##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from      to
 Commission File Number: 001-33138
 KBW, INC.
  Delaware
    
    13-4055775(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 787 Seventh Avenue, New York, New York 10019
 Registrants telephone number: (212) 887-7777
 þ o
 o o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PageNumberAVAILABLE INFORMATION
    
    
    1PART I. FINANCIAL INFORMATION
    
    
    2ITEM 1. Financial Statements
    
    
    2Consolidated Statements of Financial ConditionJune 30, 2009 (Unaudited) and December 31, 2008
    
    
    2Consolidated Statements of OperationsThree and Six Months ended June 30, 2009 and 2008 (Unaudited)
    
    
    3Consolidated Statement of Changes in Stockholders EquitySix Months ended June 30, 2009 (Unaudited)
    
    
    4Consolidated Statements of Cash FlowsSix Months ended June 30, 2009 and 2008 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    19ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34ITEM 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATION
    
    
    37ITEM 1. Legal Proceedings
    
    
    37ITEM 1A. Risk Factors
    
    
    37ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37ITEM 3. Defaults Upon Senior Securities
    
    
    37ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    38ITEM 5. Other Information
    
    
    38ITEM 6. Exhibits
    
    
    38SIGNATURES
    
    
    39EXHIBIT INDEX
    
    
    40EX-31.1EX-31.2EX-32.1EX-32.2




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AVAILABLE INFORMATION
   th
 1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 KBW, INC. AND SUBSIDIARIES  
 Consolidated Statements of Financial Condition  (Dollars in thousands)
 June 30,2009
    
    
    December 31,(unaudited)
    
    
    2008ASSETSCash and cash equivalents
    
    $
    229,904
    
    
    $
    194,981Financial instruments owned, at fair value:Equities
    
    
    43,066
    
    
    
    41,765Corporate and other debt
    
    
    44,530
    
    
    
    53,879Mortgage-backed securities
    
    
    29,545
    
    
    
    Other investments
    
    
    37,034
    
    
    
    34,893154,175
    
    
    
    130,537Receivables from clearing brokers
    
    
    62,266
    
    
    
    130,682Accounts receivable
    
    
    19,617
    
    
    
    19,391Income taxes receivable
    
    
    29,852
    
    
    
    33,270Furniture, equipment and leasehold improvements,
at cost, less accumulated depreciation and amortization
of $24,058 in 2009 and $21,546 in 2008
    
    
    19,103
    
    
    
    18,895Other assets
    
    
    44,578
    
    
    
    43,710Total assets
    
    $
    559,495
    
    
    $
    571,466LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Financial
instruments sold, not yet purchased, at fair valueEquities
    
    $
    19,962
    
    
    $
    11,162Payable to clearing broker
    
    
    19,627
    
    
    
    Short-term borrowings
    
    
    
    
    
    
    31,547Accounts payable, accrued expenses, and other liabilities
    
    
    84,479
    
    
    
    122,070Income taxes payable
    
    
    10,369
    
    
    
    9,956Total liabilities
    
    
    134,437
    
    
    
    174,735Stockholders equity:Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    302
    
    
    
    298Paid-in capital
    
    
    151,894
    
    
    
    137,618Retained earnings
    
    
    282,962
    
    
    
    275,019Notes receivable from stockholders
    
    
    (609
    )
    
    
    (2,225
    )Accumulated other comprehensive loss
    
    
    (9,491
    )
    
    
    (13,979
    )Total stockholders equity
    
    
    425,058
    
    
    
    396,731Total liabilities and stockholders equity
    
    $
    559,495
    
    
    $
    571,466
  2




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KBW, INC. AND SUBSIDIARIES  
 Consolidated Statements of Operations  (Dollars in thousands, except per share information)  (unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Investment banking
    
    $
    42,313
    
    
    $
    47,253
    
    
    $
    69,173
    
    
    $
    90,340Commissions
    
    
    35,852
    
    
    
    45,601
    
    
    
    71,871
    
    
    
    98,367Principal transactions, net
    
    
    23,580
    
    
    
    (29,037
    )
    
    
    27,696
    
    
    
    (59,137
    )Interest and dividend income
    
    
    2,037
    
    
    
    6,368
    
    
    
    3,775
    
    
    
    14,460Investment advisory fees
    
    
    320
    
    
    
    287
    
    
    
    633
    
    
    
    593Other
    
    
    994
    
    
    
    699
    
    
    
    4,224
    
    
    
    1,400Total revenues
    
    
    105,096
    
    
    
    71,171
    
    
    
    177,372
    
    
    
    146,023Expenses:Compensation and benefits
    
    
    65,479
    
    
    
    57,000
    
    
    
    111,146
    
    
    
    116,933Occupancy and equipment
    
    
    5,442
    
    
    
    4,539
    
    
    
    10,601
    
    
    
    9,282Communications and data processing
    
    
    7,242
    
    
    
    6,919
    
    
    
    13,902
    
    
    
    13,342Brokerage and clearance
    
    
    3,602
    
    
    
    5,887
    
    
    
    7,484
    
    
    
    13,040Business development
    
    
    3,213
    
    
    
    4,128
    
    
    
    6,245
    
    
    
    7,917Interest
    
    
    57
    
    
    
    1,176
    
    
    
    226
    
    
    
    3,244Other
    
    
    6,452
    
    
    
    6,291
    
    
    
    12,229
    
    
    
    10,471Total expenses
    
    
    91,487
    
    
    
    85,940
    
    
    
    161,833
    
    
    
    174,229Income / (loss) before income taxes
    
    
    13,609
    
    
    
