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 Fourth Quarter Earnings Call 2013. 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 will now turn the call over to Jim Zemlyak, CFO at Stifel. You may begin your conference.

Thank you, Mike. 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 fourth quarter and full year 2013 results. Please note that this conference call is being recorded. If you’d like to follow on with today’s slide presentation, you may download 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. Slide 1 of today's presentation covers this in greater detail. Forward-looking statements are not statements of facts 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 MD&A section of the Company’s annual report on Form 10-K. With that, I would like to turn the call over to our Chairman, CEO and President of Stifel Financial, Ron Kruszewski.

Thank you, Jim. I'd like to start off today's call with my overall comments, which are that, we are very pleased to post our 18th consecutive year of record net revenues at Stifel. These results speaks to the dedication of our over 5,800 professionals as well as to our balanced business model. Non-GAAP net income from continuing operations for the year improved over the prior year as a result of both better market conditions and the benefits of our recent acquisitions. Looking forward, we will continue to take advantage of opportunities in the marketplace that add to shareholder value. Now turning towards looking at the market overview, client activity in the last quarter of the year was [excellent] (ph). Both equity and corporate bond average daily volume was up 4% sequentially. U.S. equity capital markets finished the year strong, up in terms of both number of transactions, they were up 14% in dollar volume which was up 55%. This is reflected in our strong investment banking results for the quarter. New bond activity was up 8% sequentially, although debt capital market activity declined. Domestic equity flows in mutual funds were positive for all four quarters of 2013. Now, our current outlook of the market could be summed up with a word which I believe is going to be 'choppy'. The year ended, 2013 ended with great optimism reflected in the strong market rally and the hand-off to 2014 was expected to be strong. However, the hand-off at this point appears to be at best a limp handshake. Many of the economic indicators, housing, manufacturing, retail sales are coming in weak and below expectation. Common explanation is weather and an increase in inventories in the second half of 2013, although while certainly an impact in my belief is that the general…

(Operator Instructions) Your first question is from Hugh Miller with Sidoti & Co. Your line is open. Hugh Miller - Sidoti & Co.: So I guess wanted to start off a little bit on the investment banking side of the business and obviously you guys commented about not annualizing this number on a go forward basis, but I realize that advisory revenue can sometimes benefit from a year-end push but do you feel as though any of the business kind of possibly that pulled forward and closed during the quarter, this is demand expected was going to close in 1Q, or how should we be thinking about that?

As I said, look, I think that the fourth quarter historically for us being a year-end and for whatever reasons, some years are tax motivated, other reasons are just people trying to get things done within a calendar year. The fourth quarter is historically a quarter where business is strongest, and my comment there is that, I don't think that if you take $160 million annualized, [$700 million or $750 million] (ph), that's a lot, and it was a great quarter. Here I'm just trying to show that we consistently build this segment and I believe that we can build it from here, but investment banking is historically more cyclical and can be lumpy. I'm not sure if that answered your question, it was a strong quarter but reflects in many ways the investments we've made in the past, primarily KBW and Miller Buckfire, along with some strong additions we've made on the historical Stifel platform. Hugh Miller - Sidoti & Co.: Sure, okay, and I appreciate the color you gave on the overall market environment, and it kind of seems like you gave a balanced assessment there. I realize that some of the online brokerage companies aren't the best measure for your firm, but some of them are seeing strong returns in January commenting kind of that the level of client engagement have been substantially stronger than what we've seen in some time and kind of a growing appetite for risk, and I was wondering if you could talk to us about what your financial advisors are seeing with their clients and whether or not there is an increase in the retail investor with risk appetite?

Look, I think a lot of what I see, and I only see what you see in many of these firms, but when the markets are up as much as they are and you have activity and the process, et cetera, et cetera, it's not surprising for me to see the DARTs, the daily trades as the discounters go up. I think that's more reflective of maybe the day-traders in many ways. I mean I think engagement has never – has always been strong here, it's been more fixed income than equity, and we're seeing more equity engagement but I wouldn't say that we're seeing the increase here in terms of equity engagement that maybe is indicative of what you're seeing in some of the discount brokers DARTs, but I'm also not surprised by that. Hugh Miller - Sidoti & Co.: Okay, I appreciate the insight there. And as we turn to kind of the advisor recruiting, we've been hearing a little bit about some of your peers that are starting to get excited a bit more about the environment, it's been a little bit more challenging than it was during the credit crisis, but that [aggregate condition] (ph) of seeing retention awards does create some opportunity. I was wondering if you can talk about what you're seeing with advisor recruiting interest and also on the potential for Wealth Management M&A for your firm on that basis as well?

