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Record Fourth Quarter Revenues of $176.4 million

MINNEAPOLIS, Jan 26, 2011 (BUSINESS WIRE) --

Piper Jaffray Companies (NYSE: PJC) today announced net income of $9.4 million, or $0.49 per diluted common share, for the fourth quarter ended Dec. 31, 2010. These results were reduced by $0.48 per diluted common share, due to a $9.1 million after-tax charge ($9.5 million pre-tax), substantially all of which related to the previously-announced restructuring of the firm's European operations. On a non-GAAP, core basis for the quarter, which excludes the restructuring charge, results were $0.97 per diluted common share. For the fourth quarter of 2009, Piper Jaffray recorded net income of $12.3 million, or $0.63 per diluted common share, and net income of $7.1 million, or $0.36 per diluted common share, for the third quarter of 2010. Fourth quarter 2010 net revenues were a record $176.4 million, compared to $132.9 million in the year-ago period, and $116.5 million for the third quarter of 2010.

For the year ended Dec. 31, 2010, net income was $24.4 million, or $1.23 per diluted common share, which included $10.2 million (after-tax) of restructuring charges and $4.0 million (after-tax)for the reversal of previously recognized expense related to performance-based restricted stock awards. In 2009, net income was $30.4 million, or $1.55 per diluted common share. Net revenues were $530.1 million for the twelve months ended Dec. 31, 2010, up 13 percent compared to last year, the highest since Piper Jaffray became a public company in 2003.

"We are very pleased with our strong fourth quarter results, reflecting solid performance in all of our businesses," said Andrew S. Duff, chairman and chief executive officer. "In 2010, we took actions to improve our profitability and return on equity for the longer term. We materially diversified our business mix with the addition of Advisory Research and the improved profitability of FAMCO. For 2010, asset management comprised 13 percent of total net revenues and 28 percent of operating income, up from 3 percent and a loss in 2009, respectively. Also, we completed a significant restructuring of our European operations. Europe will continue to be an important market for us in distributing U.S. and Asia securities and facilitating global M&A business, but we will no longer originate or distribute European securities."

Duff added: "In 2011, we remain committed to further improving our productivity, profit margins and return on equity. We are optimistic about how our firm is positioned against an improving macroeconomic backdrop, yet are cautious about the potential for volatile periods in the capital markets in the year ahead."

Fourth Quarter
Consolidated Expenses
For the fourth quarter, compensation and benefits expenses were $106.4 million compared to $79.8 million in the fourth quarter of 2009, and $66.1 million in the third quarter of 2010. Compensation and benefits expenses increased compared to both periods due to the improved performance during the quarter. Also, the third quarter of 2010 included a $6.6 million reversal of previously recognized compensation expense related to performance-based restricted stock grant awards that are no longer expected to be earned.

For the fourth quarter, compensation and benefits expenses as a percentage of net revenues were 60.3 percent, compared to 60.0 percent for the fourth quarter of 2009 and 56.7 for the third quarter of 2010, which was reduced by 5.6 percentage points due to the reversal of previously recognized compensation expense as described above.

Non-compensation expenses were $46.9 million, an increase of 37 percent compared to the fourth quarter of 2009, mainly due to the $9.5 million (pre-tax) restructuring charge and the addition of Advisory Research, which increased intangible amortization expense. Fourth quarter non-compensation expenses increased 27 percent compared to the third quarter of 2010, mainly driven by the $9.5 million restructuring charge.

Fourth Quarter
Business Segment Results

The firm has two reportable business segments: Capital Markets and Asset Management. Consolidated net revenues and expenses are fully allocated to these two segments.

Capital Markets
Capital Markets generated pre-tax operating income of $16.0 million, which was reduced by $9.4 million (pre-tax) of restructuring charges, compared to $18.7 million in the fourth quarter of 2009, and $9.3 million in the third quarter of 2010. Net revenues of $151.0 million rose 18 percent and 52 percent, compared to the year-ago period and the third quarter of 2010, respectively.

The following is a recap of completed deal information for the fourth quarter of 2010:

Asset Management
For the quarter ended Dec. 31, 2010, asset management generated pre-tax operating income of $7.1 million, compared to $0.3 million in the fourth quarter of 2009, and $4.3 million in the third quarter of 2010. Net revenues of $25.3 million rose from $4.9 million in the year-ago period, primarily attributable to the acquisition of Advisory Research. Revenues rose 49 percent, or $8.3 million, compared to the third quarter of 2010, mainly driven by performance fees.

Other Matters
In the fourth quarter of 2010, $2.4 million, or 84,005 shares, of the firm's common stock was repurchased pursuant to a share repurchase authorization. The average price per share repurchased was $28.62. The firm has $57.4 million remaining on a share repurchase authorization which expires on Sep. 30, 2012.

Full Year 2010
Consolidated Expenses
For the year ended Dec. 31, 2010, compensation and benefits expenses were $315.2 million, up 12 percent compared to $281.3 million in 2009. The increase was attributable to higher revenues, including ten months of Advisory Research revenues.

Non-compensation expenses were $157.2 million, up 20 percent compared to 2009, mainly due to restructuring charges related to the firm's European operations and the addition of Advisory Research, including intangible amortization expense.

Full Year 2010
Business Segment Results

Capital Markets
For the year ended Dec. 31, 2010, Capital Markets generated pre-tax operating income of $41.6 million, compared to $59.3 million in 2009. The lower results were primarily due to higher restructuring charges and a lower contribution from fixed income institutional brokerage. Net revenues were $462.9 million, up 2 percent compared to the year-ago period. Equity financing and advisory services revenues substantially increased compared to the prior year, and were largely offset by decreased revenues in debt financings and institutional brokerage.