    (14,769
    )
    
    
    15,539
    
    
    
    (28,206
    )Income tax expense / (benefit)
    
    
    6,396
    
    
    
    (5,031
    )
    
    
    7,596
    
    
    
    (10,969
    )Net income / (loss)
    
    $
    7,213
    
    
    $
    (9,738
    )
    
    $
    7,943
    
    
    $
    (17,237
    )Earnings per common share:Basic (Note
10)
    
    $
    0.20
    
    
    $
    (0.32
    )
    
    $
    0.22
    
    
    $
    (0.56
    )Diluted  (Note
10)
    
    $
    0.20
    
    
    $
    (0.32
    )
    
    $
    0.22
    
    
    $
    (0.56
    )Weighted average number
of common shares outstanding:Basic
    
    
    31,405,229
    
    
    
    30,800,637
    
    
    
    31,380,008
    
    
    
    30,767,838Diluted
    
    
    31,405,229
    
    
    
    30,800,637
    
    
    
    31,380,008
    
    
    
    30,767,838
  3




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KBW, INC. AND SUBSIDIARIES  
 Consolidated Statement of Changes in Stockholders Equity  (Dollars in thousands, except per share information)  (unaudited)
 Notes
    
    
    AccumulatedReceivable
    
    
    Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    from
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Stockholders
    
    
    (Loss) / Income
    
    
    EquityBalance at December 31, 2008
    
    $
    
    
    
    $
    298
    
    
    $
    137,618
    
    
    $
    275,019
    
    
    $
    (2,225
    )
    
    $
    (13,979
    )
    
    $
    396,731Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,943
    
    
    
    
    
    
    
    
    
    
    
    7,943Other comprehensive
income, currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,488
    
    
    
    4,488Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,431Amortization of stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    20,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,137Cancellation of 237,524
shares of restricted stock in
satisfaction of withholding
tax requirements
    
    
    
    
    
    
    (2
    )
    
    
    (4,601
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,603
    )Issuance of 605,261 shares of
common stock
    
    
    
    
    
    
    6
    
    
    
    15,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,020Restricted stock units
converted
    
    
    
    
    
    
    
    
    
    
    (1,214
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,214
    )Stock-based awards vested
    
    
    
    
    
    
    
    
    
    
    (13,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,700
    )Tax shortfall related to
stock-based awards
    
    
    
    
    
    
    
    
    
    
    (1,360
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,360
    )Repayment of notes
receivable from stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,616
    
    
    
    
    
    
    
    1,616Balance at June 30, 2009
    
    $
    
    
    
    $
    302
    
    
    $
    151,894
    
    
    $
    282,962
    
    
    $
    (609
    )
    
    $
    (9,491
    )
    
    $
    425,058
 Description of preferred stock and details:
 Number of SharesPar Value
    
    Authorized
    
    Issued
    
    OutstandingJune 30, 2009
    
    $
    0.01
    
    
    
    10,000,000
    
    
    
    
    
    
    
    December 31, 2008
    
    $
    0.01
    
    
    
    10,000,000
    
    
    
    
    
    
    
    Description of common stock and details:Number of SharesPar Value
    
    Authorized
    
    Issued(*)
    
    Outstanding(*)June 30, 2009
    
    $
    0.01
    
    
    
    140,000,000
    
    
    
    30,201,553
    
    
    
    30,201,553December 31, 2008
    
    $
    0.01
    
    
    
    140,000,000
    
    
    
    29,833,816
    
    
    
    29,833,816
 
 (*)
    
    These share amounts exclude
legally vested restricted stock units.  4




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KBW, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows  (Dollars in thousands)  (unaudited)
 Six Months Ended June 30,2009
    
    
    2008Cash flows from operating activities:Net income / (loss)
    
    $
    7,943
    
    
    $
    (17,237
    )Adjustments to reconcile net income / (loss) to net cash provided by / (used in)
operating activities:Amortization of stock-based compensation
    
    
    20,137
    
    
    
    19,102Depreciation and amortization
    
    
    2,396
    
    
    
    2,413Deferred income tax benefit
    
    
    (106
    )
    
    
    (8,935
    )(Increase) decrease in operating assets:Financial instruments owned, at fair value
    
    
    (23,490
    )
    
    
    121,151Securities purchased under resale agreements
    
    
    
    
    
    
    23,846Receivables from clearing brokers
    
    
    68,669
    
    
    
    58,695Accounts receivable
    
    
    124
    
    
    
    (13,172
    )Income taxes receivable
    
    
    3,418
    
    
    
    Other assets
    
    
    (636
    )
    
    
    (6,207
    )Increase (decrease) in operating liabilities:Financial instruments sold, not yet purchased, at fair value
    
    
    8,800
    
    
    
    (41,279
    )Securities sold under repurchase agreements
    
    
    
    
    
    
    (64,386
    )Payable to clearing broker
    
    
    19,627
    
    
    
    Short-term borrowings
    
    
    (31,547
    )
    
    
    (4,020
    )Accounts payable, accrued expenses and other liabilities
    
    
    (38,932
    )
    
    
    (98,272
    )Income taxes payable
    
    
    400
    
    
    
    1,231Net cash provided by / (used in) operating activities
    
    
    36,803
    
    
    
    (27,070
    )Cash flows from investing activities:Purchase of furniture, equipment and leasehold improvements
    
    
    (2,597
    )
    
    
    (1,758
    )Net cash used in investing activities
    
    
    (2,597
    )
    