Well, first question – you asked two questions there – on the first, our recruiting is based upon our financial models which are not always in line with the competitive environment of recruiting. If we don't see an increase to shareholder value through recruiting, we won't adjust our deals accordingly, and that's really been the case for the past actually several years now, as I think that there's been stabilization efforts of the largest firms defined by keeping headcount constant, defined by recruiting as many people as you're losing, which there's been a lot of shuffling going on between major firms and big deals, but we don't play there. Has that gotten better? I think it has but I would say marginally. I don't feel that there is – you're going to see a return to the recruiting that we saw in 2009 and 2010, both because of environment is a lot more stable for one, and for us we're still not going to play in a dilutive recruiting environment, dilutive to earnings. So that's my overall view. I forgot, what was your second question? Hugh Miller - Sidoti & Co.: The other was just with regards to M&A on that landscape.

Look, M&A for us is very opportunistic and when I look back at our M&A in Global Wealth Management, the reasons that they all occurred are as numerous as the deals themselves. So I generally would say that in strong equity markets, M&A is not as prevalent as it is in weaker markets, and we just flipped through a market that was up 30% and it leaves its teachings all in here. So I would not say that this market is conducive to M&A which is generally – will be mostly driven because of one factor, it will be weak markets and people having fear, which we don't have today. So, not something that I'm going to say is a robust Global Wealth Management M&A market, not at the prices that we would want to pay. Hugh Miller - Sidoti & Co.: Sure, okay, I appreciate that. And last question just with regards to I guess the tick size pilot program that the SEC is testing to potentially look at kind of small caps with wider spreads and wanted to get your thoughts there and whether or not you view that as an opportunity for the Institutional commissions for your business?

Look, a lot of the Institutional flow business for the most part is in the high – the liquid names and the flow, that's the way the business has evolved, primarily because spreads in the ticks have narrowed to sub-penny. What has then happened is, in my opinion, has been almost a destruction of the ecosystem for small-cap companies, in that it is very difficult to support both through research and through trading companies that have small-market cap. So to answer your question, I am encouraged by the fact that we have policy-makers that recognize that to encourage capital formation and to encourage an environment that allows small-cap companies to grow through the capital markets and not just sell, that there is some minimum spread that can be almost an opt-in system. So what does it mean to the flow business? I don't think it means much. What does it mean to the potential for capital raising or capital formation? I think a lot. If you couple this with some of the other things that you're seeing, like the confidential process that you can file IPOs, has helped. And so that depends on appear to be swinging towards recreating of an ecosystem which can allow companies with post-IPO market caps of $200 million to $250 million to get the market support required so that they can be relevant, and in the end that will be positive for a firm like ours that has a lot more influence, a lot more focus in that market. We talk about wanting to be, and in many ways are, the top investment banker to that segment and so the supporting of that ecosystem is important to us and I'm encouraged by it. Hugh Miller - Sidoti & Co.: Okay, appreciate your thoughts. Thank you.

Your next question is from Devin Ryan with JMP Securities. Your line is open.

I just have a question on excess capital or capital return, I mean obviously it still seems like there's lot of attractive areas to put capital back into the business and the Bank is an example of it, you guys have talked about. Just trying to think about are there other areas that you can actually return capital or there are just so many attractive areas to put capital back into the business that that's more compelling use right now?

I mean as I understand your question, in its simplest answer, we can deploy excess leverage by adding assets to the balance sheet, i.e. deal with the numerator of the equation, and/or look at the denominator which is equity, and as an example buy back stock or look at ways to reduce the denominator, which is the equity base. And my view on it has been, certainly if you look at it very simplistically, leveraging the balance sheet is much more accretive to shareholders than say buying back stock in terms of what we can do to get book dilution and you have a number of things. So we are looking at leveraging our balance sheet to what we believe are significant growth opportunities. I think that's been our past and as I look forward, I think it's our future, not to say there's no more growth opportunities. So since the beginning of the financial crisis, we have tripled revenues. You can look at all of our numbers, I won't bore you with them, but that was opportunities that we see to deploy capital versus return it and I would say that my mindset today is to deploy capital with the appropriate return hurdles. We're not looking to dilute shareholder value, we're looking to accrete shareholder value, and we see opportunities to deploy capital in our businesses versus dealing with the denominator.

