Piper Jaffray Companies Announces 2005 Third Quarter Results

20 October 2005

Piper Jaffray Companies
(NYSE: PJC) today announced net income of $15.1 million, or $0.79 per diluted
share, for the quarter ended Sept. 30, 2005, up from $11.8 million, or
$0.61 per diluted share, for the year-ago period. In the second quarter of
2005, net income totaled $1.2 million, or $0.06 per diluted share, which was
reduced by a pre-tax restructuring charge of $8.6 million, or $0.29 per
diluted share after tax.
For the first nine months of 2005, net income was $23.7 million, or
$1.25 per diluted share, compared to $38.5 million and $1.99 per diluted share
for the year-ago period. Net revenues were $568.1 million year-to-date, down
5.8 percent from the first nine months of 2004. For the first nine months of
2005, annualized return on average tangible shareholders' equity(1) was
7.7 percent, compared to 13.3 percent for the first nine months of 2004.

Third Quarter Business Highlights

-- Generated total net revenues of $209.4 million, up 12.4 percent from
the year-ago period
-- Achieved an 11 percent pre-tax margin, the strongest level since
becoming a public company
-- Achieved record quarterly mergers and acquisitions revenues
-- As part of a European expansion of its healthcare franchise the firm's
London subsidiary:
-- became a member of the London Stock Exchange and commenced trading
in European stocks as well as market-making in 27 healthcare
stocks listed on that exchange,
-- initiated research coverage on nine UK-based healthcare companies,
and
-- was named an advisor on two cross-border mergers and acquisitions
transactions

"We are pleased with our improved revenues and profit margin, which were
driven by our record M&A results and the expense reductions we implemented
across the firm during the second quarter," said chairman and chief executive
officer Andrew S. Duff. "Our improved financial results demonstrate progress,
but we recognize we have further work to do to achieve consistent, competitive
performance."

Results of Operations

Net Revenues
Net revenues for the third quarter were $209.4 million, up 12.4 percent
and 16.5 percent from the third quarter of 2004 and the second quarter of
2005, respectively. The increase compared to both periods was mainly driven
by robust mergers and acquisitions revenues.

Non-Interest Expenses
For the quarter, non-interest expenses were $186.3 million, up
11.1 percent from the third quarter of 2004. Compensation expenses were
$129.2 million, up 13.1 percent from the year-ago period, mainly due to
increased variable compensation driven by higher net revenues and
profitability and due to personnel investments in the Capital Markets
business.
Non-compensation expenses were $57.1 million, up 6.8 percent from the same
quarter last year, mainly driven by increased litigation-related expenses.
Most other non-compensation expense categories were improved over last year
due in part to cost-reduction measures. Compared to the second quarter of
2005, non-compensation expenses declined by $10.6 million, or 15.6 percent,
primarily due to the pre-tax restructuring charge taken in the second quarter.
For the third quarter of 2005, pre-tax operating margin was 11.0 percent,
up from 10.0 percent for the year-ago period, and up significantly from
0.9 percent for the second quarter of 2005, which was adversely impacted by
the $8.6 million pre-tax restructuring charge. For the third quarter,
annualized return on average tangible shareholders' equity(1) was
14.8 percent, compared to 11.7 percent for the year-ago period.
During the third quarter of 2005, the firm repurchased 343,642 shares of
the company's outstanding common stock under its previously announced
repurchase program, at an average price of $31.96 per share.

Business Segment Review

Capital Markets
Capital Markets generated $124.0 million in net revenues for the quarter,
up $22.6 million, or 22.3 percent, from the year-ago period, and up
$26.4 million, or 27.0 percent, compared to the second quarter of 2005.
Segment pre-tax operating income for the quarter increased 43.2 percent to
$22.6 million compared to the third quarter of 2004, and rose 75.8 percent
compared to the second quarter of 2005.
Capital Markets revenue growth stemmed mainly from very strong mergers and
acquisitions activity. In addition, improved revenues from interest rate
products and cash equities sales and trading contributed to the strong
performance.

Institutional Sales and Trading
Institutional sales and trading net revenues were $50.0 million, up
17.1 percent from the year-ago period.

-- Equity sales and trading revenues were $31.6 million, an increase of
19.8 percent compared to the year-ago period, due primarily to higher
trading volumes and the addition of algorithmic and program trading.
-- Fixed income sales and trading revenues were $18.4 million, up
12.8 percent compared to the year-ago period. This growth in revenues
was primarily driven by higher revenues from interest rate products,
which were partially offset by lower secondary sales and trading
revenues due to the effects of TRACE (Trade Reporting and Compliance
Engine) and higher interest rates.