    
    (1,758
    )Cash flows from financing activities:Issuance of shares of common stock
    
    
    106
    
    
    
    Cancellation of restricted stock in satisfaction of withholding
tax
    
    
    (4,603
    )
    
    
    (2,810
    )Excess (shortfall) net tax benefit related to stock-based awards
    
    
    (1,360
    )
    
    
    113Repayment of notes receivable from stockholders
    
    
    1,616
    
    
    
    2,969Net cash (used in) / provided by financing activities
    
    
    (4,241
    )
    
    
    272Currency adjustment:Effect of exchange rate changes on cash
    
    
    4,958
    
    
    
    160Net increase / (decrease) in cash and cash equivalents
    
    
    34,923
    
    
    
    (28,396
    )Cash and cash equivalents at the beginning of the period
    
    
    194,981
    
    
    
    194,358Cash and cash equivalents at the end of the period
    
    $
    229,904
    
    
    $
    165,962Supplemental disclosures of cash flow information:Cash paid during the period for:Income taxes
    
    $
    6,122
    
    
    $
    531Interest
    
    $
    296
    
    
    $
    4,385
  5




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KBW, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Dollars in thousands, except per share information)
 (1) Organization and Basis of Presentation
   (2) Summary of Significant Accounting Policies
 (a) Principles of Consolidation
  Consolidated Financial Statements Consolidation of Variable Interest Entities  an interpretation of ARB No. 51
 Determining Whether a
General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 (b) Use of Estimates
  (c) Cash and Cash Equivalents
  6




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 (d) Fair Value of Financial Instruments
 Fair Value
Measurement Issues
Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in
Energy Trading and Risk Management Activities,
  Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
 The Fair Value Option for Financial Assets and Financial Liabilities
 (e) Securities Purchased Under Resale Agreements and Securities Sold Under Repurchase
Agreements
   7




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 (f) Receivables From and Payable to Clearing Brokers
  (g) Furniture, Equipment and Leasehold Improvements
  (h) Revenue Recognition
 Investment Banking
    
    
    Underwriting revenues are recognized on trade date, net of related syndicate expenses,
at the time the underwriting is completed. In syndicated underwritten transactions,
management estimates the Companys share of transaction-related expenses incurred by the
syndicate, and the Company recognizes revenue net of such expense. On final settlement,
the Company adjusts these amounts to reflect the actual transaction-related expenses and
resulting underwriting fee.
    
    Private placement revenues are recorded when the services related to the underlying
transaction are completed under the terms of the engagement. This is generally the
closing date of the transaction.
  Commissions
  Principal transactions
  Interest and dividend income
  8




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 (i) Stock-Based Compensation
  (j) Income Taxes
  Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109 .
 (k) Earnings Per Common Share (EPS)
  Determining Whether
Instruments Granted in Share-Based Payment Transactions Are
Participating Securities. Earnings
per Share.
 (l) Foreign Currency Translation
  (3) Financial Instruments
 Fair
Value Measurement
  9




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 Level 1
    
    Quoted market prices in active markets for identical assets or liabilities.Level 2
    
    Observable market based inputs or unobservable inputs that are corroborated
by market data.Level 3
    
    Unobservable inputs that are not corroborated by market data.
        10




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 Assets at Fair Value as of June 30, 2009
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFinancial instruments owned, at fair value:Equities
    
    $
    27,534
    
    
    $
    18
    
    
    $
    15,247
    
    
    $
    42,799Corporate and other debt:Corporate debt
    
    
    
    
    
    
    13,254
    
    
    
    501
    
    
    
    13,755CDOs
    
    
    
    
    
    
    5,415
    
    
    
    1
    
    
    
    5,416Other debt obligations(1)
    
    
    
    
    
    
    
    
    
    
    25,359
    
    
    
    25,359Total corporate and other debt
    
    
    
    
    
    
    18,669
    
    
    
    25,861
    
    
    
    44,530Mortgage-backed securities  residential
    
    
    
    
    
    
    29,545
    
    
    
    
    
    
    
    29,545Other investments(2)
    
    
    
    
    
    
    
    
    
    
    37,034
    
    
    
    37,034Total non-derivative trading assets
    
    
    27,534
    
    
    
    48,232
    
    
    
    78,142
    
    
    
    153,908Derivative financial instruments
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    267Total financial instruments owned
    
    $
    27,801
    
    
    $
    48,232
    
    
    $
    78,142
    
    
    $
    154,175
 
 (1)
    
    Principally consists of bank and insurance company trust preferred and capital securities.(2)
    
    Principally consists of investments
in limited and general partnership interests. Liabilities at Fair Value as of June 30, 2009
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFinancial instruments sold, not yet
purchased, at fair value:Equities
    
    $
    19,745
    
    
    $
    
    
    
    $
    
    
    
    $
    19,745Total
non-derivative trading liabilities
    
    
    19,745
    
    
    
    
    
    
    
    
    
    
    
    19,745Derivative financial instruments
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    217Total financial instruments sold, not yet purchased
    
    $
    19,962
    
    
    $
    
    
    
    $
    
    
    
    $
    19,962
 11




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 Assets at Fair Value as of December 31, 2008
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFinancial instruments owned, at fair value:Equities
    
    $
    19,169
    
    
    $
    7,031
    
    
    $
    14,722
    
    
    $
    40,922Corporate and other debt
    
    
    
    
    
    
    21,191
    
    
    
    32,688
    
    
    
    53,879Other investments
    
    
    
    
    
    
    
    
    
    
    34,893
    
    
    
    34,893Total non-derivative trading assets
    
    
    19,169
    
    
    
