Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Stifel, Nicolaus First Quarter Earnings 2012 Conference Call. [Operator Instructions] Thank you. Mr. Jim Zemlyak, you may begin your conference call.

Thank you, Mike. Good afternoon. I am Jim Zemlyak, CFO of Stifel Financial Corp. I would like to welcome everyone to our conference call today to discuss the first quarter 2012 financial 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 from our website at 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. 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 and the results in the company's quarterly reports on 10-Q. I will now turn the call over to the Chairman, CEO and President of Stifel Financial Corp. Ron Kruszewski.

Thank you, Jim, and welcome, everyone, to our call. The first quarter of 2012 proved to be our second best quarter in terms of net revenues, net income and diluted earnings per share. The overall improvement in the economy positively impacted both our Global Wealth Management and Institutional Group’s businesses during the quarter, particularly in investment banking and fixed income trading. During the quarter, we continued to expand our retail platform as a result of successful recruiting efforts of financial advisors. The increased levels of activity we saw in the quarter can be attributed to strong performance of the equity markets, improving investor sentiment, lower volatility, and increased risk taking as evidenced by improved pricing and performance for new offerings. However, outside of a major event or catalyst to move the markets, we remain cautious on the outlook for the remainder of the year. That said, we continue to believe we are well positioned to gain market share from the dislocation in the marketplace and changing regulatory requirements. Turning to Slide 4, this reviews our quarterly results which reflect frankly a good first quarter. As compared to the year ago quarter the 2011 first quarter, net revenues this quarter of a little over $400 million represented a 9% increase. Our GAAP net income was $34.8 million or $0.55 per diluted share compared to GAAP net income of $31.4 million or $0.50 a diluted share last year. Our pre-tax margins were 15% compared with 14%. Looking sequentially or versus the fourth quarter of 2011, our net revenues were up 12%. Our GAAP net income increased 29%. Our operating margins increased 200 basis points from 13 to 15. Our effective income tax rate for the quarter was 41% compared to 38% in the year ago quarter and really 40% for the fourth…

[Operator Instructions] Your first question comes from the line of Patrick Davitt from Bank of America Merrill Lynch.

You mentioned the high yield deal in April which is great obviously. Do you feel like you’re starting to see a lot more trend traction in terms of being involved in the entire cycle of a transaction like that given that it was the first time you have done it, or is there not much of a pipeline of that?

Well actually it’s not – it’s not the first time we’ve done it. We had similar deals to that in the past. I think, I just pointed out, because it speaks to the progress we made in building the investment bank. And for us that deal in particular where we were the sole exclusive advisor on the buy side and we were able to, while not being a universal bank, was able to be involved in all aspects of that transaction, the advice, the bridge and the take out. And so do I think that we are going to do more? I certainly hope so.

In the institutional business, you had a pretty strong revenue quarter but still year-over-year at least the lack of compensation leverage, do you still have a number of producers in there that really haven’t ramped up, or is there something else going on that is making you accrue so much so early in the year?

I think we tend to try to be a little more conservative in the way we built our accruals and historically that’s how we look at it. I mean we are obviously -- we are doing our level best to estimate comp levels. But that said, we have a model that is built for rebound in the equity markets. And while we saw it, putting in investment banking, the equity volumes are lull. And so we are -- net-net, we’ve also made some investments. So there is the compensation, transition expenses in those equity numbers. But I am comfortable with where we are, Patrick. I do -- I watch our contribution margins and our contribution margins in our fixed income business are strong. And they are weaker in the equity businesses. I think that’s across the street. We’re not -- and we are continuing to build to gain market share.

So it’s really about just getting to a more active environment and that should naturally come down?

Yes.

And then on the hiring side, you mentioned that you are seeing pickup there. Can you talk about where you are seeing I guess most of the people coming your way, they are wire houses, regional’s and to the extent that there is a lot of upfront money required to get them, I know you never play that game. But do you feel like the wire houses have stopped playing it?

No, I don’t, in terms of that, I think that we have -- just on balance, have seen a lot more interest in our company across the board. And so we are seeing it -- like I mentioned from the last call, that we are seeing a lot of activity and it’s encouraging.

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

So in terms of the -- given what’s going on in the markets I understand sort of a cautious outlook, in particular in the equity side of the business. But is there anything near term you see it in your other businesses that has given you the reason that to be more cautious than maybe you were end of last quarter.

No, I actually -- the overall -- what concerns me, what makes me positive, I will give you both. What concerns me is that I don’t want 2012 to turn into 2011. We had start of the year rather with --optimistically and then went into the Europe, downgrade of the U.S., blah blah and ended the year weakly. We started off very strong this year, now you are hearing these rumblings out of Europe. These are the things that are out of our control. That has been mostly impacted in the equity side of our business. The fixed income and the bank and just the private client brokerage business absent some real upheaval, I am optimistic about both the remainder -- certainly or the rise that I can see. So there’s not a lot that we can do about the overall global economic environment.

So sort of thinking about the fixed income market in the near term, I mean first quarter we had 3 high trades volumes and spreads only contracted. Is that a sustainable sort of number in the near term or should there be sort of a pullback in your opinion in the next couple of quarters?

A lot of people are concerned about fixed income in saying that what’s going to happen, when rates start to rise or whatever. I would say that fixed income volumes are substantially primarily because the average duration, I believe, the average duration for a lot of this portfolio is pretty short. And there is a lot of activity moving around in these portfolios. Certainly looking around our own bank, and look at the average duration, I think if that’s going on elsewhere I can see why volumes are okay. Look, they’re going to fluctuate the trade volumes and credit spreads going to do what they are going to do. But I think fixed income certainly is down from 2009 levels. But I think it’s a sustainable level at this point.

