.7 million and $27.4 million, respectively, and is reported in other assets on the consolidated statement of financial condition.

The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2022 and 2021 (in thousands).

	Year Ended December 31, 2022
	Beginning Balance		Provision			Charge- offs			Recoveries		Ending Balance
Commercial and industrial	$	44,661	$	13,662		$	(4,550	)	$	370	$	54,143
Residential real estate		28,560		(8,119	)		—			—		20,441
Commercial real estate		3,934		8,963			—			—		12,897
Fund banking		8,868		2,843			—			—		11,711
Construction and land		8,536		32			—			—		8,568
Securities-based loans		4,006		(813	)		(36	)		—		3,157
Home equity lines of credit		511		(147	)		—			—		364
Other		268		104			—			—		372
	$	99,344	$	16,525		$	(4,586	)	$	370	$	111,653

	Year Ended December 31, 2021
	Beginning Balance		Provision			Charge- offs			Recoveries		Ending Balance
Commercial and industrial	$	62,557	$	(12,665	)	$	(5,232	)	$	1	$	44,661
Residential real estate		16,300		12,260			—			—		28,560
Fund banking		4,665		4,203			—			—		8,868
Construction and land		17,275		(8,739	)		—			—		8,536
Securities-based loans		2,015		1,991			—			—		4,006
Commercial real estate		8,580		(4,646	)		—			—		3,934
Home equity lines of credit		374		137			—			—		511
Other		263		5			—			—		268
	$	112,029	$	(7,454	)	$	(5,232	)	$	1	$	99,344

On January 1, 2020, we adopted the new accounting standard that requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in our company’s relevant financial assets. During the year ended December, 31, 2021, we released $11.5 million of net credit loss reserves, including $7.5 million of the allowance for credit losses for funded loans and $4.0 million of the allowance for unfunded lending commitments, reflecting the improvement in our economic projections. During the year ended December 31, 2022, we recorded $33.5 million of net credit loss reserves, including $16.5 million of the reserve for credit losses for funded loans and $17.0 million of the reserve for unfunded lending commitments. For more information on our company’s credit loss accounting policies, including the allowance for credit losses, see Note 2 – Summary of Significant Accounting Policies. For more information on the reserve for unfunded lending commitments, see Note 24 – Off-Balance Sheet Credit Risk.

At December 31, 2022, we had $10.3 million of impaired loans, net of discounts, which included $0.2 million in troubled debt restructurings. The specific allowance on impaired loans at December 31, 2022, was $6.5 million. At December 31, 2021, we had $17.3 million of impaired loans, net of discounts, which included $0.2 million in troubled debt restructurings. The specific allowance on impaired loans at December 31, 2021, was $6.2 million. The gross interest income related to impaired loans, which would have been recorded had these loans been current in accordance with their original terms, and the interest income recognized on these loans during the year ended December 31, 2022 and 2021, were insignificant to the consolidated financial statements.

The following tables present the aging of the recorded investment in past due loans at December 31, 2022 and 2021, by portfolio segment (in thousands):

	December 31, 2022
	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current Balance		Total
Residential real estate	$	2,445	$	688	$	3,133	$	7,368,538	$	7,371,671
Commercial and industrial		—		9,226		9,226		4,887,950		4,897,176
Fund banking		—		—		—		4,182,641		4,182,641
Securities-based loans		—		—		—		2,724,551		2,724,551
Commercial real estate		—		—		—		675,599		675,599
Construction and land		—		—		—		593,191		593,191
Home equity lines of credit		29		182		211		106,925		107,136
Other		36		6		42		50,551		50,593
Total	$	2,510	$	10,102	$	12,612	$	20,589,946	$	20,602,558

	December 31, 2022 *
	Nonaccrual		Restructured		Nonperforming loans with no allowance		Total
Commercial and industrial	$	9,226	$	—	$	—	$	9,226
Residential real estate		870		150		—		1,020
Other		6		—		—		6
Total	$	10,102	$	150	$	—	$	10,252

*There were no loans past due 90 days and still accruing interest at December 31, 2022.

