Good morning. My name is Ardae and I will be your conference operator today. At this time, I would like to welcome everyone to the Stifel Financial fourth quarter and annual 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). I would now like to turn the call over to James Zemlyak, Chief Financial Officer

Thank you, operator. Good morning, everyone. This is Jim Zemlyak, CFO of Stifel Financial Corp. I would like to welcome everyone to our conference call today to discuss our fourth quarter and 2008 fiscal results. Please note that this conference call is being recorded. If you’d like to follow on with today’s slides and 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, and CEO, and President, of Stifel Financial Mr. Ron Kruszewski.

Thanks Jim. Welcome everyone. As we do on all of our calls, we follow along with slides. So, I will be addressing slides and hopefully everyone in the call has those. I thought the way to start would be to restate the code I put in our earnings release which was simply put 2008 was uniquely challenging for the financial services industry. Our Company has been fortunate – many of the issues which plagued a number of our brother in. While we are mindful of this environment, we consider this a time of unparalleled opportunity for our Company. Going forward, we will continue on the long-term building of shareholder value primarily to the addition of talented and entrepreneurial people. And I would like to take the time to congratulate and thank our hard working associates for record results in the most difficult of environments in 2008, and also thank our clients for their continued confidence in Stifel Financial. So, turning to the fourth quarter highlights, we recorded net revenues of $228 million, 8% higher than the comparable quarter in 2007. It was a balanced business model which drove those record revenues, frankly balanced Fixed Income offset declines in equity and Private Client which is historically what happens when the economy is performing like it does. Those revenues drove a record core net income of $21.7 million, $0.72 per diluted shares. So, it was up 6%. It was not a record core net income. We had some share of – increase in shares due to our offering in September. It was a second best quarter on a core EPS basis. Our pre-tax margins were 16%, equal with last year. On a GAAP basis, net income was $17.8 million, $0.59 diluted share. Book value increased to $22.75, which was up 24%. And…

(Operator instructions) Your first question comes from the line of Guy Mozaki [ph] with Bank of America, Maryland.

Hello, Guy. Guy Mozaki – Bank of America: Hi, Ron. How are you? Question for you, first of all what are you seeing in the first six weeks or so of the year in terms of changes in Private Client behavior to give us a sense for how activity is starting off the year?

I’ll tell you. As I see with par facility in the market and as we all know, I think the activity – I’ve not seen a real change in activity. But the activity is around a base of assets that’s significantly low. So, when I look at it, it’s not like the clients are saying, mail me the cash in my account and putting it away. I think clients are still in the market, we are seeing – I would say relatively normal activity. But asset values are down, probably down 40. We have a lot of Fixed Income, assets are down 20%, but that flows through revenues. That’s offset by our increases in new hires. Unfortunately those new hires margins aren’t the same. So, that’s how I got to my lions, tigers and bears in my comment. Guy Mozaki – Bank of America: And just a follow up on that. You did talk about this a little bit, but may be you could give us a little bit more color on how you are seeing the recruiting environment in what clearly are unprecedented or close to unprecedented level of upheaval in the industry broadly and certainly affecting retail. What are you hearing from people? How can you take best advantage of it and how do you trade it off against the fact that we might be looking at a weaker revenue environmental role?

First of all, I said the environment has never been better for a firm position as Stifel is. We are well capitalized. We don’t have the distractions that a number of these have. We have the capital available, and we believe access to capital to prudently grow. The answer simply is that we can’t keep up the opportunities Guy, it’s that simple. And I don’t – how to say, we have to be prudent and selective in what we are doing, just we can maximize our investments. It’s a very, very active market environment if you will with all the upheaval. As I look forward, the – it’s difficult to add people in the view point of a short-term market decline in revenues, but you have to do it. Because if you going to build value for us long term, we have to look beyond the abyss and look forward to when markets will recover. And the firms that add – people that we are adding are going to significantly add to our value. Now if the market never comes back, if I made a few mistakes here. But I don’t believe here for a second. I do believe though, and we are been cautious. I do believe that this will go on longer than people think. So, long answer to a very pointed question, but I’ll summarize it by saying we are going to continue to add people because we believe when we look back in future periods this will be the investments that create a lot of value. Guy Mozaki – Bank of America: Is there a sweet spot for you in the fact that a lot of the larger firms haven’t may be in some cases tended as much to the care and feeding of what they view as some of the smaller producers, the $0.5 million type guys?

