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    2016 ANNUAL REPORT
    ASSOCIATES
    SHARE THE
    VISION

THE SHARED VISION

It takes vision to build a company from a single office to a diverse business with 1,350 employees. For more than 80 years, our associates have provided that vision. As employee-owners, our associates are responsible for our business’ success and, more importantly, the success of our clients. In this report, we are delighted to share their stories about what D.A. Davidson means to them — and their vision for what we can achieve in partnership with our clients.

"We are constantly reminded that our success has been, is and will be the result of the talent, commitment and integrity of our associates — whether they work in a support role behind the scenes, alongside clients or in leadership."

DEAR FELLOW SHAREHOLDERS, CLIENTS AND ASSOCIATES

2016 was a year of surprise, change and challenges, not only for our business, but for our country and across the globe, with election results in the U.S. and Europe that changed the political and economic landscape, and volatile domestic markets that ended the year at record equity valuations. Notwithstanding the challenges, D.A. Davidson Companies also ended the year with record net revenues. Our success is a tribute to our clients’ loyalty and our associates’ skill and dedication.

Our results were again led by our largest business, the Individual Investor Group, which continued to expand its services to our clients and improve its productivity. The group acquired Nebraska-based SMITH HAYES Companies to expand its Midwest footprint in key Nebraska markets and to position the group for further growth in the Midwest.

Our Fixed Income Capital Markets group was our best- performing business, with strong revenues and profits, fueled by a record level of public finance transactions and improved results in our taxable sales and trading business.

Ultimately the firm recorded net revenues of $371 million, and our pre-tax profits were the strongest since 2008. These results allowed us to achieve records for both shareholder equity and book value per share for a second year in a row. Our diversified business lines serve to complement each other through business cycles and adjustments and, most importantly, serve our diverse clients ranging from individuals to corporations and public institutions.

  • OUR CAPITAL IS HUMAN

    We are constantly reminded that our success has been, is and will be the result of the talent, commitment and integrity of our associates — whether they work in a support role behind the scenes, alongside clients or in leadership.

    This year, our firm-wide associate survey provided us with great insight into what is working well and what we can improve upon as a company. Our culture, integrity, ethics and deeply-rooted commitment to our local communities once again received the highest rankings. We are proud of our 1,350 associates and that these values, combined with our commitment of putting clients’ interests first, honor our history and will define our future.

    In 2016 we made changes to our executive team to replace retiring members, deepen and expand the team and develop our future leaders. Larry Martinez, a longtime member of senior leadership, now serves as D.A. Davidson Companies President. We appointed Monte Giese as President of Equity Capital Markets. Additionally, Steve Condon has been named President of the combined Asset Management and Trust businesses. We thank Doug Woodcock and Art Sims, who retired in 2016 from their roles as heads of Equity Capital Markets and D.A. Davidson Trust Company, respectively.

  • STRATEGIC PLAN AND CONTINUED GROWTH

    Each year our executive management and Board of Directors evaluate our strategic plan to assess our goals for the future. While we have a number of strategic priorities, growth was again significant in 2016. In addition to the SMITH HAYES acquisition noted above, the Individual Investor Group opened a new office in Vancouver, Washington, the Public Finance Group opened a new office in Roseville, California, and the Trust Company expanded its expertise with the development of D.A. Davidson Private Trust in Seattle.

    Another tenet of our strategic plan is our commitment to the improvement of our infrastructure, including technology. This past year we made significant investments in a new website and the adoption of eSignature and a number of digital tools geared toward reducing paperwork and increasing the ease and efficiency for our clients to transact business with us. We will continue to be nimble and pursue a model of innovation and creative use of new technologies to achieve a best-in-class experience for our clients.

  • LOOKING TO THE FUTURE

    In 2016 we continued the recruitment of talented leaders to the D.A. Davidson Board of Directors. We are pleased to welcome to the Board Chet Helck, previous CEO of Raymond James’ Global Private Client Group; Tom Smith, founder and former Chairman of SMITH HAYES; Michael Purpura, President of IIG; and Richard Tschetter, Financial Advisor with over 40 years of experience in the industry.