    28,222
    
    
    
    82,303
    
    
    
    129,694Derivative financial instruments
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    843Total financial instruments owned
    
    $
    20,012
    
    
    $
    28,222
    
    
    $
    82,303
    
    
    $
    130,537
 Liabilities at Fair Value as of December 31, 2008
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFinancial instruments sold, but not yet purchased,
at fair value:Equities
    
    $
    10,701
    
    
    $
    
    
    
    $
    
    
    
    $
    10,701Total non-derivative trading liabilities
    
    
    10,701
    
    
    
    
    
    
    
    
    
    
    
    10,701Derivative financial instruments
    
    
    461
    
    
    
    
    
    
    
    
    
    
    
    461Total financial instruments sold, not yet purchased
    
    $
    11,162
    
    
    $
    
    
    
    $
    
    
    
    $
    11,162
    12




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##### Table of Contents



KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 Level 3 Financial Assets
 Changes inunrealized gains andTotal gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) included inand (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    earnings related toThree months ended
    
    Balance as of March
    
    
    (realized and
    
    
    Purchases/
    
    
    Transfers in/out
    
    
    Balance as of
    
    
    assets still held atJune 30, 2009
    
    31, 2009
    
    
    unrealized)
    
    
    (sales), net
    
    
    of Level 3
    
    
    June 30, 2009
    
    
    reporting dateEquities
    
    $
    15,128
    
    
    $
    119
    
    
    $
    
    
    
    $
    
    
    
    $
    15,247
    
    
    $
    119Corporate debt
    
    
    500
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    501
    
    
    
    CDOs
    
    
    1
    
    
    
    19
    
    
    
    (19
    )
    
    
    
    
    
    
    1
    
    
    
    Other debt obligations
    
    
    27,295
    
    
    
    3,708
    
    
    
    (5,644
    )
    
    
    
    
    
    
    25,359
    
    
    
    8,208Other investments
    
    
    36,252
    
    
    
    946
    
    
    
    (164
    )
    
    
    
    
    
    
    37,034
    
    
    
    1,032Total Level 3 Financial Assets
    
    $
    79,176
    
    
    $
    4,793
    
    
    $
    (5,827
    )
    
    $
    
    
    
    $
    78,142
    
    
    $
    9,359
 Changes inunrealized gains andTotal gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) included inand (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    earnings related toThree months ended
    
    Balance as of March
    
    
    (realized and
    
    
    Purchases/
    
    
    Transfers in/out
    
    
    Balance as of
    
    
    assets still held atJune 30, 2008
    
    31, 2008
    
    
    unrealized)
    
    
    (sales), net
    
    
    of Level 3
    
    
    June 30, 2008
    
    
    reporting dateNon-derivative trading assets
    
    $
    166,245
    
    
    $
    (19,759
    )
    
    $
    (10,861
    )
    
    $
    
    
    
    $
    135,625
    
    
    $
    (18,658
    )
 Changes inunrealized gains andTotal gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) included inand (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    earnings related toSix months ended
    
    Balance as of
    
    
    (realized and
    
    
    Purchases/
    
    
    Transfers in/out
    
    
    Balance as of
    
    
    assets still held atJune 30, 2009
    
    December 31, 2008
    
    
    unrealized)
    
    
    (sales), net
    
    
    of Level 3
    
    
    June 30, 2009
    
    
    reporting dateEquities
    
    $
    14,722
    
    
    $
    (239
    )
    
    $
    
    
    
    $
    764
    
    
    $
    15,247
    
    
    $
    (239
    )Corporate debt
    
    
    1,581
    
    
    
    (1,080
    )
    
    
    
    
    
    
    
    
    
    
    501
    
    
    
    (1,080
    )CDOs
    
    
    44
    
    
    
    21
    
    
    
    (64
    )
    
    
    
    
    
    
    1
    
    
    
    (26
    )Other debt obligations
    
    
    31,063
    
    
    
    (60
    )
    
    
    (5,644
    )
    
    
    
    
    
    
    25,359
    
    
    
    4,440Other investments
    
    
    34,893
    
    
    
    1,121
    
    
    
    1,020
    
    
    
    
    
    
    
    37,034
    
    
    
    1,033Total Level 3 Financial Assets
    
    $
    82,303
    
    
    $
    (237
    )
    
    $
    (4,688
    )
    
    $
    764
    
    
    $
    78,142
    
    
    $
    4,128
 Changes inunrealized gains andTotal gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) included inand (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    earnings related toSix months ended
    
    Balance as of
    
    
    (realized and
    
    
    Purchases/
    
    
    Transfers in/out
    
    
    Balance as of
    
    
    assets still held atJune 30, 2008
    
    December 31, 2007
    
    
    unrealized)
    
    
    (sales), net
    
    
    of Level 3
    
    
    June 30, 2008
    
    
    reporting dateNon-derivative trading assets
    
    $
    171,816
    
    
    $
    (30,517
    )
    
    $
    427
    
    
    $
    (6,101
    )
    
    $
    135,625
    
    
    $
    (31,870
    )
  13




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
    (4) Short-Term Borrowings
  (5) Commitments and Contingencies
 (a) Leases
  (b) Litigation
 Accounting for Contingencies
    14




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
  (c) Limited Partnership Commitments
  (6) Financial Instruments with Off-Balance-Sheet Risk
   (a) Broker-Dealer Activities
  (b) Derivative Financial Instruments
   15