Got it. I appreciate the update, I just wanted to get the current thoughts there. And then just with respect to the fixed income business, walk again maybe your view of how the Knight Group has been performing relative to expectations when you made the acquisition, if there's additional upside in that Group relative to kind of the run rate?

Yes, I mean I think I have said that I thought my expectations – I'll correct this if I'm wrong because I don't have it in front of me, but I think I said $70 million to $100 million in revenue and I would say that it's within that range. As any business, you've got to get traction and get going. That business is not unlike any deal we've done and that capability leads to other opportunities to leverage revenues. So I'm pleased with where that's gone and it has opened other doors and we're evaluating other opportunities as a result of that. I would say that it is performing well within our initial expectations. But frankly for the six months, I would tell you it probably exceeded my expectations as to what – it always takes time to start a business up or transfer a business to a new platform. And so I'm pleased with our results thus far.

Okay great. And then just lastly on the expense base and the opportunity to reduce the non-comp ratio over time, I mean is there any low hanging fruit there that you feel like it is easier than others to kind of pick out the expense base and maybe what are some of the areas where you feel like that there's still some wood to chop there?

I think, again, we talk about – I think you have to look at the fact that we have done a very good job of integrating businesses, and if you look historically, after we get through our merger related expenses, our margins have remained consistent at about 15%. I see though the ability to even have more leverage to an overall cost basis and while we continue to make progress on that front, we also continue to grow. And so while I can point to numerous cost reductions in numerous places where we have consolidated rent and saved millions here or a couple of million there, we also did KBW, Knight, Acacia, and Ziegler, those all deals we did last year, those all in and of themselves increased the expense rate and the inefficiency in the short run. So look, at the end of the day, 22.5% in my way of thinking about the business, all else being equal, we can produce and we'll continue to leverage, but I want to compliment our team at also doing all of these and maintaining 15% margin. So do I see opportunity? Yes. I'm often frustrated that I see all these cost saving initiatives come through yet that ratio stays stubbornly in the 22%, mid-22% range and I've looked at it a number of times and I have decided that our acquisition appetite has something to do with that.

Got it, appreciate the color and congrats again on the nice quarter.

Your next question is from Michael Wong with Morningstar. Your line is open.

I believe that you said previously that you're trying to get your Bank assets to 50% loans and 50% securities. Will it be more of the penetration with your retail corporate clients, general growth with the recovering economy, buying loan portfolios or something else?

All of the above. Look, I mean I think what we've said is that we always look – and I don't mean we have a flip band per hedge, I mean I don't really know because Acacia was an opportunity we took advantage of. I will say that our approach at loan growth has been what I would characterize more as natural to our clients versus wholesale. So I don't want to say we're going to get to 50% loans to investments by doing shared national credit and selling our investment portfolio. That we could do but that is not then our strategy today. What we do want to do is increase our loans almost organically and naturally, and as I see it, the Bank has gotten a sufficient scale where we are focusing on increasing our net interest margin and also increasing the loan book relative to the investment book. How it gets there is through our Global Management business, through our Institutional business and potentially through acquisitions, if they still arise.

Okay. And just following up on that a little bit, you also still mentioned before maybe more asset-based lending, and with regards to that program, how much of those securities-based loans in the Bank would be let's say incremental as opposed to substitution for margin loans?

I think most of the substitutions occurs to the extent that it has. I would like to think that that growth of certainly security-based product lending is incremental, and I certainly look at it combined, Reg T and Reg U in my mind, the location might be separate but it's part of the loan book, we manage it that way. But I think I would just be repeating my answer to your previous question if I went much further on that.

Okay, thanks.

The next question is from Patrick O'Shaughnessy with Raymond James. Your line is open.

Just my question is, with the Global Wealth Management segment at this point, you are growing your advisor base kind of 1% to 2% a year for past couple of years and it sounds like you don't really think that's going to dramatically accelerate from here. So kind of putting the Bank growth aside, what is your framework for your growth model for the Global Wealth Management segment at this point?