They certainly created a sweet spot. I mean, I don’t know if it’s – I think it’s – I mean as I have said it, we – our cost structure, our ability to make acceptable cash on cash returns will – goes down below $300, 000 per FA and that doesn’t mean we don’t love the guys doing millions but we also believe that financial advisors that frankly are being like care and feeding analogy, probably not being done, we welcome them here. And a lot of phone calls. Guy Mozaki – Bank of America: And then a completely different question, the balance sheet question really you pointed to the deleveraging that happened. In the quarter, some of that was probably was just because of the buy back of the TARP. But at the same time, you are looking at taking some of the ARSs, you said on the balance sheet, is that going to be basically reverse the deleveraging we’ve seen over the last couple of quarters?

By definition, yes. We – these ARSs are they are high quality, but to the extent we are going to put $40 million on our balance sheet. It’s not significant to $1.5 billion balance sheet. Again we have to balance our shareholders’ and clients on that equation. But I’m not really sure it moves the needle in terms of our overall leverage and what we are doing. Guy Mozaki – Bank of America: Okay. Fair enough. Thanks very much for answering the questions, appreciate it.

Thanks Guy.

Your next question comes from the line of Darren Woodman [ph] with Woodman Capital Management Darren Woodman – Woodman Capital Management: You have been adding a large number of reps and I was wondering if you could help us in terms of likely developing patterns for compensation, benefit expenses. In some of your divisions, those expenses went down, others went up. Assuming that the markets continue this pattern for the foreseeable future; could you help us with the interplay of revenues and compensation and benefit expenses by division?

I mean, it’s all be round numbers depending on – it is more on the OpEx, it’s a little bit more of the problem on the Private Clients, I’ll speak to the Private Client. The Private Client business, the additions of new financial advisors cost money and then you have to expense over time. That can add up to 15 basis points if you will, 15% on that incremental revenue over and above normal. How that impacts the overall comp ratio is obviously weighted average and I haven’t really thought about. The simple answer I think to your question is that across all division, when you add people in difficult markets, you are going to drive your comp ratios higher and you are going to drive your margins lower. The question is when that market turns, you have the capability to take that same leverage on the up side. That’s what we are betting on. I really can’t give you any numbers to model it because it does go to both how other rolling off from previous years and how you are adding people. But in general I have said that we will have margin compression as we add people in tough markets. Darren Woodman – Woodman Capital Management: Thank you.

Your next question comes from the line of Joel Jeffrey with KBW

Hi, Joel. Joel Jeffrey – KBW: Good morning. How are you?

Good. Joel Jeffrey – KBW: Just a quick question on the release you had last night. Give us a little more detail exactly the assignment of client actionable legal claims means?

It means the assignment of actionable legal claim. I mean, Joe, our belief is that – if you believe what you read and may be one of the big arguments between the downstream firms and the bigger firms is who had – who knew what went. And we simply believe that this was not the financial advisors did not have knowledge and did not knowingly sell a product that was going to freeze in the marketplace. But do we think there was a period of time where people did have that knowledge. Certainly if you believe what you – if you’ve read in complaints filed by some of the state that I don’t want to name, you can quickly get to that conclusion. So, to the extent that we are going to provide liquidity to our clients and the amount of ARS that we buy from them, we want an assignment of those claims that may exist. It doesn’t mean we are going to assert any and we are not going to do it. But we need to protect all of our share holders’ too in this investment for the liquidity we are providing. So, if we think our clients have recourse upstream if you will, we want that recourse to travel with the paper that we are buying back. Does it make sense? Joel Jeffrey – KBW: Yes. And then in terms of the $0.06 charge you took this quarter related to the ARS, if the ARS stayed at current levels, you would anticipate another annualized loss in the first quarter?