    With the new members of leadership, the management team, and in partnership with our employee-owners, we know that D.A. Davidson and our clients are in the best hands. While we do not take our success for granted, we are optimistic that together we can continue to deliver exceptional service for our clients, a positive experience for our associates and value for our shareholders. We thank our clients and shareholders for their loyalty, and our associates for their good work.

    • $0 M
    IN NET REVENUES
    0 %
    INCREASE IN PROFITABILITY
    $0 M
    IN SHAREHOLDERS' EQUITY
    $0 B
    IN ASSETS UNDER ADMINISTRATION

    2016 BUSINESS REVIEW

    D.A. Davidson ended the year with record net revenues of $370.7 million and overall strong performance. Pre-tax profits were the highest since 2008, and net revenues were up 4.1 percent over last year. These results allowed us to achieve records for both shareholder equity and book value per share for a second year in a row.

    • INDIVIDUAL INVESTOR GROUP

      The Individual Investor Group again grew net revenues per financial advisor. The business finished the year with a solid performance that benefited from improved equity markets and additional revenues from the SMITH HAYES acquisition.

    • FIXED INCOME CAPITAL MARKETS

      The Fixed Income Capital Markets business was fueled by record public finance results and strong results in our secondary taxable business. Overall the business generated a record $85.3 million in net revenues.

    • EQUITY CAPITAL MARKETS

      The Equity Capital Markets group grew significantly and our investment banking team completed several major transactions in 2016. Both the investment banking and CD underwriting businesses greatly exceeded the prior year’s performance.

    • ASSET MANAGEMENT

      Our combined asset management area — Davidson Investment Advisors, D.A. Davidson Trust Company and Davidson Fixed Income Management — finished the year with strong fourth quarter results. Our Asset Management businesses focused their work on strategic development and Trust expanded into new geographic areas and business lines, positioning both businesses for a strong 2017.

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    D.A. DAVIDSON OFFICES

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    STATES OF THE U.S. WE OPERATE IN

    FINANCIAL HIGHLIGHTS

    WHAT'S NEW

    A few noteworthy highlights for the year

    • website

      FRESH WEBSITE

      The newly redesigned website features a modern look, dynamic content and a responsive design with mobile viewing optimization.

      "The new website is the next step in streamlining D.A. Davidson’s story and brand across all our digital channels. The ability to offer quality digital content helps strengthen our relationships with clients."

      —ADRIENNE HARVEY,
      WEB AND CONTENT PROJECT MANAGER

    • SMITH HAYES TRANSACTION

      Combining forces with the Nebraska-based firm allows us to bring D.A. Davidson’s personalized services to more clients and continue to build our Midwest presence and reputation. Following the transaction, SMITH HAYES Companies adopted the D.A. Davidson name and logo.

    • EXPANDED REACH IN WASHINGTON STATE, CALIFORNIA AND NEW YORK

      A new office in Vancouver offers solutions from our Individual Investor Group and D.A. Davidson Trust. In California, our public finance team’s new Roseville office delivers bond transaction capabilities to more municipalities across the West. We are also growing in New York City and Seattle.

       

    • ESIGNATURE AND HOUSEHOLD ACCOUNT SIGNING

      New digital services bring speed and convenience to clients. Clients now have the ability to sign documents wherever they are, open accounts and take advantage of our other services — easily and with less paperwork.

      "Our clients lead busy lives and travel often. With eSignature they can review and sign forms quickly any time of day, in any place on any type of device."

      —KIM ELLIS,
      VICE PRESIDENT OF BUSINESS SOLUTIONS

    • PRIVATE TRUST INITIATIVE

      We launched the Private Trust initiative with the goal of offering a new level of trust services throughout the Northwest. This allows us to forge deeper relationships by providing high-quality, individualized trust services that reflect the personal philosophies of clients with complex wealth and trust issues.

       

    • BUILDING A BETTER WORKPLACE

      In 2016, we were an award recipient for the Association of Washington Business’ first-ever “Achieve Award,” which recognized our workforce development initiatives. We also earned a spot on the Best Places to Work in Idaho list for a fifth consecutive year. As a commitment to continuously improving our work environment, we surveyed our associates as to how they feel about working at D.A. Davidson. With an 80% response rate, the results were overwhelmingly positive and we gained important insight for further areas of improvement.

