Robert W. Baird & Co. Incorporated Consolidated Statements ...

1 Robert W. Baird & Co. Incorporated Consolidated Statements of financial Condition As of December 31, 2017 and 2016 With Report of Independent Registered Public Accounting Firm SEC File Number: 8-00497 Robert W. Baird & Co. Incorporated Table of Contents PageRe port of Inde pe nde nt Re gis te re d Public Accounting Firm1 Cons olidate d State me nts of financial Condition2-3 Note s to Cons olidate d State me nts of financial Condition4-34 Report of Independent Registered Public Accounting Firm The Stockholders and Board of Directors Robert W. Baird & Co. Incorporated : Opinion on the Consolidated financial Statement We have audited the accompanying Consolidated statement of financial condition of Robert W.

2 Baird & Co. Incorporated and subsidiaries (the Company) as of December 31, 2017, and the related notes (collectively, the Consolidated financial statement). In our opinion, the Consolidated financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2017, in conformity with generally accepted accounting principles. The accompanying Consolidated statement of financial condition of Robert W. Baird & Co. Incorporated and subsidiaries as of December 31, 2016, was audited by other auditors whose report thereon dated February 28, 2017, expressed an unqualified opinion on those Statements . Basis for Opinion This Consolidated financial statement is the responsibility of the Company s management.

3 Our responsibility is to express an opinion on this Consolidated financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated financial statement is free of material misstatement, whether due to error or fraud.

4 Our audit included performing procedures to assess the risks of material misstatement of the Consolidated financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the Consolidated financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company s auditor since 2017. Chicago, Illinois February 26, 2018 KPMG LLP is a Delaware limited liability partnership and the member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

5 KPMG LLPAon CenterSuite 5500200 E. Randolph StreetChicago, IL 60601-64361 Robert W. Baird & Co. Incorporated Consolidated Statements of financial Condition As of December 31, 2017 and 2016 (In Thousands) See accompanying notes to the Consolidated Statements of financial Condition. Assets 20172016 Cash and Cash Equivalents372,802$ 330,761$ Cash Segregated Under Federal Regulations110,000 58,000 Cash Held by Baird P rivate Equity Partnerships412 1,493 Securities Purchased Under Agreements to Resell2,640 316,069 Deposits with Clearing Organizations46,252 27,717 Receivables.

6 Clients201,829 211,323 Brokers and Dealers199,297 72,899 Deposits P aid on Securities Borrowed425,016 264,547 Notes Receivable, Net104,899 106,230 Other208,864 160,300 1,139,905 815,299 Securities Owned, at Fair Value999,527 599,228 Furniture, Equipment, Leasehold Improvements and Capital Leases at Cost, Less Accumulated Depreciation and Amortization of $141,427 and $126,343, respectively76,399 70,427 Goodwill89,229 89,229 Intangible Assets, at Cost, Less Accumulated Amortization of $15,719 and $14,346, respectively16,726 17,945 Deferred Tax Asset, Net- 38,183 Other Assets57,570 54,592 Total Assets2,911,462$ 2,418,943$ December 31 2 Robert W.

7 Baird & Co. Incorporated Consolidated Statements of financial Condition (Continued) As of December 31, 2017 and 2016 (In Thousands) See accompanying notes to the Consolidated Statements of financial Condition. Liabilities and Stockholders' Equity 20172016 Lia bilitie s :Money Borrowed:Book Credit Balances in Bank Accounts5,783$ 21,637$ Securities Sold Under Agreements to Repurchase663,925 629,834 P ayables:Clients189,841 140,106 Brokers and Dealers14,739 42,602 Deposits Received on Securities Loaned1,793 1,900 206,373 184,608 Securities Sold, Not Yet Purchased, at Fair Value586,058 250,907 Deferred Tax Liability, Net12,430 - Accounts P ayable, Accrued Expenses and Other Liabilities513,714 495,660 Subor dina te d Lia bilitie s175,032 204,745 Total Liabilities2,163,315 1,787,391 Stockholders' Equity:Common Stock; $1 stated par value.

8 72,450,000 shares authorized and 26,501,574 shares issued as of December 31, 2017 and 2016. 26,454,488 shares outstanding as of December 31, 2017 and ,502 26,502 Additional P aid-In Capital196,184 196,184 Retained Earnings527,633 409,899 Treasury Stock, at Cost(1,486) (1,486) Accumulated Other Comprehensive Loss(1,044) (431) Total Robert W. Baird & Co. Incorporated Stockholders' Equity747,789 630,668 Noncontrolling Interests in Baird Private Equity P artnerships358 884 Total Stockholders' Equity748,147 631,552 Total Liabilities and Stockholders' Equity2,911,462$ 2,418,943$ December 31 3 Robert W.

9 Baird & Co. Incorporated Notes to Consolidated Statements of financial Condition December 31, 2017 and 2016 (In Thousands, Except Share and Per Share Amounts) 1. Organization and Description of Business The Consolidated Statements of financial Condition include Robert W. Baird & Co. Incorporated (RWB), Baird Insurance Services, a wholly owned general insurance agency subsidiary, and RWB s Consolidated private equity partnerships as more fully discussed in footnote 14, Private Equity Consolidation (together, the Company). The Consolidated private equity partnerships follow ASC 946, financial Services Investment Companies. The Company is registered as a securities broker dealer and an investment adviser with the Securities and Exchange Commission (SEC) under the Securities and Exchange Act of 1934 and the Investment Advisers Act of 1940, and is also a member of the financial Industry Regulatory Authority (FINRA) and various securities exchanges.

10 The Company is also a member of the National Futures Association (NFA) and is registered as an introducing broker (IB) with the Commodity Futures Trading Commission (CFTC). The Company engages in a broad range of activities in the private wealth management, equity and fixed income capital markets, asset management and private equity businesses, including securities brokerage; investment advisory and asset management services; institutional equity and fixed income sales; research services; origination of and participation in underwritings and distribution of corporate and municipal securities issuances; municipal advisory services; merger and acquisition advisory services; private equity and venture capital investing; and market making and trading activities in equity, municipal and other fixed income securities.