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##### Table of Contents



KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
  Current
    
    Average
    
    End ofNotional
    
    Fair
    
    PeriodValue
    
    Value
    
    Fair ValueJune 30, 2009:Purchased options
    
    $
    14,421
    
    
    $
    415
    
    
    $
    267Written options
    
    $
    4,879
    
    
    $
    785
    
    
    $
    217December 31, 2008:Purchased options
    
    $
    7,721
    
    
    $
    557
    
    
    $
    843Written options
    
    $
    6,100
    
    
    $
    344
    
    
    $
    461
  Three Months Ended
    
    
    Six Months EndedType of Instrument
    
    June 30, 2009
    
    
    June 30, 2009Equities
    
    $
    6,666
    
    
    $
    5,699Corporate and other debt
    
    
    9,288
    
    
    
    11,069Mortgage-backed securities
    
    
    6,347
    
    
    
    11,154Other investments
    
    
    1,279
    
    
    
    (226
    )Total
    
    $
    23,580
    
    
    $
    27,696
  (7) Concentrations of Credit Risk
   (8) Notes Receivable from Stockholders
  (9) Stock-Based Compensation
  16




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##### Table of Contents



KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
  (10) Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income / (loss)
    
    $
    7,213
    
    
    $
    (9,738
    )
    
    $
    7,943
    
    
    $
    (17,237
    )Less: Allocation of earnings to participating securities(1)
    
    
    929
    
    
    
    
    
    
    
    973
    
    
    
    Net income / (loss) applicable to common shareholders
    
    
    6,284
    
    
    
    (9,738
    )
    
    
    6,970
    
    
    
    (17,237
    )Weighted average number of common shares outstanding(2):Basic
    
    
    31,405,229
    
    
    
    30,800,637
    
    
    
    31,380,008
    
    
    
    30,767,838Effect of dilutive securities  restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted
    
    
    31,405,229
    
    
    
    30,800,637
    
    
    
    31,380,008
    
    
    
    30,767,838Earnings per common share(1)(2):Basic
    
    $
    0.20
    
    
    $
    (0.32
    )
    
    $
    0.22
    
    
    $
    (0.56
    )Diluted
    
    $
    0.20
    
    
    $
    (0.32
    )
    
    $
    0.22
    
    
    $
    (0.56
    )
 
 (1)
    
    In accordance with EITF 03-6-1, unvested share-based payment awards that have
non-forfeitable rights to dividends or dividend equivalents are to be treated as a separate class
of securities in calculating EPS.
The impact of adopting EITF 03-6-1 to basic EPS for the three and six months ended June 2009 was a
reduction of $0.03 and $0.03 per common share of EPS, which were $0.23 and $0.25, respectively, before such reduction. The impact of adopting
EITF 03-6-1 to diluted earnings per common share for the three and six months ended was a reduction
of $0.02 and $0.02 per common share of EPS, which were $0.22 and $0.24, respectively, before such reduction. There was no
impact on EPS amounts for the three and six month periods ended 2008.(2)
    
    In accordance with SFAS No. 128, basic and diluted common shares outstanding are
equal for the three and six months ended June 30, 2009 and 2008 as the inclusion of incremental
participating securities would be anti-dilutive. (11) Income Taxes
  
    
    The Companys gross unrecognized tax benefits, excluding interest, have not changed
significantly since December 31, 2008.
    
    The Company classifies interest and penalties, if any, related to tax uncertainties as
income tax expenses. As of June 30, 2009, this amount had not changed significantly
since December 31, 2008.
    
    The Company and its subsidiaries file federal consolidated and various state, local and
foreign tax returns. The federal income tax returns have been audited through 2004.
Various state, local and foreign returns are subject to audits by tax authorities
beginning with the 2002 tax year. The settlement of certain state and local audits within
the next 12 months, if any, is not anticipated to have a significant impact on the
Companys results or financial position.
 (12) Industry Segment Data
 Disclosures about Segments of an
Enterprise and Related Information
 17




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KBW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
(Dollars in thousands, except per share information)
 (13) Net Capital Requirement
  June 30, 2009Net Capital
    
    $
    118,959Excess
    
    $
    115,121
  (14) Recent Accounting Developments
 Accounting for Transfers of Financial Assets-an
amendment of FASB Statement No. 140 Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities
 (15) Subsequent Events
  18




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##### Table of Contents



ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our unaudited consolidated
financial statements and the related notes included elsewhere in this report.
 Cautionary Statement Regarding Forward-Looking Statements
   Overview
       19




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Business Environment
     20




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Results of Operations
 Three Months Ended June 30, 2009 Compared with Three Months Ended June 30, 2008
 Overview
    Three Months EndedJune 30,
    
    
    Period-to-Period2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(unaudited)Revenues:Investment banking
    
    $
    42,313
    
    
    $
    47,253
    
    
    $
    (4,940
    )
    
    
    (10.5
    )%Commissions
    
    
    35,852
    
    
    
    45,601
    
    
    
    (9,749
    )
    
    
    (21.4
    )Principal transactions, net
    
    
    23,580
    
    
    
    (29,037
    )
    
    
    52,617
    
    
    
    N/MInterest and dividend income
    
    
    2,037
    
    
    
    6,368
    
    
    
    (4,331
    )
    
    
    (68.0
    )Investment advisory fees
    
    
    320
    
    
    
    287
    
    
    
    33
    
    
    
    11.5Other
    
    
    994
    
    
    
    699
    
    
    
    295
    
    
    
    42.2Total revenues
    
    
    105,096
    
    
    
    71,171
    
    
    
    33,925
    
    
    