Investment Banking
For the quarter, investment banking revenues were $73.4 million, up
26.3 percent from the prior-year period, driven by record mergers and
acquisitions revenues.

-- Mergers and acquisitions revenues were $39.4 million, up 70.8 percent
compared to last year, driven by an increased number and value of
closed transactions.
-- Equity underwriting revenues were $18.2 million, up 7.9 percent from
the year-ago period, due to higher revenues from IPOs and follow-on
offerings.
-- Public finance investment banking revenues were $15.8 million, down
13.2 percent from the year-ago period. Public finance revenues were
very strong in both the third quarter of 2004 and the second quarter
of 2005.

Segment operating expenses for the quarter were $101.4 million, an
increase of $15.8 million, or 18.5 percent, from the same period a year ago,
driven by higher variable compensation expenses due to increased net revenues
and profitability and driven by personnel investments in the Capital Markets
business.
Segment pre-tax operating margin was 18.3 percent, up from 15.6 percent in
the year-ago period and 13.2 percent in the second quarter of 2005. The
improvement was due to higher revenues and lower non-compensation expenses.
Based on robust mergers and acquisitions activity, the firm significantly
increased its national ranking in this business to 12th, up from 24th for the
year-ago period. Following is a recap of completed deals and industry
rankings (based on the number of transactions completed) during the third
quarter of 2005:

-- 20 mergers and acquisitions transactions with an enterprise value of
$4.2 billion, ranking the firm 12th nationally. In the same period
last year the firm completed 13 transactions with an enterprise value
of $2.0 billion. (Source: Mergerstat)
-- 17 equity offerings, raising a total of $2.1 billion in capital, and
placing the firm 14th nationally. These results compare to completion
of 20 equity offerings in the same quarter last year for a total of
$3.3 billion in capital raised. (Source: Dealogic)
-- 107 tax-exempt issues with a total par value of $1.5 billion, ranking
the firm fourth nationally. In the third quarter of last year, the
firm completed 143 tax-exempt issues, with a total par value of
$1.6 billion. In the Upper Midwest, the firm completed 61 public
finance issues during the quarter with a total par value of
$487 million, ranking the firm the lead underwriter in this region.
The firm completed 82 public finance issues with a total par value of
$710 million in the Upper Midwest in the prior-year period. (Source:
Thomson Financial)

Private Client Services
For the quarter, Private Client Services recorded net revenues of
$87.3 million, up $2.4 million, or 2.9 percent, compared to the third quarter
of 2004. Net revenues increased 3.8 percent compared to the second quarter of
2005. Segment pre-tax operating income was $5.3 million, down 25.9 percent
from the third quarter of 2004, mainly driven by increased litigation-related
expenses. Segment pre-tax operating income increased 153.2 percent compared
to the second quarter of 2005, due to a modest increase in revenues and
essentially flat expenses.
Private Client Services benefited from increased private client activity
during the quarter and the continued increase in revenues from fee-based
accounts, which achieved another record level. For the third quarter,
fee-based account revenues accounted for nearly 21 percent of Private Client
Services' net revenues, up from 18 percent last year.
Segment operating expenses were $82.0 million for the quarter, up
5.5 percent from the year-ago period. Segment pre-tax operating margin for
the quarter was 6.1 percent, down from 8.4 percent in the third quarter of
2004 but improved from 2.5 percent for the second quarter of 2005.

Corporate Support and Other
Corporate Support and Other pre-tax operating loss was $3.9 million for
the third quarter of 2005, an increase of $0.7 million over the third quarter
of 2004, due to increased interest expense from higher interest rates on
subordinated debt.