Correct. I mean we simply – it was an interesting discussion as we went through the whole process. But at the end of the day, once we agree to do it, but we felt that we had to take a liquidity, basically a liquidity charge for our commitment due with us. So, while it’s not in our balance sheet yet, we’ve effectively taken what we think the earnings impact in Q4 for what’s going to happen some time in Q1 and Q2. Joel Jeffrey – KBW: So, would you be carrying these securities in a trading portfolio or in an available for sale portfolio?

It will be in the broker deal because we don’t have available for sale in the broker deal. So, I guess that’s trading. Joel Jeffrey – KBW: Okay. And I apologize if I missed this earlier. But can you give us a little more detail on the asset level between the last two quarters?

We had a lot of – you talking about the broker dealer? Joel Jeffrey – KBW: Yes, it’s looks like it’s down about 500.

Yes, it was down about 500, right between June and September. And so what happened was, we had a lot of activity at the end of Q3 which was a lot of flow business. We had failed in inventories and the difference between trade etcetera, etcetera, etcetera was all flow based. I think I said in Q3 that our assets went up to $1.9 billion. I think two days later, we were back to $1.5 billion. That was a snapshot in time relating primarily to the flow activity. Joel Jeffrey – KBW:

I think the Butler Wick is going to be accretive. And on the expense side, we certainly have some retention expense and we haven’t talked much about that. But even think that net of retention, in other words accretive. We think that that’s a great franchise, great people, couldn’t be more pleased with how that’s gone so far. That’s a real solid name in that part of the country and we see that as a great merger with us. So, I view it as net net accretive. Joel Jeffrey – KBW: Great. And then just lastly Ron, do you have tangible book value number for the quarter?

I’ll take the next caller’s question. Do you have a question, Joel? Joel Jeffrey – KBW: That’s it.

I’ll get it now. I’ll say it, so we can move on from here. Okay. Joel Jeffrey – KBW: Great. Thanks so much.

Your next question comes from the line of David Trone with Fox-Pitt.

Hi, David. David Trone – Fox-Pitt: Hi, Ron. How are you doing? I had a quick question for you. You alluded the future FA growth, the current capital and access to capital. And you did the raise in September. I’m wondering under the first scenario current capital, how many more brokers roughly do you think you could bring on?

We have – let me answer this, but I don’t want to give you a number that way. There’s a lot of moving parts in that, answering that question, David. Because it depends whether we are sitting on existing seats or opening offices, level of production a whole bunch of things. I will say, I see that you picked up on comment about access to capital. I think what we feel, is we have – we are very well capitalized to fund our ongoing organic growth for the foreseeable future. So, don’t see any need to do anything as it relates to just on ongoing recruiting. I actually think our capital probably it leads today and plus retains earnings. We hope we are making money. That pool of capital probably well positions us for adding organically as we have in the past. As they look forward though, I see a lot of opportunity through dislocations to potentially other things that we have done in the past AKA, whether it be a (inaudible) or Butler Wick, that may require capital. And we feel that if that’s the case, we are well positioned because we actually believe we have access to capital. I believe that we can do that. So, I would more talking about our positioning. To answer your question, we are very well capitalized to continue our probe going forward. But we also think we are – if a big opportunity came along, we are well positioned to take advantage of that. David Trone – Fox-Pitt: Okay. It’s unlikely you would race to fund organic growth? You are going to do that with ongoing earnings?

(inaudible) David Trone – Fox-Pitt: Right. But so the kind of the big ramp up is over and now you are – it will be a little bit slower pace of growth over the next several quarters versus the second half of ’08?

We are actively growing the firm and we are well capitalized, David. I don’t want to be vague. I don’t really have an answer to that question. But I can say we are actively growing. The market is very conducive and we are well capitalized. David Trone – Fox-Pitt: Okay. And then how do you tie in the lure of buying back more trust preferred? Would it continue to be pretty big discounts I guess in the market?

