NOTE 8 – Bank Loans

The following table presents the balance and associated percentage of each major loan category in our loan portfolio at March 31, 2013 and December 31, 2012 (in thousands, except percentages):


	March 31, 2013					December 31, 2012
	Balance		Percent			Balance		Percent

Consumer⁽¹⁾	$	426,015		47.5	%	$	425,382		51.6	%
Commercial and industrial		370,817		41.3			300,034		36.4
Residential real estate		69,481		7.7			65,657		8.0
Home equity lines of credit		18,114		2.0			19,531		2.4
Commercial real estate		12,720		1.4			12,805		1.5
Construction and land		510		0.1			510		0.1
		897,657		100.0	%		823,919		100.0	%
Unamortized loan fees, net of origination costs		(1,654)					(1,207)
Loans in process		50					1,370
Allowance for loan losses		(9,406)					(8,145)
	$	886,647				$	815,937

⁽¹⁾	Includes securities-based loans of $425.9 million and $425.3 million at March 31, 2013 and December 31, 2012, respectively.

Changes in the allowance for loan losses for the periods presented were as follows (in thousands):


	Three Months Ended March 31,
	2013		2012

Allowance for loan losses, beginning of period	$	8,145	$	5,300
Provision for loan losses		1,720		543
Charge-offs:
Residential real estate		(484)		(109)
Recoveries		25		47
Allowance for loan losses, end of period	$	9,406	$	5,781

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 (“non-accrual status”), and any accrued and unpaid interest income is reversed. At March 31, 2013, we had $1.1 million of non-accrual loans, which included $0.4 million in troubled debt restructurings, for which there was a specific allowance of $0.3 million. At December 31, 2012, we had $1.8 million of non-accrual loans, which included $1.6 million in troubled debt restructurings, for which there was a specific allowance of $0.6 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 three months ended March 31, 2013 and 2012, were insignificant to the consolidated financial statements.

Credit Quality

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 portfolios. 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 March 31, 2013 and December 31, 2012, approximately 90% and 96% 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 following is a breakdown of the allowance for loan losses by type for as of March 31, 2013 and December 31, 2012 (in thousands, except rates):


	March 31, 2013					December 31, 2012
	Balance		Percent⁽¹⁾			Balance		Percent⁽¹⁾

Commercial and industrial	$	6,890		41.3	%	$	5,450		36.4	%
Consumer		639		47.5			647		51.6
Residential real estate		423		7.7			408		8.0
Commercial real estate		356		1.4			691		1.5
Home equity lines of credit		212		2.0			195		2.4
Construction and land		13		0.1			13		0.1
Qualitative		873		-			741		-
	$	9,406		100.0	%	$	8,145		100.0	%

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

At March 31, 2013 and December 31, 2012, Stifel Bank had loans outstanding to its executive officers, directors, and their affiliates in the amount of $0.6 million and $0.6 million, respectively, and loans outstanding to other Stifel Financial Corp. executive officers, directors, and their affiliates in the amount of $5.2 million and $7.2 million, respectively. Such loans and other extensions of credit were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral requirements) as those prevailing at the time for comparable transactions with other persons.

At March 31, 2013 and December 31, 2012, we had mortgage loans held for sale of $165.7 million and $214.5 million, respectively. For the three months ended March 31, 2013 and 2012, we recognized gains of $4.6 million and $2.8 million, respectively, from the sale of originated loans, net of fees and costs.