       

    "D.A. Davidson has done a great job meeting the need for technological innovation while maintaining its cultural essence. Our infrastructure is every bit as robust as most of the much larger firms in the industry."

    —HEDLEY GREENE , SENIOR VICE PRESIDENT, CO-DIRECTOR OF WEALTH PLANNING

    MONTE GIESE

    PRESIDENT, EQUITY CAPITAL MARKETS

    I love the fact that in the Equity Capital Markets business — both institutional equities and investment banking — we have the ability to compete on a daily basis. Every day we are able to provide better ideas, better execution and better advice to our clients, whether they are large institutional money managers or leading companies.

    What we do can impact the financial outcome for thousands of shareholders, employees and investors. That’s very exciting.

    D.A. Davidson is unique in the financial services industry. Not only do we have deep resources, but our professionals also have the runway and entrepreneurial flexibility to make decisions and come up with great ideas for clients.

    We have bankers, research analysts, salespeople and traders whose advice, ideas and execution capabilities have become standards within industries and sectors.

    Our employees are also owners of the company. That creates a different approach to the business, and a culture that promotes the right values — honesty, integrity and a team approach.

    We occupy an increasingly differentiated position within our industry. The financial services industry, and in particular the equity capital markets space, has seen a bifurcation into the large bulge bracket firms on the one hand, and specialized providers of discrete services on the other.

    There is an opportunity for firms like D.A. Davidson that provide full-service capabilities — M&A advisory, capital raising, strong research and efficient trading execution — with capacity in both the institutional and individual investor markets. It’s a unique value proposition for our corporate and institutional clients that I see increasing in value over time.

    INDIVIDUAL INVESTOR GROUP,

    D.A. DAVIDSON & CO.

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    With a focus on the long term, our Individual Investor Group offers a wide range of wealth management solutions to help clients plan for and work toward their goals. Our team of approximately 400 financial advisors is backed by a network of support professionals and a wide range of resources designed to help each client create a strategy for financial success. In 2016, we added the former SMITH HAYES Companies in Nebraska, strengthening our Midwest presence.

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    EQUITY CAPITAL MARKETS,

    D.A. DAVIDSON & CO.

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    Our Equity Capital Markets group begins 2017 with a new president, longtime investment banker Monte Giese. Besides its banking role, the ECM team provides liquidity and distribution through institutional sales and trading, equity research, market-making, corporate services and brokered CD underwriting. Our award-winning institutional research team offers a national perspective on companies across a variety of industries.

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    INVESTMENT BANKING,

    D.A. DAVIDSON & CO.

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    With a focus on expanding client access to our services, our Investment Banking team increased the number of bankers to its highest level ever, providing complementary capabilities in the group’s financial institutions, food and beverage, and real estate practices. Our bankers deliver merger and acquisition advisory services as well as assist in raising capital for middle market and emerging businesses worldwide.

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    FIXED INCOME
    CAPITAL MARKETS,
    D.A. DAVIDSON & CO.

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    A national leader in raising capital, our Fixed Income team delivers a uniquely client-focused, disciplined approach for public finance, underwriting, trading and sales services. The group found strong demand in 2016 for its public finance expertise, which focuses on state and local governments, public and private utilities, higher education, public and charter schools, healthcare, housing and real estate, specialty districts and resorts, tribal financing and more.

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    "We serve each client one at a time, providing them with our collective best effort and commitment to their success. My vision for the firm is that we achieve prominence nationally for expertise and integrity in the niches we serve, and are able to offer our services to more people."

    —DAREN SHAW, MANAGING DIRECTOR, INVESTMENT BANKING

    ZACH BISHOP

    MANAGING DIRECTOR, PUBLIC FINANCE

    I enjoy promoting economic development in Colorado through facilitating the creation of public improvements and new projects. My experience with D.A. Davidson has allowed me to deepen relationships within the region and develop expertise I can also bring to my volunteer work with nonprofits.

    SAM SHARP

    MANAGING DIRECTOR, PUBLIC FINANCE

    We operate as a nimble, entrepreneurial business unit within the larger D.A. Davidson platform. I find that the firm is very effective at giving us the tools we need to succeed, and giving us the capacity to be creative in our marketplace.

