NOTE 9 – Bank Loans

The following table presents the balance and associated percentage of each major loan category in our loan portfolio at December 31, 2012 and 2011 (in thousands, except percentages):


	December 31, 2012					December 31, 2011
	Balance		Percent			Balance		Percent

Consumer⁽¹⁾	$	425,382		51.6	%	$	371,399		58.2	%
Commercial and industrial		300,034		36.4			186,996		29.3
Residential real estate		65,657		8.0			51,755		8.1
Home equity lines of credit		19,531		2.4			24,086		3.8
Commercial real estate		12,805		1.5			3,107		0.5
Construction and land		510		0.1			514		0.1
		823,919		100.0	%		637,857		100.0	%
Unamortized loan fees, net of origination costs		(1,207)					(421)
Loans in process		1,370					4
Allowance for loan losses		(8,145)					(5,300)
	$	815,937				$	632,140

⁽¹⁾	Includes securities-based loans of $425.3 million and $371.1 million at December 31, 2012 and 2011, respectively.

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


	Year Ended December 31,
	2012		2011		2010

Allowance for loan losses, beginning of period	$	5,300	$	2,331	$	1,702
Provision for loan losses		3,004		2925		460
Charge-offs:
Residential real estate		(254)		(5)		(216)
Commercial real estate		-		(5)		-
Other		-		-		(2)
Total charge-offs		(254)		(10)		(218)
Recoveries		95		54		387
Allowance for loan losses, end of period	$	8,145	$	5,300	$	2,331

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 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. At December 31, 2011, we had $2.5 million of non-accrual loans, which included $0.3 million of trouble 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 years ended December 31, 2012, 2011 and 2010, 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 December 31, 2012 and 2011, approximately 96% and 95% 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 December 31, 2012 and 2011 (in thousands, except rates):


	December 31, 2012					December 31, 2011
	Balance		Percent⁽¹⁾			Balance		Percent⁽¹⁾

Commercial and industrial	$	5,450		36.4	%	$	2,595		29.3	%
Commercial real estate		691		1.5			633		0.5
Consumer		647		51.6			510		58.2
Residential real estate		408		8.0			679		8.1
Home equity lines of credit		195		2.4			-		-
Construction and land		13		0.1			-		-
Qualitative		741		-			883		3.9
	$	8,145		100.0	%	$	5,300		100.0	%

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

At December 31, 2012 and 2011, Stifel Bank had loans outstanding to its executive officers, directors, and their affiliates in the amount of $0.6 million and $0.8 million, respectively, and loans outstanding to other Stifel Financial Corp. executive officers, directors, and their affiliates in the amount of $7.2 million and $4.3 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 December 31, 2012 and 2011, we had mortgage loans held for sale of $214.5 million and $131.8 million, respectively. For the years ended December 31, 2012, 2011 and 2010, we recognized gains of $13.8 million, $9.7 million and $8.3 million, respectively, from the sale of originated loans, net of fees and costs.