	December 31, 2021
	30 - 89 Days Past Due		90 or More Days Past Due		Total Past Due		Current Balance		Total
Residential real estate	$	6,194	$	1,332	$	7,526	$	5,474,500	$	5,482,026
Commercial and industrial		9,290		6,571		15,861		4,193,089		4,208,950
Fund banking		—		—		—		3,136,803		3,136,803
Securities-based loans		—		—		—		2,880,158		2,880,158
Construction and land		—		—		—		511,084		511,084
Commercial real estate		—		1		1		409,846		409,847
Home equity lines of credit		—		—		—		82,508		82,508
Other		44		—		44		32,067		32,111
Total	$	15,528	$	7,904	$	23,432	$	16,720,055	$	16,743,487

	December 31, 2021 *
	Nonaccrual		Restructured		Nonperforming loans with no allowance		Total
Commercial and industrial	$	15,861	$	—	$	—	$	15,861
Residential real estate		1,332		154		—		1,486
Commercial real estate		—		—		1		1
Total	$	17,193	$	154	$	1	$	17,348

*There were no loans past due 90 days and still accruing interest at December 31, 2021.

Credit quality indicators

As of December 31, 2022, bank loans were primarily extended to non-investment-grade borrowers. Substantially all of these loans align with the U.S. federal bank regulatory agencies’ definition of Pass. Loans meet the definition of Pass when they are performing and/or do not demonstrate adverse characteristics that are likely to result in a credit loss. A loan is determined to be impaired when principal or interest becomes 90 days past due or when collection becomes uncertain. At the time a loan is determined to be impaired, the accrual of interest and amortization of deferred loan origination fees is discontinued (nonaccrual status), and any accrued and unpaid interest income is reversed.

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk. Trends in delinquency ratios are an indicator, among other considerations, of credit risk within our loan portfolio. The level of nonperforming assets represents another indicator of the potential for future credit losses. Accordingly, key metrics we track and use in evaluating the credit quality of our loan portfolio include delinquency and nonperforming asset rates, as well as charge-off rates and our internal risk ratings of the loan portfolio. In general, we are a secured lender. At December 31, 2022 and 2021, 97.5% and 98.5% of our loan portfolio was collateralized, respectively. Collateral is required in accordance with the normal credit evaluation process based upon the creditworthiness of the customer and the credit risk associated with the particular transaction. The Company uses the following definitions for risk ratings:

Pass. A credit exposure rated pass has a continued expectation of timely repayment, all obligations of the borrower are current, and the obligor complies with material terms and conditions of the lending agreement.

Special Mention. Extensions of credit that have potential weakness that deserve management’s close attention and, if left uncorrected, may, at some future date, result in the deterioration of the repayment prospects or collateral position.

Substandard. Obligor has a well-defined weakness that jeopardizes the repayment of the debt and has a high probability of payment default with the distinct possibility that the Company will sustain some loss if noted deficiencies are not corrected.

Doubtful. Inherent weakness in the exposure makes the collection or repayment in full, based on existing facts, conditions, and circumstances, highly improbable, and the amount of loss is uncertain.

Substandard loans are regularly reviewed for impairment. Doubtful loans are considered impaired. When a loan is impaired, the impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

Portfolio segments:

Commercial and industrial (“C&I”). C&I loans primarily include commercial and industrial lending used for general corporate purposes, working capital and liquidity, and “event-driven.” “Event-driven” loans support client merger, acquisition, or recapitalization activities. C&I lending is structured as revolving lines of credit, letter of credit facilities, term loans, and bridge loans. Risk factors considered in determining the allowance for corporate loans include the borrower’s financial strength, seniority of the loan, collateral type, leverage, volatility of collateral value, debt cushion, and covenants.

Fund banking. Fund banking loans primarily include capital call lines of credit, also known as subscription lines of credit. These credit facilities are used by closed-end private investment funds (“Fund”) that have raised capital commitments from limited partners to effectively manage the Fund’s cash and bridge timing between the Fund’s investments and capital calls. The lines of credit are collateralized by a pledge of the limited partner’s contractually callable capital and the general partner’s right to call such capital as permitted in the Fund’s partnership agreement.

Securities-based loans. Securities-based loans allow clients to borrow money against the value of qualifying securities for any suitable purpose other than purchasing, trading, or carrying securities or refinancing margin debt. The majority of consumer loans are structured as revolving lines of credit and letter of credit facilities and are primarily offered through Stifel’s Pledged Asset (“SPA”) program. The allowance methodology for securities-based lending considers the collateral type underlying the loan, including the liquidity and trading volume of the collateral, position concentration, and other borrower specific factors such as personal guarantees.