Yes. First of all, the two tranches of trust preferred are buried in securitization. So, I don’t know that’s even possible. We were able to buy trust preferred where they never got secured type. So, they sat at warehouses. So, actually I’m sure whether it would last. I think the $235 million pieces that are on the captive, those are buried in securitizations, but I don’t see those coming out unless those securitizations collapse in some manner. And then the last piece of the last one, I’m not actually sure what that is. David Trone – Fox-Pitt: Okay.

The lure of doing that I – we effectively swapped – we swapped $12.5 million of trust preferred and $0.50 for stock, two times book. I might do that again. David Trone – Fox-Pitt: Okay. Great. Thanks a lot, Ron.

Tangible book value $17.23, Joel.

Your next question comes from the line of Michael Isenberg with (inaudible).

Good morning, gentlemen.

Good morning.

Congratulations on a really solid quarter. I have a couple of questions, or question on the Fixed Income division, and more specifically looking at the quarter-over-quarter revenue generation and earnings generation from that division, if you could just think you can write some detail as to what drove that quarter-over-quarter growth? And if you think it’s sustainable going forward that type of growth?

I don’t think I would not take that growth lying and project that forward. I don’t think that would be realistic. That said, we – this is a business we can grow. And what happened was that we have added a lot of people. The combination of the unfortunate surrounding Bear and Lehman creates a lot of flow business that ended in firms like ours. So, I think a lot of firms like us are experiencing not only the addition of people but the business that used to go to them are coming our way, combined with credit spreads, combined with a sort of distraction of other firms – a perfect storm for Fixed Income . And while I believe our Fixed Income business is very strong and very well positioned, I would be hard pressed to continue that trajectory of growth.

And would you say, taking this follow up, that if you had to break down to the extent you can again wherever the growth came from, was it phenomenally from the principle side, the principle investing side or was it from the – as you said from the flow business the pick up in agency transactions on the –?

Again I’ve always asked this question, people – are agency transactions flow through our principle line items. Al right, it is how we trade through inventories that turn very fast and are very liquid, but it drives principle transactions. We are not a proprietary trading house. Most of – virtually all of those revenues are driven through flow business. And if you want to say agency, okay. We just don’t book them as agency trades. We book them as principle trades. But they are buying and selling and servicing clients on the flow side. So, but it’s not embedded in our results as some black box profit, trading book that’s generating a lot of profit.

Okay. Thank you very much.

You are welcome.

Your next question comes from the line of Michael Wong with Morningstar. Michael Wong – Morningstar: Hi, good morning.

Good morning, Michael. Michael Wong – Morningstar: I was just wondering do you have any unusual expenses and other operating expenses this quarter because of the big jump from 3Q?

I think that a fair amount of that is the – is our increases in opening offices and as I have said, we are continuing to build in a market where revenues have been declining, certainly on a same store basis. So, the quick cap answer to that is the – it’s our building with some decline in revenue and that’s going to drive OpEx ratios higher. We had some unusual legal expenses also in the quarter. I’m not sure how much that drove off that. But I would say the primary driver is opening a bunch of offices that certainly are profitable. Unfortunately, you don’t drive revenue but rent and code expenses since day one. Anyhow that’s what I had been talking about for a while, and I see that continuing. We are going to sacrifice margins for what I believe is going to be future growth. Michael Wong – Morningstar: Okay. So, that $20 million or so run rate, it’s better than the $15 million or so in the prior quarters this year?

I don’t give projections, but the – somewhere in between it would be – I’m just trying to give you some sense, okay. I think there were some one-timers in there too, but is fair enough. Michael Wong – Morningstar: Okay. And just a question, do you have any sort of level of assets under management, as a financial advisor which you think you would be getting a good return on the capital you used as advisor [ph]?