Despite all of that, Patrick, we've probably been at the top of the recruiting list of anyone in terms of number of net advisors. I think that – I'm not saying that we are accepting 1%, 2% or 3% net growth, many people have net declines, I'm not accepting that, I'm saying that we are going to recruit on an economic model that makes sense. If I was going to say I want to grow our advisor base by 15% and took our deal up significantly, we would far exceed that in our ability to recruit. We recruit at a significant discount, which has been the case for the last few years. So I believe that pendulum has a way of swinging both ways and we've been in business for long time and I'd rather keep our powder dry. There will come a time, either through a potential acquisition or by a change in the environment or a change in the competitive landscape of recruiting, that we will be able to go back to 10%, 15% growth, but we're not going to have that as a target and sacrifice that at the altar of financial returns.

That's helpful. And then kind of building off a point that you mentioned, a lot of your or most of your recent acquisitions have been in the Institutional space, what sort of opportunity is out there for acquisitions in the Global Wealth Management space at this point?

I think again, you look at what really has happened in the last few years, if you had a significant increase in the equity valuation from the crisis flow, and we all know the numbers and the equity valuations, multiple expansions, last year they were up 30%, and so the overall environment in the Global Wealth Management business with that kind of business has been – it's been a very strong market to be talking about whether or not that's conducive to Global Wealth acquisitions or what have you. On the other hand, in that same environment, you've had the Institutional volumes, Institutional equity volume grow from $10 billion a day to $5 billion a day and fixed income go from the securitization money machine to – that business model got broke. And so what happened was that all of our opportunities that we saw that we could add shareholder value have been on the Institutional space. It's not that I suddenly have become myopic in the Institutional space, it's because that's where we saw value opportunities, and I think frankly the last quarter is proving that up, that we've made the right deals at the right time. And so in the past the opportunities have been to do mergers with the Stone & Youngbergs and the KBWs and the Thomas Weisel Partners and the Miller Buckfires, all of which are exceeding where they would have been before we did the deal with them and we've not seen the same opportunity in Global Wealth Management. If we do, we'll execute.

Got you, that's helpful. On KBW, now that you have a few quarters under your belt with that being integrated, how is it going, I think in particular on your Institutional equities business, trying to make sure that you're still getting I guess two separate checks from your clients, the KBW check, the Stifel check, what sort of pushback are you getting from them, and I guess just in general, how is that kind of a separate carve out of the KBW folks, how is that going?

I couldn't be more pleased. I mean our volumes in almost any way that you measure it, our market share is up, and the answer is that while the Street in general, both the buy and the sell side, maybe questioned our strategy, what came out of it was an underscoring of the fact that if you provide service in a sector to a marketplace, you will get paid. The KBW brand and where they trade and where they research is so strong in financial services that the fact that we left it alone and didn't talk about all the things that we were about talking about, is not a testament necessarily to the fact that there's two different brands, the testament is that they provide value in the financial services sector that no one else really does and we kept that value in terms of sales trading and research and the market did what they should've done which was reward us for doing that. I think the integration has gone exceedingly well, both from a people and a market acceptance. If I have any disappointment, it's the fact that in any year of integration you play defense instead of offense and we played a lot of defense last year and I'm looking forward to some nice market share gain in that space and I couldn't be more pleased with the integration of the KBW brand under the Stifel umbrella both, you name it, from investment banking, equity flow business, research, our trading volumes, I could bore you with statistics but they are all up.

Okay, great. And one last question for me, in your commentary about earnings this quarter, I think you kind of alluded to a normalized tax rate of 38.5%. Is that a reasonable rate to kind of be using to model you guys going forward?

Yes, look, I often say 39% and I always say 39%, it always comes in at 38.5%, and so if I go talk to my tax guys, they pick 39% and I always say, whatever. So, in that range, 38.5%, 39%, you can pick a number. I thought 38.5% was appropriate certainly for this quarter. Going forward, there's a lot of things. We've been more impacted by our international operations in our tax rates, and then as we've made investments, both the discontinuing of Canada plus the investments we've made in Europe, I think will make the 38.5% more achievable, but it's like interest rates, I don't like predicting tax rates.

Alright, understood. Thank you.

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

My closing remarks is that I would like to congratulate my partners at Stifel on a great year. We've been busy building this Company from $100 million of revenue back in the late 90s to $2 billion today, and I believe that as the shareholders of this organization, we continue to look forward to opportunities and continue to provide above-market shareholder returns. I look forward to reporting first quarter 2014 results and thank you for your interest in our Company. With that, we will say, goodbye.

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