Real Estate. Real estate loans include residential real estate non-conforming loans, residential real estate conforming loans, commercial real estate, and home equity lines of credit. The allowance methodology related to real estate loans considers several factors, including, but not limited to, loan-to-value ratio, FICO score, home price index, delinquency status, credit limits, and utilization rates.

Construction and land. Short-term loans used to finance the development of a real estate project.

Other. Other loans includes consumer and credit card lending.

Based on the most recent analysis performed, the risk category of our loan portfolio was as follows: (in thousands):

	December 31, 2022
	Pass		Special Mention		Substandard		Doubtful		Total
Residential real estate	$	7,370,717	$	266	$	—	$	688	$	7,371,671
Commercial and industrial		4,743,290		87,761		56,899		9,226		4,897,176
Fund banking		4,182,641		—		—		—		4,182,641
Securities-based loans		2,724,548		—		—		3		2,724,551
Commercial real estate		655,599		20,000		—		—		675,599
Construction and land		593,191		—		—		—		593,191
Home equity lines of credit		106,954		—		—		182		107,136
Other		50,587		—		—		6		50,593
Total	$	20,427,527	$	108,027	$	56,899	$	10,105	$	20,602,558

	December 31, 2021
	Pass		Special Mention		Substandard		Doubtful		Total
Residential real estate	$	5,480,693	$	—	$	84	$	1,249	$	5,482,026
Commercial and industrial		4,056,632		38,000		107,747		6,571		4,208,950
Fund banking		3,136,803		—		—		—		3,136,803
Securities-based loans		2,880,158		—		—		—		2,880,158
Construction and land		476,844		14,240		20,000		—		511,084
Commercial real estate		407,298		2,548		—		1		409,847
Home equity lines of credit		82,479		29		—		—		82,508
Other		32,111		—		—		—		32,111
Total	$	16,553,018	$	54,817	$	127,831	$	7,821	$	16,743,487

	Term Loans Amortized Cost Basis by Origination Year – December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Residential real estate:
Pass	$	2,804,330	$	2,478,052	$	988,361	$	441,509	$	183,115	$	475,350	$	—	$	7,370,717
Special Mention		266		—		—		—		—		—		—		266
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		688		—		688
	$	2,804,596	$	2,478,052	$	988,361	$	441,509	$	183,115	$	476,038	$	—	$	7,371,671
Commercial and industrial:
Pass	$	1,466,275	$	1,477,504	$	328,453	$	293,464	$	328,414	$	275,900	$	573,280	$	4,743,290
Special Mention		20		64,277		—		751		—		10,550		12,163		87,761
Substandard		—		10,739		—		4,366		33,244		—		8,550		56,899
Doubtful		—		—		451		—		8,775		—		—		9,226
	$	1,466,295	$	1,552,520	$	328,904	$	298,581	$	370,433	$	286,450	$	593,993	$	4,897,176
Fund banking:
Pass	$	55,000	$	—	$	1,695	$	—	$	—	$	—	$	4,125,946	$	4,182,641
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
	$	55,000	$	—	$	1,695	$	—	$	—	$	—	$	4,125,946	$	4,182,641
Securities-based loans:
Pass	$	39,027	$	9,080	$	38,800	$	24,278	$	—	$	9,293	$	2,604,070	$	2,724,548
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		3		3
	$	39,027	$	9,080	$	38,800	$	24,278	$	—	$	9,293	$	2,604,073	$	2,724,551
Commercial real estate:
Pass	$	406,580	$	108,265	$	32,510	$	20,828	$	43,479	$	43,937	$	—	$	655,599
Special Mention		20,000		—		—		—		—		—		—		20,000
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
	$	426,580	$	108,265	$	32,510	$	20,828	$	43,479	$	43,937	$	—	$	675,599
Construction and land:
Pass	$	181,214	$	105,940	$	165,914	$	85,053	$	38,482	$	16,588	$	—	$	593,191
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
	$	181,214	$	105,940	$	165,914	$	85,053	$	38,482	$	16,588	$	—	$	593,191
Home equity lines of credit:
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	106,954	$	106,954
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		182		182
	$	—	$	—	$	—	$	—	$	—	$	—	$	107,136	$	107,136
Other:
Pass	$	9,995	$	—	$	10,000	$	—	$	2,431	$	25,393	$	2,768	$	50,587
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		6		6
	$	9,995	$	—	$	10,000	$	—	$	2,431	$	25,393	$	2,774	$	50,593