Additional Shareholder Information

As of Sept. 30, As of June 30, As of Sept. 30,
2005 2005 2004

Full Time Employees: 2,879 2,907 3,029
Financial Advisors: 856 863 853
Client Assets: $52 billion $51 billion $49 billion
Shareholders' equity: $734.2 million $725.0 million $715.0 million
Book value per share: $39.96 $38.74 $36.98
Tangible book value
per share: $22.51 $21.58 $21.17

(1) Tangible shareholders' equity equals total shareholders' equity less
goodwill and identifiable intangible assets. For the period
presented, annualized return on average tangible shareholders' equity
is computed by dividing annualized net earnings by average monthly
tangible shareholders' equity. Management believes that annualized
return on tangible shareholders' equity is a meaningful measure of
performance because it reflects the tangible equity deployed in our
businesses. This measure excludes the portion of our shareholders'
equity attributable to goodwill and identifiable intangible assets.
The majority of our goodwill is a result of the 1998 acquisition of
our predecessor company, Piper Jaffray Companies Inc., and its
subsidiaries by U.S. Bancorp. The following table sets forth a
reconciliation of shareholders' equity to tangible shareholders'
equity. Shareholders' equity is the most directly comparable GAAP
financial measure to tangible shareholders' equity.

Average for the
Three Months Ended Three Months Ended As of
(Dollars in thousands) Sep. 30, 2005 Sep. 30, 2004 Sep. 30, 2005

Shareholders' equity $729,847 $708,640 $734,185
Deduct: Goodwill and
identifiable
intangible
assets 320,834 305,635 320,634
Tangible shareholders'
equity $409,013 $403,005 $413,551

Average for the
Nine Months Ended Nine Months Ended As of
(Dollars in thousands) Sep. 30, 2005 Sep. 30, 2004 Sep. 30, 2005

Shareholders' equity $731,413 $692,630 $734,185
Deduct: Goodwill and
identifiable
intangible
assets 321,234 305,635 320,634

Tangible shareholders'
equity $410,179 $386,995 $413,551

Conference Call
Andrew S. Duff, chairman and chief executive officer, and Sandra G.
Sponem, chief financial officer, will host a conference call to discuss third
quarter 2005 financial results on Wednesday, Oct. 19, 2005, at 11 a.m. ET
(10 a.m. CT). The call can be accessed via live audio webcast available
through the firm's web page, http://www.piperjaffray.com , or by dialing
(866) 244-9933, or (706) 643-7489 international, and referring to conference
ID 9434678 and the leader's name, Andrew Duff. Callers should dial in at
least 15 minutes early to receive instructions. A replay of the conference
call will be available beginning at approximately 1 p.m. ET Oct. 19 at the
same web address or by calling (800) 642-1687 or (706) 645-9291 international.

About Piper Jaffray Companies
Piper Jaffray Companies (NYSE: PJC) is a focused securities firm dedicated
to delivering superior financial advice, investment products and transaction
execution within selected sectors of the financial services marketplace. The
company operates through two primary revenue-generating segments: Capital
Markets and Private Client Services. Through its chief operating subsidiary,
Piper Jaffray & Co., the firm has served corporations, government and
non-profit entities, institutional investors and the financial advisory needs
of private individuals since 1895. Headquartered in Minneapolis, Piper
Jaffray has approximately 3,000 employees in 104 offices in 23 states across
the country and in London. For more information about Piper Jaffray, visit us
online at http://www.piperjaffray.com .

Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements. Statements that
are not historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. These forward-looking
statements cover, among other things, the future prospects of Piper Jaffray
Companies. Forward-looking statements involve inherent risks and
uncertainties, and important factors could cause actual results to differ
materially from those anticipated, including the following: (1) we have agreed
to certain restrictions to preserve the tax treatment of our spin-off from
U.S. Bancorp, which reduce our strategic and operating flexibility, (2) we
have agreed to indemnify U.S. Bancorp for taxes and related losses resulting
from any actions we take that cause the spin-off to fail to qualify as a
tax-free transaction, (3) developments in market and economic conditions have
in the past adversely affected, and may in the future adversely affect, our
business and profitability, (4) we may not be able to compete successfully
with other companies in the financial services industry, (5) our underwriting
and market-making activities may place our capital at risk, (6) an inability
to readily divest or transfer trading positions may result in financial losses
to our business, (7) use of derivative instruments as part of our risk
management techniques may place our capital at risk, while our risk management
techniques themselves may not fully mitigate our risk exposure, (8) an
inability to access capital readily or on terms favorable to us could impair
our ability to fund operations and could jeopardize our financial condition,
(9) we may make strategic acquisitions of businesses, engage in joint ventures
or divest or exit existing businesses, which could cause us to incur
unforeseen expense and have disruptive effects on our business but may not
yield the benefits we expect, (10) our technology systems are critical
components of our operations, and the failure of those systems may disrupt our
business, cause financial loss and constrain our growth, (11) our business is
subject to extensive regulation that limits our business activities, and a
significant regulatory action against our company may have a material adverse
financial effect or cause significant reputational harm to our company, (12)
regulatory capital requirements may adversely affect our ability to expand or
maintain present levels of our business or impair our ability to meet our
financial obligations, (13) our exposure to legal liability is significant,
and could lead to substantial damages, (14) we may suffer losses if our
reputation is harmed, (15) provisions in our certificate of incorporation and
bylaws and of Delaware law may prevent or delay an acquisition of our company,
which could decrease the market value of our common stock, and (16) other
factors identified in the document entitled "Risk Factors" filed as Exhibit
99.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005,
and in our subsequent reports filed with the SEC. These reports are available
at our Web site at http://www.piperjaffray.com and at the SEC Web site at
http://www.sec.gov . Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update them in light of new
information or future events.