In terms of thinking about sort of 26 advisors you added this quarter, is that impacted in any way by some seasonality or the sort of how you see a potentially consistent run rate of new advisors being added throughout the year?

Well, seasonality because for us when we have seasonal departures, they occur in the first quarter and have to do with year-end reviews, et cetera. So most of our departures occur in the first quarter. So a net 26, I would hope would be -- the run rate would be higher.

And then just lastly, looks like other revenue was up a little bit more than we were modeling and from the prior quarter, what was driving that?

How about I say, I don’t know but I will try to answer before I get off the call.

Your next question comes from the line of Devin Ryan from Sandler O'Neill.

Just a couple of follow ups for me here. So first on the day trading obviously, you had a real nice rebound in taxable day trading. But I was a little surprised to see the 15% decline in muni, brokerage revenues from what was a tough quarter last quarter especially with Stone & Youngberg being on your platform a little bit longer this quarter. So just love to get some color there and follow up on that business going forward?

I think most of that decline, they don’t have it by group. I know that the activity in munis in the private client group was significantly lower. Okay, and so you’ve got to be care to remember, we are reporting these numbers across the board, and Stone & Youngberg has been a fantastic addition across many facets on the institutional side. But you’ve got to look at also as what’s going on in the private client group.

And then also just on the comp level, you mentioned the expensing of retirement eligible deferred comp, and how that negatively impacted the comp ratio in the quarter. Is that just a first quarter event or is that something that’s going to recur going forward in additional further quarters I guess?

That was the first quarter event.

Okay, so don’t expect that -- I mean is that always a first quarter event?

When it occurs, it occurs in the first quarter, because that’s when we are finally allocating bonuses and determining -- it’s a first quarter event when it happens.

Your next question comes from the line of Chris Harris from Wells Fargo.

So it sounds like you’re a little bit cautious as you remarked, but nothing terribly bearish. But I’m just kind of curious to get your sense of where kind of volumes have to go or how much does the business potentially needs to decline before we start looking at maybe doing something on the expense side of the ledger? It seems like you are wanting to continue to pull expenses where they are, keep headcount where they are, I am just wondering if things decline a lot further than you’re expecting, what are your thoughts there?

Look, first of all, I am striking somewhat of a cautious tone. Look at the markets the last week and I remember last year and I remember pipelines drying up because of increased volatility in choppy markets. But let’s not lose sight of the fact, we just had our second best quarter ever, $400 million of revenue, 15% margin across the board. We raised additional capital. I mean it’s not like we are struggling. We are having -- we had a very acceptable quarter and really didn’t fire on all engines that we can do in this firm. So I am cautious about the overall market but I am not concerned about the performance of this company. I think this company on a relative basis is performing fantastically. Am I thinking about -- am I worried about cutting expenses or worrying about headcount? No, I am worried about gaining in market share. So I am cautious about the market that we operate in, I am not really concerned about our positioning.

What do you think it’s going to take to get really equity volumes going again? I mean we’ve obviously seen a huge recovery in the market but really just people seem very disengaged. I'd love your opinion or some color there on what you think is, it’s where you’re going to get the fund flows getting positive or transaction volumes kind of increasing from here?

Well, couple things, one is I think you have to -- we all have to recognize that the volumes that occurred post the crisis were way above the mean. And so reversion to the mean is kind of what we are doing to where we are. I would hope that the level of activity is higher than what we are now but to get back to the volumes, and the volumes when Citigroup was trading like water, it was crazy, those volumes. We're not going to -- I don’t think that we’re going to get back to that. So that’s the first thing. So is it -- from these levels, I would like to think we are higher but we are not going to -- I don’t think we are going back to the 12 -- those days any time soon. But what I do think for the health of the equity market is we need to see flow of funds into equity, and not into -- we just don’t see net flows into equity that I think would be the foundation of a bull market. What it will take to do that is, it’s the confidence, it’s difficult policy getting arms around the budget all the things that concern people, the guys on CNBC not talking about end of the world, it seems like every other minute. Those kind of sentiment changes, so we will see, it’s an election year, and hope springs eternal.

And then switching gears, I guess a follow up here on the bank, I don’t think anybody could take issue with how well you guys have run the bank, I mean really very good performance there. But just wondering why loan growth hasn’t been a little bit stronger that has -- I mean I got it that you guys want to be kind of conservative growing the bank but it seems like you just have a tremendous opportunity to kind of increase the loan capacity there. So just wondering what you think about loan growth from here?

I think we have a ability and continued ability to grow the loan book. We are being prudent, we are growing on a prudent basis. The loan growth could be a lot faster if I didn’t think it would outstrip how we are building the bank. I have always said that banks that get into trouble are banks that grow too fast. And so we are just taking a prudent approach. There is a lot of loan demand and there are a lot of loans that we don’t do, and some of the best loans we made are the ones we haven’t made. So I don’t really have a comment on that. I am not disappointed at all about what’s going on in our bank.

There are no further questions at this time. I will turn the call back over to Mr. Ron Kruszewski.

Very good, operator. Well everyone on the call, thank you. I again want to conclude by saying that it was a very, very good quarter. Run rate revenues of $1.6 billion, acceptable margin and I see real opportunity to build our franchise while I am cautious about the macro-economic environment with which we are operating today. With that I look forward to talking to everyone next quarter. Bye.

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