    47.7Expenses:Compensation and benefits
    
    
    65,479
    
    
    
    57,000
    
    
    
    8,479
    
    
    
    14.9Non-compensation expenses:Occupancy and equipment
    
    
    5,442
    
    
    
    4,539
    
    
    
    903
    
    
    
    19.9Communications and
data processing
    
    
    7,242
    
    
    
    6,919
    
    
    
    323
    
    
    
    4.7Brokerage and clearance
    
    
    3,602
    
    
    
    5,887
    
    
    
    (2,285
    )
    
    
    (38.8
    )Business development
    
    
    3,213
    
    
    
    4,128
    
    
    
    (915
    )
    
    
    (22.2
    )Interest
    
    
    57
    
    
    
    1,176
    
    
    
    (1,119
    )
    
    
    (95.2
    )Other
    
    
    6,452
    
    
    
    6,291
    
    
    
    161
    
    
    
    2.6Non-compensation expenses
    
    
    26,008
    
    
    
    28,940
    
    
    
    (2,932
    )
    
    
    (10.1
    )Total expenses
    
    
    91,487
    
    
    
    85,940
    
    
    
    5,547
    
    
    
    6.5Income / (loss) before income taxes
    
    
    13,609
    
    
    
    (14,769
    )
    
    
    28,378
    
    
    
    N/MIncome tax expense / (benefit)
    
    
    6,396
    
    
    
    (5,031
    )
    
    
    11,427
    
    
    
    N/MNet income / (loss)
    
    $
    7,213
    
    
    $
    (9,738
    )
    
    $
    16,951
    
    
    
    N/M
    %
 
 N/M = Not Meaningful 21




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Three Month Non-GAAP Financial Measures
 Share-Based Payment,
     22




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##### Table of Contents



GAAP
    
    
    Reconciliation Amount
    
    
    Non-GAAP(dollars in thousands, except per share information)Three
months ended June 30, 2009:Compensation and benefits expense
    
    $
    65,479
    
    
    $
    (2,421
    ) (a)
    
    $
    63,058Income before income taxes
    
    $
    13,609
    
    
    $
    2,421
    (a)
    
    $
    16,030Income tax expense
    
    $
    6,396
    
    
    $
    878
    (b)
    
    $
    7,274Net income
    
    $
    7,213
    
    
    $
    1,543
    (c)
    
    $
    8,756Compensation ratio (d)
    
    
    62.3
    %
    
    
    
    
    
    
    60.0
    %Earnings per share:Basic
    
    $
    0.20
    
    
    $
    0.05
    
    
    $
    0.25Diluted
    
    $
    0.20
    
    
    $
    0.05
    
    
    $
    0.25Weighted average number of
common shares outstanding (e):Basic
    
    
    31,405,229
    
    
    
    
    (f)
    
    
    31,405,229Diluted
    
    
    31,405,229
    
    
    
    
    (f)
    
    
    31,405,229Three
months ended June 30, 2008:Compensation and benefits expense
    
    $
    57,000
    
    
    $
    (2,874
    ) (a)
    
    $
    54,126(Loss) / income before income taxes
    
    $
    (14,769
    )
    
    $
    2,874
    (a)
    
    $
    (11,895
    )Income tax (benefit) / expense
    
    $
    (5,031
    )
    
    $
    976
    (b)
    
    $
    (4,055
    )Net (loss) / income
    
    $
    (9,738
    )
    
    $
    1,898
    (c)
    
    $
    (7,840
    )Compensation ratio (d)
    
    
    80.1
    %
    
    
    
    
    
    
    76.1
    %Earnings per share (e):Basic
    
    $
    (0.32
    )
    
    $
    0.07
    
    
    $
    (0.25
    )Diluted
    
    $
    (0.32
    )
    
    $
    0.07
    
    
    $
    (0.25
    )Weighted average number of
common shares outstanding (e):Basic
    
    
    30,800,637
    
    
    
    
    (f)
    
    
    30,800,637Diluted
    
    
    30,800,637
    
    
    
    
    (f)
    
    
    30,800,637
 
 (a)
    
    The non-GAAP adjustment represents the pre-tax expense with respect to the amortization of the
IPO restricted stock awards granted to employees on November 2006.(b)
    
    The non-GAAP adjustment with respect to income tax expense / (benefit) represents the elimination
of the tax expense / (benefit) resulting from the amortization of the IPO restricted stock awards
in the period.(c)
    
    The non-GAAP adjustment with respect to net income / (loss) was the after-tax amortization of the
IPO restricted stock awards in the period.(d)
    
    The second quarter 2009 and 2008 compensation ratios were calculated by dividing compensation and
benefits expense by total revenues of $105,096 and $71,171, respectively.(e)
    
    In accordance with Statement of Financial Accounting Standards No. 128, basic and diluted common
shares outstanding were equal for the quarters ended June 30,
2009 and 2008.(f)
    
    Both the basic and diluted weighted average number of common shares outstanding were not adjusted.  23




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Revenues
 Investment Banking
  Commissions
  Principal Transactions, Net
  Interest and Dividend Income
  24




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##### Table of Contents



Other
  Expenses
 Compensation and Benefits
  Brokerage and Clearance
  Business Development
  Interest
  Income Tax Expense / (Benefit)
  Six Months Ended June 30, 2009 Compared with Six Months Ended June 30, 2008
 Overview
    25




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For the Six Months EndedJune 30,
    
    
    Period-to-Period2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(unaudited)Revenues:Investment banking
    
    $
    69,173
    
    
    $
    90,340
    
    
    $
    (21,167
    )
    