Since 1895. Member SIPC and NYSE.

Piper Jaffray Companies
Preliminary Unaudited Results of Operations

For the Three Months Ended Percent Inc/(Dec)
(Amounts in thousands, Sept. 30, June 30, Sept. 30, 3Q05 vs. 3Q05 vs.
except per share data) 2005 2005 2004 2Q05 3Q04
Revenues:

Commissions and fees $73,045 $67,879 $61,187 7.6% 19.4%
Principal transactions 35,637 38,158 39,813 (6.6) (10.5)
Investment banking 81,091 55,024 65,204 47.4 24.4
Interest 18,231 17,052 12,962 6.9 40.6
Other income 11,336 11,267 13,571 0.6 (16.5)

Total revenues 219,340 189,380 192,737 15.8 13.8

Interest expense 9,979 9,715 6,512 2.7 53.2

Net revenues 209,361 179,665 186,225 16.5 12.4

Non-interest expenses:

Compensation and benefits 129,196 110,383 114,197 17.0 13.1
Occupancy and equipment 14,295 14,419 14,968 (0.9) (4.5)
Communications 9,362 10,299 10,558 (9.1) (11.3)
Floor brokerage and
clearance 4,473 4,732 4,068 (5.5) 10.0
Marketing and business
development 9,243 10,014 9,723 (7.7) (4.9)
Outside services 10,894 12,374 11,215 (12.0) (2.9)
Cash award program 1,005 1,061 1,219 (5.3) (17.6)
Restructuring-related
expense - 8,595 - N/M N/M
Other operating expenses 7,828 6,196 1,702 26.3 359.9

Total non-interest
expenses 186,296 178,073 167,650 4.6 11.1

Income before income tax
expense 23,065 1,592 18,575 1348.8 24.2

Income tax expense 7,917 355 6,806 2130.1 16.3

Net income $15,148 $1,237 $11,769 1124.6% 28.7%

Earnings Per Common Share
Basic $0.80 $0.07 $0.61 1042.9% 31.1%
Diluted $0.79 $0.06 $0.61 1216.7% 29.5%

Weighted average number of
common shares
Basic 18,841 19,028 19,333 (1.0)% (2.5)%
Diluted 19,107 19,195 19,387 (0.5)% (1.4)%

N/M - Not Meaningful

Piper Jaffray Companies
Preliminary Unaudited Results of Operations

For the Nine Months Ended
(Amounts in thousands, except per share Sept. 30, Sept. 30, Percent
data) 2005 2004 Inc/(Dec)
Revenues:

Commissions and fees $211,084 $196,475 7.4%
Principal transactions 108,659 142,132 (23.6)
Investment banking 192,437 198,246 (2.9)
Interest 50,885 40,157 26.7
Other income 33,330 44,378 (24.9)

Total revenues 596,395 621,388 (4.0)

Interest expense 28,301 18,460 53.3

Net revenues 568,094 602,928 (5.8)

Non-interest expenses:

Compensation and benefits 348,981 371,594 (6.1)
Occupancy and equipment 42,741 42,383 0.8
Communications 30,066 31,728 (5.2)
Floor brokerage and clearance 13,408 13,427 (0.1)
Marketing and business development 29,907 31,516 (5.1)
Outside services 33,907 30,295 11.9
Cash award program 3,202 3,559 (10.0)
Restructuring-related expense 8,595 - N/M
Other operating expenses 21,151 16,989 24.5

Total non-interest expenses 531,958 541,491 (1.8)

Income before income tax expense 36,136 61,437 (41.2)

Income tax expense 12,416 22,898 (45.8)