Let’s try and understand your question. The financial – the private wealth management business is a stable, high return, high ROE business. It is you don’t have to deploy a lot of capital. To that you have to look at it as CapEx. When you are adding people and as you add offices, we view that as CapEx, and then we measure our sort of cash on cash return after tax and CapEx. I don’t if that answers your question. In the end, it’s revenue driven not necessarily assets driven, although they are highly correlated. Michael Wong – Morningstar: Okay. Yes, I was just wondering if you were to be recruiting financial advisors from other firms that had – that being with them a relatively lower levels of assets with them if there is like breakeven point with the assets that they have to bring with them to make a decent return on your investment in that financial advisor if you recruit them over?

The answer to that is of course, yes revenues follow out such assets. I mean it’s round numbers. If someone’s doing $300,000 in production, if I have $40 million in assets, it gives you some sense of that, but we certainly look at assets as a basis to drive revenue. Michael Wong – Morningstar: Okay.

I guess I’m not going to give you my breakeven for FA, if that’s what you are driving for. Michael Wong – Morningstar: Okay. Last question. For the large gain in – instead of actual growth, that’s just the Fixed Income capital market commissions and principle this quarter? Is that seasonally high, it’s like 30 to 40, or the private quarter is a little more normal?

Fixed Income had a great quarter. We’ve seen, as I’ve said, we’ve seen tremendous building in that business. The market had been very conducive as I said in my early remarks. Some of the changes and some of the uncertainty, whether it be stimulus and what that means for inflation or legislative cram down has the consequences in that market has me somewhat concerned about the trajectory of growth in that market. But we’ll see it changes almost every day. Michael Wong – Morningstar: Okay. Thank you for answering my questions.

(Operator instructions) Your next question comes from the line of Dave [ph] with FBR Capital Markets

Hi, Dave Dave – FBR Capital Markets: Hi, Ron. How are you? Just quickly it sounds as if there is competitions leading up pretty aggressively even along the larger guys. Can you just give us an idea on the retention efforts on their part to sort of maintain – the current – they can have as well as recruit others? Is there a retention effort going on your part?

I mean you retain FAs by allowing them to be entrepreneurial and creating an environment that let’s them do what they think is in the best interest of their clients and providing them the arrow they need in their quiver if you will to service their clients. And from the management perspective try your – to keep your name out of the press and bad things and protect your reputation and run a good job. If you do all those things, retention generally is pretty high, and there is not uncertainty. So, our FAs are significant shareholders’ in the firm, that’s also highly retainable, we own somewhere in the mid 40s on a fully diluted basis of the firm. Our FAs are significant shareholders, and they have not only helped drive the growth and that’s how I advise [ph] that equity capital market, banking, Fixed Income, they also share in the rewards of that growth through share ownership. All of that has led to what I think is very high return of rates across the firm. We are doing anything above that, no? We are all partners and view ourself that way. Dave – FBR Capital Markets: And that’s helpful. I was wondering whether the transitions having the large guys that’s really filtering down towards the mid cap players but –?

Other issues are different. And in those issues that their pacing are different and frankly it’s creating the environment that is conducive to our growth. Dave – FBR Capital Markets: Okay. That’s fair. And just follow up lastly, you mentioned Bear and Lehman creating some flow business, is that what trended the benefit once those existing platforms get more established with their new owners. Does that benefit do you think kind of subside a little bit or do you think it’s pretty sticky for you guys?

I feel it’s pretty sticky. So, time will tell. But I’m not sure that when – I’m pretty confident in my 25 years at institutional business two and two never equals four. And that leakage could go elsewhere. Dave – FBR Capital Markets: Yes.

And that’s just my belief. And so when you do a good job your clients tend to be pretty sticky. Dave – FBR Capital Markets: Okay. Thanks for your color and congrats on a good quarter.

Thank you.

There are no further questions at this time.

Okay. I will conclude by again congratulating the partners in the firm. We are cautious about 2009, but we will continue to invest and hopefully continue to create shareholder value for all you that are right on call, and I appreciate all the questions and look forward to talking to you Q1 2009. Thank you.

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