    Part of how we grow is by maintaining market share. One of the things we enjoy most about our market is that it’s not commoditized. We have very customized solutions that require deep relationships with our clients to make sure we understand their goals and can best match those goals to the available options in the capital markets.

    We continuously work to better serve our clients, stay competitive on pricing, and be innovative and open-minded about what our clients’ needs might be in the future.

    "Looking ahead, I envision significant growth of the Trust Company, stronger partnerships with financial advisors to provide trust services for their clients, and having the technology and other infrastructure we need to remain competitive and continue to provide excellent service."

    —MONA FISK , VICE PRESIDENT AND TRUST OFFICER, D.A. DAVIDSON TRUST COMPANY

    HEATHER KUBAS

    CHIEF OPERATING OFFICER, DAVIDSON INVESTMENT ADVISORS

    As a native of Great Falls, Montana, I’ve witnessed the positive impact D.A. Davidson has had in our area over the years. The firm is both a highly-respected employer and community advocate. I’m honored to be a part of the D.A. Davidson team, working with colleagues who share the common goal of providing the highest level of service to our clients.

    I believe the variety of financial solutions our firm offers and its reputation for integrity will continue to resonate well throughout our current footprint and in potential new markets. I am also confident our associates will be a huge part of our continued success.

    D.A. Davidson is very supportive of associates and encourages professional growth. I’ve been able to leverage my prior work experience and professional designations to advance within the company, and I encourage my employees to pursue their own career goals with the continued education and professional training programs offered by the firm.

    The company is very forward-looking. We are always on the lookout for ways to make advancements in communication and technology to make our processes even smoother, more efficient and more convenient for our clients. Our recently redesigned website and launch of our mobile app are two recent examples of this. I look forward to seeing what the future holds!

    5

    YEARS WITH D.A. DAVIDSON

    5

    PEOPLE SHE MANAGES

    7

    COUNTRIES SHE HAS VISITED

    DAVIDSON INVESTMENT ADVISORS

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    Our asset management and investment advisory company, Davidson Investment Advisors, completed a strong 2016 with an eye toward continued successes. With a long-term outlook and team approach to both client relationships and management, DIA helps clients meet their objectives through several investment options and its own mutual fund. The firm provides money management to institutions, foundations, corporations, high net worth investors and trusts.

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    DAVIDSON FIXED INCOME MANAGEMENT

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    Investors look to Davidson Fixed Income Management for customized portfolios, tax-exempt mutual funds and clear investment strategies. The firm continues to offer clients with high-quality fixed income portfolios and investment advisory services for public sector entities, nonprofit institutions, institutional investors and investment advisors.

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    D.A. DAVIDSON TRUST COMPANY

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    With a new president, Steve Condon, our Trust Company continues to help clients develop legacies that reflect their personal values. Using a holistic approach, the trust team offers solutions that include customized trusts, investment management, wealth planning and retirement planning. The team also delivers access to expert advisors, trust officers, estate planning specialists, real estate management experts and retirement planning professionals.

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    CHRIS JOHNS

    MANAGING DIRECTOR, SENIOR VICE PRESIDENT, DFIM

    I enjoy managing fixed income portfolios in constantly changing market environments and providing consistent results to our clients. We have received support from senior management on significant new business opportunities and have grown substantially. Since I joined the company in 2005, the portfolios we manage have grown from $150 million to over $1 billion today.

    My vision for D.A. Davidson is that we will remain a conservatively managed independent company that will grow from increased employee productivity and strategic acquisitions. We will stay abreast of the dynamic regulatory environment and adjust to new investment products and delivery systems to best meet the needs of our clients.

    11

    YEARS WITH D.A. DAVIDSON

    30

    YEARS OF INDUSTRY EXPERIENCE

    10

    HE HAS MENTORED

    THE POWER OF GIVING

    D.A. Davidson is committed to helping nonprofit organizations improve our world, whether that means alleviating suffering, feeding hungry children or expanding our horizons through art. We donate generously and encourage our associates to volunteer. Every year, they spend thousands of hours rolling up their sleeves and working to better their communities. We also boost many of our associates’ contributions by providing donations through our gift matching program — adding power to the causes that resonate with our colleagues.