Net income $23,720 $38,539 (38.5)%

Earnings Per Common Share
Basic $1.26 $1.99 (36.7)%
Diluted $1.25 $1.99 (37.2)%

Weighted average number of common shares
Basic 18,814 19,333 (2.7)%
Diluted 19,007 19,383 (1.9)%

N/M - Not Meaningful

Piper Jaffray Companies
Preliminary Unaudited Segment Data

For the Three Months Ended
September June September Percent Inc/(Dec)
30, 30, 30, 3Q05 vs. 3Q05 vs.
(Dollars in thousands) 2005 2005 2004 2Q05 3Q04
Capital Markets

Institutional Sales
Fixed Income $18,439 $19,354 $16,348 (4.7)% 12.8%
Equities 31,576 29,418 26,363 7.3 19.8

Total Institutional
Sales 50,015 48,772 42,711 2.5 17.1

Investment Banking
Underwriting
Fixed Income 15,809 19,758 18,223 (20.0) (13.2)
Equities 18,166 16,960 16,836 7.1 7.9
Mergers and
Acquisitions 39,432 11,240 23,083 250.8 70.8

Total Investment
Banking 73,407 47,958 58,142 53.1 26.3

Other Income 565 868 495 (34.9) 14.1

Net revenues 123,987 97,598 101,348 27.0 22.3

Operating expenses 101,355 84,726 85,539 19.6 18.5

Segment pre-tax
operating income $22,632 $12,872 $15,809 75.8% 43.2%

Segment pre-tax
operating margin 18.3% 13.2% 15.6%

Private Client Services

Net revenues $87,292 $84,081 $84,872 3.8% 2.9%
Operating expenses 81,980 81,983 77,703 (0.0) 5.5
Segment pre-tax
operating income $5,312 $2,098 $7,169 153.2% (25.9)%

Segment pre-tax
operating margin 6.1% 2.5% 8.4%

Corporate Support and
Other
Net revenues $(1,918) $(2,014) $5 (4.8)% N/M
Operating expenses 1,956 1,708 3,189 14.5 (38.7)%
Segment pre-tax
operating loss $(3,874) $(3,722) $(3,184) 4.1% 21.7%

Segment pre-tax
operating margin N/M N/M N/M

Reconciliation to total
income before taxes:
Total segment pre-tax
operating income $24,070 $11,248 $19,794 114.0% 21.6%
Cash award program 1,005 1,061 1,219 (5.3) (17.6)
Restructuring related
expense - 8,595 - N/M N/M
Total income before tax
expense $23,065 $1,592 $18,575 1348.8% 24.2%

Pre-tax operating margin 11.0% 0.9% 10.0%

N/M - Not Meaningful

Piper Jaffray Companies
Preliminary Unaudited Segment Data

For the Nine Months Ended
September 30, September 30, Percent
(Dollars in thousands) 2005 2004 Inc/(Dec)
Capital Markets

Institutional Sales
Fixed Income $54,111 $60,002 (9.8)%
Equities 87,314 91,115 (4.2)

Total Institutional Sales 141,425 151,117 (6.4)

Investment Banking
Underwriting
Fixed Income 47,199 47,483 (0.6)
Equities 55,464 64,642 (14.2)
Mergers and Acquisitions 67,246 62,634 7.4

Total Investment Banking 169,909 174,759 (2.8)

Other Income 2,196 1,132 94.0

Net revenues 313,530 327,008 (4.1)

Operating expenses 266,499 275,057 (3.1)

Segment pre-tax operating income $47,031 $51,951 (9.5)%

Segment pre-tax operating margin 15.0% 15.9%

Private Client Services

Net revenues $260,572 $270,773 (3.8)%
Operating expenses 248,351 249,543 (0.5)
Segment pre-tax operating income $12,221 $21,230 (42.4)%

Segment pre-tax operating margin 4.7% 7.8%

Corporate Support and Other
Net revenues $(6,008) $5,147 N/M
Operating expenses 5,311 13,332 (60.2)%
Segment pre-tax operating loss $(11,319) $(8,185) 38.3%

Segment pre-tax operating margin N/M N/M

Reconciliation to total income
before taxes:
Total segment pre-tax operating
income $47,933 $64,996 (26.3)%
Cash award program 3,202 3,559 (10.0)
Restructuring related expense 8,595 - N/M
Total income before tax expense $36,136 $61,437 (41.2)%

Pre-tax operating margin 6.4% 10.2%

N/M - Not Meaningful