    
    (23.4
    )%Commissions
    
    
    71,871
    
    
    
    98,367
    
    
    
    (26,496
    )
    
    
    (26.9
    )Principal transactions, net
    
    
    27,696
    
    
    
    (59,137
    )
    
    
    86,833
    
    
    
    N/MInterest and dividend income
    
    
    3,775
    
    
    
    14,460
    
    
    
    (10,685
    )
    
    
    (73.9
    )Investment advisory fees
    
    
    633
    
    
    
    593
    
    
    
    40
    
    
    
    6.7Other
    
    
    4,224
    
    
    
    1,400
    
    
    
    2,824
    
    
    
    201.7Total revenues
    
    
    177,372
    
    
    
    146,023
    
    
    
    31,349
    
    
    
    21.5Expenses:Compensation and benefits
    
    
    111,146
    
    
    
    116,933
    
    
    
    (5,787
    )
    
    
    (4.9
    )Non-compensation expenses:Occupancy and equipment
    
    
    10,601
    
    
    
    9,282
    
    
    
    1,319
    
    
    
    14.2Communications and
data processing
    
    
    13,902
    
    
    
    13,342
    
    
    
    560
    
    
    
    4.2Brokerage and clearance
    
    
    7,484
    
    
    
    13,040
    
    
    
    (5,556
    )
    
    
    (42.6
    )Business development
    
    
    6,245
    
    
    
    7,917
    
    
    
    (1,672
    )
    
    
    (21.1
    )Interest
    
    
    226
    
    
    
    3,244
    
    
    
    (3,018
    )
    
    
    (93.0
    )Other
    
    
    12,229
    
    
    
    10,471
    
    
    
    1,758
    
    
    
    16.8Total non-compensation expenses
    
    
    50,687
    
    
    
    57,296
    
    
    
    (6,609
    )
    
    
    (11.5
    )Total expenses
    
    
    161,833
    
    
    
    174,229
    
    
    
    (12,396
    )
    
    
    (7.1
    )Income / (loss) before income taxes
    
    
    15,539
    
    
    
    (28,206
    )
    
    
    43,745
    
    
    
    N/MIncome tax expense / (benefit)
    
    
    7,596
    
    
    
    (10,969
    )
    
    
    18,565
    
    
    
    N/MNet income / (loss)
    
    $
    7,943
    
    
    $
    (17,237
    )
    
    $
    25,180
    
    
    
    N/M
    %
 
 N/M
    
     Not Meaningful Six Month Non-GAAP Financial Measures
   26




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##### Table of Contents



ReconciliationGAAP
    
    
    Amount
    
    
    
    
    
    
    Non-GAAP(dollars in thousands, except per share information)Six
months ended June 30, 2009:Compensation and benefits expense
    
    $
    111,146
    
    
    $
    (4,723
    )
    
    
    (a
    )
    
    $
    106,423Income before income taxes
    
    $
    15,539
    
    
    $
    4,723
    
    
    
    (a
    )
    
    $
    20,262Income tax expense
    
    $
    7,596
    
    
    $
    2,309
    
    
    
    (b
    )
    
    $
    9,905Net income
    
    $
    7,943
    
    
    $
    2,414
    
    
    
    (c
    )
    
    $
    10,357Compensation ratio (d)
    
    
    62.7
    %
    
    
    
    
    
    
    
    
    
    
    60.0
    %Earnings per share:Basic
    
    $
    0.22
    
    
    $
    0.08
    
    
    
    
    
    
    $
    0.30Diluted
    
    $
    0.22
    
    
    $
    0.08
    
    
    
    
    
    
    $
    0.30Weighted average number of common
shares outstanding (e):Basic
    
    
    31,380,008
    
    
    
    
    
    
    
    (f
    )
    
    
    31,380,008Diluted
    
    
    31,380,008
    
    
    
    
    
    
    
    (f
    )
    
    
    31,380,008Six
months ended June 30, 2008:Compensation and benefits expense
    
    $
    116,933
    
    
    $
    (5,547
    )
    
    
    (a
    )
    
    $
    111,386(Loss) / income before income taxes
    
    $
    (28,206
    )
    
    $
    5,547
    
    
    
    (a
    )
    
    $
    (22,659
    )Income tax (benefit) / expense
    
    $
    (10,969
    )
    
    $
    2,157
    
    
    
    (b
    )
    
    $
    (8,812
    )Net (loss) / income
    
    $
    (17,237
    )
    
    $
    3,390
    
    
    
    (c
    )
    
    $
    (13,847
    )Compensation ratio (d)
    
    
    80.1
    %
    
    
    
    
    
    
    
    
    
    
    76.3
    %Earnings per share (e):Basic
    
    $
    (0.56
    )
    
    $
    0.11
    
    
    
    
    
    
    $
    (0.45
    )Diluted
    
    $
    (0.56
    )
    
    $
    0.11
    
    
    
    
    
    
    $
    (0.45
    )Weighted average number of common
shares outstanding (e):Basic
    
    
    30,767,838
    
    
    
    
    
    
    
    (f
    )
    
    
    30,767,838Diluted
    
    
    30,767,838
    
    
    
    
    
    
    
    (f
    )
    
    
    30,767,838
 
 (a)
    
    The non-GAAP adjustment represents the pre-tax expense with respect to the amortization of the
IPO restricted stock awards granted to employees in November 2006.(b)
    
    The non-GAAP adjustment with respect to income tax expense / benefit represents the elimination
of the tax expense / (benefit) resulting from the amortization of the IPO restricted stock awards
in the period.(c)
    