    BY THE NUMBERS

    $
    DONATED TO PHILANTHROPIC ORGANIZATIONS WORKING IN HUMAN SERVICES AND COMMUNITY DEVELOPMENT, EDUCATION, ARTS AND CULTURE, AND NATURE CONSERVATION

    $
    PROVIDED THROUGH THE FIRM'S GIFT MATCHING PROGRAM

    GIVING HIGHLIGHTS


    LOS ANGELES FOOD COUNCIL

    Our donation helps ensure that all Los Angeles residents have healthy, affordable, fair and sustainable food.

    DUMB FRIENDS LEAGUE ANIMAL SHELTER, DENVER, COLORADO

    As part of the #UberPuppyBowl initiative, the Denver office made a donation and a few adoptable puppies made a visit to the office. The smiles lasted all week!

    BILLINGS CLINIC FOUNDATION, BILLINGS, MONTANA

    Through the Let Your Love Glow campaign, associates provided donations (and received red noses) to help create a new infusion space for kids going through cancer treatment.

    SEATTLE AQUARIUM

    We provided financial support for the Splash! Gala, which helps fund the aquarium’s conservation and educational programs that focus on Puget Sound wildlife. IIG President Michael Purpura also serves on the board of directors.

    Our donation helps fund after-school educational and sports programs for at-risk middle school kids, with the goal of teaching life lessons through sports.

    IDAHO SHAKESPEARE FESTIVAL

    Since 2011, our Boise branch has sponsored an array of summertime theater and related events. As part of the commitment, 10 to 15 Boise associates volunteer at the theater, working in jobs that range from taking tickets to hauling trash.

    YWCA MERCY HOME, GREAT FALLS, MONTANA

    After the I.T. Department learned that the facility needed major renovations, the group raised funds and also joined with other local organizations to frame new walls, hang drywall and paint, creating much-needed new space at the facility.

    D.A. DAVIDSON'S STUDENT INVESTMENT PROGRAM

    Each year, upper-level finance students at 20 colleges and universities invest money provided by D.A. Davidson. Their schools get to keep half of any proceeds above 5 percent, and the students gain an education in portfolio management. The program has provided more than $514,000 to colleges across the West and Midwest.

    D.A. DAVIDSON IS ALSO PROUD TO SUPPORT MANY OTHER ORGANIZATIONS, INCLUDING:

    National Multiple Sclerosis Society
    Open School
    Big Brothers Big Sisters
    United Way
    C.M. Russell Museum
    Reel Recovery


    WINNERS OF D.A. DAVIDSON'S MOST PRESTIGIOUS HONORS

    BRAGG LEWIS KNUTSON COMMUNITY SERVICE AWARD

    The highest honor earned each year by a D.A. Davidson Companies associate, this award celebrates outstanding community involvement and volunteering.

    JOHN CLAY, JR., VENTURA, CALIFORNIA

    John is a Senior Vice President, Financial Advisor and Branch Manager. His commitment to volunteerism and social responsibility is matched only by the variety and number of causes to which he devotes himself. John has a seemingly endless store of energy and enthusiasm. With a bold vision for nonprofit development, John is known for creatively dreaming up new ways to help his community and local organizations. He is also unafraid to share his leadership skills and business acumen. John’s passion and commitment have made Ventura and the surrounding communities better places to live.

    IAN B. DAVIDSON CULTURAL EXCELLENCE AWARD

    This award, named for our company’s Chairman Emeritus, recognizes two employees each year who exemplify D.A. Davidson Companies’ core values.

    BRIAN BROWN, BOZEMAN, MONTANA

    Brian is a Senior Vice President, Financial Advisor and Branch Manager and has been described as a true ambassador for “all that’s good and admirable about our firm.” He is a committed leader who stresses ethics and integrity in his branch’s work, leading by example and with enthusiasm and a positive outlook. Brian is similarly committed to his community. He brings the same passion and work ethic to his volunteer work as he does to his job.

    JAMIE WIEFERICH, LOS ANGELES, CALIFORNIA

    Jamie is an Associate Vice President and Regional Administrative Manager and has been described as a person who embodies the “very best of D.A. Davidson culture.” Jamie believes strongly in following policies and procedures and in following up on projects she has begun. She is hard-working, with a focus on accuracy. Just as important, she is known for recognizing the achievements of others, instilling fun in the office and encouraging community involvement.

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