Joel Jeffrey - KBW

Good afternoon. My name is Berneil and I will be your conference operator today. At this time, I would like to welcome everyone to the 2008, Third Quarter’s Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the call over to Mr. Zemlyak, Chief Financial Officer of Stifel Financial. Please go ahead sir.

Thank you, operator. Good afternoon, everyone. This is Jim Zemlyak, CFO of Stifel Financial Corp. I would like to welcome everyone to our conference call today to discuss our third quarter and 2008 year-to-date results. Please note that this conference call is being recorded. If you’d like a copy of today's presentation you may download the slides or view it on www.stifel.com. Before we begin today's call, I would like to remind listeners that this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not statements of fact or guarantees of performance. They are subject to risks, uncertainties, and other factors that may cause actual future results to differ materially from those discussed in the statements. To supplement our financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance and liquidity. These non-GAAP measures should only be considered together with the company's GAAP results. And finally, for a discussion of risks and uncertainties in our business, please see the business factors affecting the company and the financial services industry in the company's Annual Report on Form 10-K and MD&A results in the company's quarterly reports on Form 10-Q. With that, I would like to turn the call over to Chairman, CEO, and President, of Stifel Financial Mr. Ron Kruszewski.

Thanks Jim. Welcome everyone. Let's get started by saying that we are pleased to report another very good quarter, especially in light of the certainly unprecedented market events and the turmoil that these times are presenting us with almost endless opportunity to continue to grow our franchise. I say that recognizing that even though business has been very good and growth has been very good, I note, as I'm sure everyone on this call knows, that we just completed one of the worst months in the history of the Dow, down somewhat 14, the S&P down 17, NASDAQ almost 18% for the month. And certainly that can have a chilling effect on activity when clients open their statements. That said, business has been very good. With respect to the third quarter of 2008, again I remind everyone that if you want to view our slides, they are online, and I'm going to outline my remarks in conjunction with the slides. So, first of all, with the third quarter, we are pleased to report record net revenues per quarter, an all-time record of almost 219 million up 20% from the comparable quarter of 2007. Revenue growth and Private Client, Equity Capital Markets and our small bank was offset by investment banking witnesses and certainly our Fixed Income Group had a big – a lot to say that 20% increase. Our GAAP net income was 12.8 million or $0.46 a diluted share up 59%. Core net income which is how we have been in measuring our progress totaled $0.60 per diluted share, which was 17% over the comparable quarter. Core earnings, pretax margin 13%. We have had margin compression, both as a result of a subdued activity on the banking side and plus a lot of growth, additions of offices. I will…

(Operator Instructions). Your first question comes from the line of Joel Jeffrey.

Hey Joel.

Hi guys, how are you? Just a quick question. Going back to the slide, where you talk about the new branches and going from losses to gains on a pro forma basis. How long do you expect that to take?

You know, we liked to get the preliminary contribution of loss to break even pretty quick, you need to really focus on those one time expenses of $3 million that are the front end costs of opening a branch. A cap these, litigation if we have and things like that. So that goes away pretty fast, as it relates to new branches. The ramping up for the branches, generally you know, a year, two years, it depends on market. But, I will really give the timeframe, I am not going to do it now, but I am just try to show why when we open new branches, we take some margin compression, but we think we are building the value in the company.

Okay. And then in terms of the business really looked like it took off, in terms of equity capital markets, does that something we think is sustainable for the near future or is that just sort of function of the volatility we have seen in the markets off late?

I think its sustainable impact, in fact I did kind of – I wanted to get through these slides, but I had a lot here and I think did gross over that. If you look at that in the equity capital markets, I think it is phenomenal, and I was on page 15 that our focus, our cash equities business quarter over quarter is up 45%, Joel and year-over-year 36%. So our research driven advise service model we think is gaining sustainable market share.

Okay. And then in terms of on the investment banking side, advisory revenues were a little higher than what we were looking for. Was there anything behind that, anything in particular, or just a strong pipeline?

You know, I think it was -- you know, that business can be lumpy and it was. We have a strong pipeline. It is difficult to predict when things will close. So again, that market is volatile and uncertain, and it was -- we got some things done in the third quarter. But I do caution everyone that things that we have in the pipeline that could close this quarter simply could not close for reasons that are going to be market-driven versus deal-driven. And so I think it is -- it was a nice performance considering the market, but that tends to be a lumpy line item.

Sure. Okay. And then lastly, in terms of performance sort of quarter to date for the fourth quarter, have you seen the retail investor pulled back by the volatility in the markets? Have you seen the institutional business continue to sort of thrive as it has? Any update there?

Well, business has been good. I mean -- but as I started the call, you know the business is good, but I always give get cautious when business is good in down markets. Alright? And I just had to leave it at that. So I don't want to get too far over my skis in talking about where we are going for the quarter. But our October flow business was quite healthy. But the markets were very volatile, as you know.

Well. Good, thanks for taking my questions.

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Thank you, operator. Everyone, may you have a good quarter and a happy holiday, and we will see everyone in what I hope will be a good final quarterly update and year update in February of 2009. Thank you very much.

This concludes today's conference call. You may now disconnect.