    The non-GAAP adjustment with respect to net income / (loss) was the after-tax amortization of the
IPO restricted stock awards in the period.(d)
    
    The compensation ratio for the six months ended June 30, 2009 and 2008 were calculated by
dividing compensation and benefits expense by total revenues of $177,372 and $146,023,
respectively.(e)
    
    In accordance with Statement of Financial Accounting Standards No. 128, basic and diluted common
shares outstanding were equal for the six months ended June 30,
2009 and 2008.(f)
    
    Both the basic and diluted weighted average number of common shares outstanding were not adjusted.  27




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##### Table of Contents



Revenues
 Investment Banking
  Commissions
  Principal Transactions, Net
  Interest and Dividend Income
  Other
  Expenses
 Compensation and Benefits
  28




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##### Table of Contents



Occupancy and Equipment
  Brokerage and Clearance
  Business Development
  Interest
  Other
  Income Tax Expense/ (Benefit)
  29




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##### Table of Contents



Critical Accounting Policies and Estimates
    Fair Value of Financial Instruments
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial Liabilities
   Fair Value Hierarchy
  30




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##### Table of Contents



Level 1
    
    Quoted market prices in active markets for identical assets or liabilities.Level 2
    
    Observable market based inputs or unobservable inputs that are corroborated by market data.Level 3
    
    Unobservable inputs that are not corroborated by market data.
           31




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##### Table of Contents



Fair Value of Financial Instruments Control Process
  Income Taxes
  Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109,
 Contractual Obligations
  Off-Balance Sheet Arrangements
   Recently Issued Accounting Standards, Not Yet Adopted
 Accounting for Transfers of Financial Assets-an
amendment of FASB Statement No. 140 Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 32




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##### Table of Contents



Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities
 Liquidity and Capital Resources
         33




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##### Table of Contents



Cash Flows
 Six months ended June 30, 2009.
   Six months ended June 30, 2008 .
   
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk
   34




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##### Table of Contents



High
    
    Low
    
    Average(dollars in thousands)Long Value:Equities
    
    $
    47,549
    
    
    $
    31,691
    
    
    $
    38,693Corporate and other debt
    
    $
    53,879
    
    
    $
    36,742
    
    
    $
    45,674Mortgage-backed securities
    
    $
    29,545
    
    
    $
    
    
    
    $
    4,221Other investments
    
    $
    37,034
    
    
    $
    34,893
    
    
    $
    35,903Short Value:Equities
    
    $
    21,436
    
    
    $
    11,162
    
    
    $
    16,379Corporate and other debt
    
    $
    41
    
    
    $
    
    
    
    $
    6U.S. Government and agency securities
    
    $
    7,957
    
    
    $
    
    
    
    $
    1,137
 Interest Rate Risk
  Credit Risk
  Inflation Risk
  Operational Risk
  35




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##### Table of Contents



ITEM 4. Controls and Procedures
    36




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
   
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Total Number ofShares Purchased as
    
    Approximate Dollar ValueTotal Number
    
    
    
    
    
    Part of Publicly
    
    of Shares that May Yet Beof Shares
    
    Average Price Paid
    
    Announced Plans or
    
    Purchased Under the PlansPeriod
    
    Purchased(1)(2)
    
    per Share
    
    Programs
    
    or ProgramsApril 1, 2009 to April 30, 2009
    
    
    2,119
    
    
    $
    24.19
    
    
    
    
    
    
    
    May 1, 2009 to May 31, 2009
    
    
    849
    
    
    $
    26.25
    
    
    
    
    
    
    
    June 1, 2009 to June 30, 2009
    
    
    2,307
    
    
    $
    28.71
    
    
    
    
    
    
    
    Total
    
    
    5,275
    
    
    $
    26.50
    
    
    
    
    
    
    
    
 
 (1)
    
    All shares purchased were other than as part of a publicly announced
plan or program. The purchased shares consist of cancelled shares of
restricted stock in satisfaction of withholding tax requirements.(2)
    
    All shares were immediately retired upon purchase by us. 
 ITEM 3. Defaults Upon Senior Securities
  37




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##### Table of Contents



ITEM 4. Submission of Matters to a Vote of Security Holders
     Proposal 1  Election of Class I Directors.
 Nominee
    
    For
    
    WithheldJohn G. Duffy
    
    
    24,401,492
    
    
    
    3,373,529Daniel M. Healy
    
    
    26,029,391
    
    
    
    1,745,630Michael J. Zimmerman
    
    
    27,144,335
    
    
    
    630,686
  Proposal 2  Approval of the KBW, Inc. 2009 Incentive Compensation Plan
 For
    
    Against
    
    Abstain18,794,702
    
    7,661,816
    
    487,623
 Proposal 3  Ratification of the Appointment of KPMG as the Companys Independent Registered
Public Accounting Firm.
 For
    
    Against
    
    Abstain27,413,247
    
    322,574
    
    39,200
 
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
  38




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##### Table of Contents



KBW, INC.By:
    /s/ JOHN G. DUFFYName:
    John G. DuffyTitle:
    Chairman and Chief Executive OfficerBy:
    /s/ ROBERT GIAMBRONEName:
    Robert GiambroneTitle:
    Chief Financial Officer 39




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##### Table of Contents



ExhibitNumber
    
    Description10.1
    
    KBW, Inc. 2009 Incentive Compensation Plan (incorporated by
reference to Exhibit 10.1 to the Registrants current report on
Form 8-K filed on June 10, 2009).31.1
    
    Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 40