On January 12, 2000, the Company completed the merger of Hanifen, Imhoff Inc. ("HII"), a Denver-based investment banking firm. The transaction has been accounted for as a purchase and provides for a tax-free exchange of 516,984 shares of the Company's stock (valued at $4,745,913) for all of the outstanding shares of HII. The purchase price has been allocated to net tangible and intangible assets acquired based on their estimated fair market values. The remaining purchase price of $3.8 million has been recorded as goodwill, which will be amortized over 25 years. The exchange ratio was calculated using the respective book values of the Company and HII. The total shares issued in the transaction were based upon the final closing equity of HII at December 31, 1999. 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. The merger added 54 investment bankers, research analysts, institutional sales associates, and traders to the capital markets segment, as well as 24 administrative and technical support associates.

The following is unaudited pro forma financial data for the combined operations, assuming the transaction had taken place on January 1, 1999.

The above pro forma statements do not purport to be indicative of the results, which actually would have occurred had the acquisition been made on January 1, 1999.

On October 25, 2000, the Company's Board of Directors declared a regular quarterly cash dividend of $0.03 per share, payable on November 22, 2000 to stockholders of record as of the close of business on November 8, 2000.

The following table summarizes the changes in the major categories of revenue and expense for

the three and nine months ended September 2000 as compared to September 1999.

The Company recorded net earnings of $8.1 million or $1.06 per diluted share on total revenues of $148.8 million for the nine months ended September 30, 2000 compared to net earnings of $5.5 million or $0.78 per diluted share on total revenues of $110.4 million for the same period one year earlier.

The Company's continued expansion of its Private Client Group, which began in 1998, was evident during the first nine months of 2000 when compared to the same period one year earlier. The Company opened 12 private client branch offices, and added 112 investment executives, and 30 independent contractors. Despite the volatility in the market place, investor demand for equity products remained strong as evidenced by the increased trading volumes on the two major stock exchanges. Trading volumes on the New York Stock Exchange ("NYSE") and NASDAQ from September 30, 1999 to September 30, 2000, increased 27% and 60%, respectively, which contributed to a 56% increase in the number of customer trades by the Company. Additionally, the merger of HII contributed to increased revenue production, most significantly in principal transactions and investment banking, which primarily consists of corporate finance advisory fees.

Fueled by the Company's continued expansion, low inflation and strong markets, all categories of revenues increased contributing to a total revenue increase of $38.4 million (35%).

Commission revenues rose due to private client expansion and increased trading volumes as referred to above. The main components of the increase were from sales of over-the-counter equities, listed options, insurance products, and mutual funds.

Revenues from principal transactions increased primarily due to the addition of HII, the increased sales of unit trusts and increased sales of nontaxable fixed income products principally in the first half of the year when higher interest rates made these investments more attractive.

Investment banking revenues increased due to an increase in corporate finance advisory fees, and municipal underwriting fees.

Interest revenues rose as a result of a 28% increase in the number of margin accounts with a 63% increase in average borrowings by customers, combined with increases in the rates charged to those customers.

Other revenues increased principally due to growth in managed account fees, which increased due to a 47 % increase in the average number of accounts and an 8% increase in the average total assets in these programs, unrealized gains recorded by a non-broker dealer subsidiary of the Company and receipts of death benefit proceeds from insurance policies. This increase was partially offset by a decrease in investment advisory fees due to the sale of Todd Investment Advisors and the gain recorded on the sale of Todd in the second quarter of 1999.

Total expenses increased $34.0 million (33%). All expense categories increased over the same period one-year earlier due to the continued expansion of the private client group and the merger of HII unless explained otherwise.

Employee compensation and benefits, a significant portion of the Company's total expense, increased $19.2 million (28%) in the first nine months of 2000. The increase in the variable component of compensation of $15.0 million (30%) grew in conjunction with increases in revenues and profitability. The increase in the fixed component of compensation of $4.2 million (22%) essentially resulted from increased employment due to the private client group expansion and the merger of HII.

Commission and floor brokerage, communications and office supplies, and occupancy and equipment rental increased $4.2 million (25%) as a result of higher business volume, continued branch office expansion, and increased expenditures on technology.

Interest expense rose due to increased borrowings by the Company to finance customer margin accounts, combined with increases in the rates paid on those borrowings.

Other operating expenses increased principally due to increased employment recruiting fees in conjunction with increased advertising and travel and promotional expenses resulting from private client group expansion and the merger of HII.

The Company recorded net earnings of $2.3 million or $0.30 per diluted share on total revenues of $48.7 million for the third quarter ended September 30, 2000 compared to net earnings of $1.4 million or $0.21 per diluted share on total revenues of $35.5 million for the same period one year earlier. The explanation of revenue and expense fluctuations presented for the nine-month period are generally applicable to the three-month operations.

The majority of the Company's assets are highly liquid, consisting mainly of cash or assets readily convertible into cash. These assets are financed primarily by the Company's equity capital, customer credit balances, short-term bank loans, proceeds from securities lending, long term notes payable, and other payables. Changes in securities market volumes, related customer borrowing demands, underwriting activity, and levels of securities inventory affect the amount of the Company's financing requirements.

During the first nine months of 2000, the Company repurchased 144,124 shares, using existing board authorizations, at an average price of $10.23 per share, to meet obligations under the Company's employee benefit plans.

On January 12, 2000 the Company completed the merger of HII, a Denver-based investment banking firm. The merger was completed with the tax-free exchange of 516,984 shares of the Company for all of the outstanding shares of HII.

Management believes the funds from operations, available informal short-term credit arrangements, and long-term borrowings, at September 30, 2000, will provide sufficient resources to meet the present and anticipated financing needs.

Stifel, Nicolaus & Company, Incorporated, the Company's principal broker-dealer subsidiary, is subject to certain requirements of the Securities and Exchange Commission with regard to liquidity and capital requirements. At September 30, 2000, Stifel, Nicolaus had net capital of approximately $37.2 million which exceeded the minimum net capital requirements by approximately $28.5 million.

The Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to the Company and those specific to the industry which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, general economic conditions, actions of competitors, regulatory actions, changes in legislation and technology changes. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Quarterly Report. The Company does not undertake any obligation to publicly update any forward-looking statements.

There have been no material changes from the information provided in the Company's Annual Report on Form 10-K for the year ended December 31, 1999.

There have been no material changes, except as reported in Item 6(b) "Report on Form 8-K," in the legal proceedings previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Such information is hereby incorporated by reference.

1. Exhibit No. (Reference to Item 601(b)of Regulation S-K) 27 Financial Data Schedule (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis, and Retrieval [EDGAR] purposes only)

2. Report(s) on Form 8-K

Pursuant to the requirement of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.