NOTE 9 – Bank Loans

The following table presents the balance and associated percentage of each major loan category in our loan portfolio at September 30, 2013 and December 31, 2012 (in thousands, except percentages):


	September 30, 2013					December 31, 2012
	Balance		Percent			Balance		Percent

Consumer⁽¹⁾	$	489,867		45.5	%	$	425,382		51.6	%
Commercial and industrial		481,336		44.7			300,034		36.4
Residential real estate		75,233		7.0			65,657		8.0
Home equity lines of credit		16,856		1.6			19,531		2.4
Commercial real estate		12,516		1.2			12,805		1.5
Construction and land		490		0.0			510		0.1
		1,076,298		100.0	%		823,919		100.0	%
Unamortized loan fees, net of origination costs		(1,752)					(1,207)
Loans in process		(163)					1,370
Allowance for loan losses		(13,233)					(8,145)
	$	1,061,150				$	815,937

⁽¹⁾	Includes securities-based loans of $489.8 million and $425.3 million at September 30, 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 September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012

Allowance for loan losses, beginning of period	$	10,919	$	6,292	$	8,145	$	5,300
Provision for loan losses		2,297		161		5,537		1,300
Charge-offs:
Residential real estate		-		(59)		(501)		(254)
Recoveries		17		-		52		48
Allowance for loan losses, end of period	$	13,233	$	6,394	$	13,233	$	6,394

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 September 30, 2013, we had $14.8 million of non-accrual loans, which included $0.4 million in troubled debt restructurings, for which there was a specific allowance of $2.3 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 and nine months ended September 30, 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 September 30, 2013 and December 31, 2012, 96.5% and 96.1% 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 September 30, 2013 and December 31, 2012 (in thousands, except rates):


	September 30, 2013					December 31, 2012
	Balance		Percent⁽¹⁾			Balance		Percent⁽¹⁾

Commercial and industrial	$	10,344		44.7	%	$	5,450		36.4	%
Consumer		735		45.5			647		51.6
Residential real estate		578		7.0			408		8.0
Commercial real estate		202		1.2			691		1.5
Home equity lines of credit		159		1.6			195		2.4
Construction and land		12		0.0			13		0.1
Qualitative		1,203		-			741		-
	$	13,233		100.0	%	$	8,145		100.0	%

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

At September 30, 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 $5.8 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 September 30, 2013 and December 31, 2012, we had mortgage loans held for sale of $75.4 million and $214.5 million, respectively. For the three months ended September 30, 2013 and 2012, we recognized gains of $2.2 million and $3.6 million, respectively, from the sale of originated loans, net of fees and costs. For the nine months ended September 30, 2013 and 2012, we recognized gains of $10.1 million and $9.6 million, respectively, from the sale of originated loans, net of fees and costs.