Operating expenses for the year were $421.3 million, up 7 percent compared to 2009, due to higher compensation expenses, and higher non-compensation expenses, driven by restructuring charges. For the year, segment pre-tax operating margin was 9.0 percent compared to 13.1 percent in 2009.

The following is a recap of completed deal information for the full year of 2010:

Asset Management
For the year ended Dec. 31, 2010, Asset Management generated pre-tax operating income of $16.1 million, compared to a loss of $2.8 million in 2009. Net revenues were $67.2 million compared to $14.9 million last year. The significant increase in revenues was driven by the acquisition of Advisory Research and performance fees.

Operating expenses for the year were $51.1 million, including $7.5 million of intangible amortization expense, compared to $17.7 million in 2009. Segment pre-tax operating margin was 24.0 percent compared to (18.5) percent last year.

Other Matters
For the full year, $47.6 million, or 1,517,587 shares, of the firm's common stock was repurchased pursuant to a share repurchase authorization. The average price per share repurchased was $31.37.

Additional Shareholder Information

As of Dec. 31, 2010 As of Sep. 30, 2010 As of Dec. 31, 2009
Number of employees: 1,031 1,082 1,039

Asset Management

$12.3 billion $12.8 billion $6.9 billion
AUM:
Shareholders' equity:

$813.3 million

$804.7 million $778.6 million
Annualized Qtrly.
Return on Avg.

5.4%

4.0%

7.3%

Adjusted

Shareholders' Equity1

Book value per share: $55.50 $54.73 $49.80
Tangible book value $29.42 $28.97 $38.50

per share2:

1Adjusted shareholders' equity equals total shareholders' equity, including goodwill associated with acquisitions, less goodwill resulting from the 1998 acquisition of our predecessor company, Piper Jaffray Companies Inc., by U.S. Bancorp. Annualized return on average adjusted shareholders' equity is computed by dividing annualized net income by average monthly adjusted shareholders' equity. Management believes that annualized return on adjusted shareholders' equity is a meaningful measure of performance because it reflects equity deployed in our businesses after our spin off from U.S. Bancorp on December 31, 2003. The following table sets forth a reconciliation of shareholders' equity to adjusted shareholders' equity. Shareholders' equity is the most directly comparable GAAP financial measure to adjusted shareholders' equity.

Average for the
Three Months Ended Three Months Ended Three Months Ended
(Dollars in thousands) Dec. 31, 2010 Sept. 30, 2010 Dec. 31, 2009
Shareholders' equity $ 809,154 $ 813,318 $ 780,592
Deduct: goodwill attributable to PJC Inc. acquisition by USB 105,522 105,522 105,522
Adjusted shareholders' equity $ 703,632 $ 707,796 $ 675,070

2Tangible shareholders' equity equals total shareholders' equity less all goodwill and identifiable intangible assets. Tangible book value per share is computed by dividing tangible shareholders' equity by common shares outstanding. Management believes that tangible book value per share is a more meaningful measure of our book value per share. Shareholders' equity is the most directly comparable GAAP financial measure to tangible shareholders' equity. The following is a reconciliation of shareholders' equity to tangible shareholders' equity:

As of As of As of
(Dollars in thousands) Dec. 31, 2010 Sept. 30, 2010 Dec. 31, 2009
Shareholders' equity $ 813,312 $ 804,682 $ 778,616
Deduct: goodwill and identifiable intangible assets 382,174 378,697 176,692
Tangible shareholders' equity $ 431,138 $ 425,985 $ 601,924

Conference Call
Andrew S. Duff, chairman and chief executive officer, and Debbra L. Schoneman, chief financial officer, will host a conference call to discuss second quarter results on Wed., Jan. 26, at 9 a.m. ET (8 a.m. CT). The call can be accessed via live audio webcast available through the firm's Web site at www.piperjaffray.com or by dialing (800) 732-5617, or (212) 231-2921 internationally, and referencing reservation #21506751. Callers should dial in at least 15 minutes early to receive instructions. A replay of the conference call will be available beginning at approximately 11 a.m. ET on Jan. 26 at the same Web address or by calling (800) 633-8284 and referencing reservation #21506751.

About Piper Jaffray
Piper Jaffray is a leading middle market investment bank and asset management firm serving clients in the U.S. and internationally. A proven advisory team combines deep industry, product and sector expertise with ready access to global capital. Founded in 1895, the firm is headquartered in Minneapolis and has offices across the United States and in London and Hong Kong. www.piperjaffray.com

Cautionary Note Regarding Forward-Looking Statements
This press release and the conference call to discuss the contents of this press release contain forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject to significant risks and uncertainties that are difficult to predict. These forward-looking statements cover, among other things, statements made about general economic and market conditions (including the municipal market), anticipated financial results (including expectations regarding operating margins, earnings per share, return on equity, and productivity and revenue and expense levels), the environment and prospects for capital markets transactions, current deal pipelines, our five-year strategic and other growth priorities (including significant revenue growth for our corporate advisory and public finance businesses, investments in our Asia-based business, growth in our asset management business (and in the revenue yield thereof), and expansion of middle market, fixed income sales), the earnings per share and return on equity benefits from our European restructuring, our tax rates, or other similar matters. These statements involve inherent risks and uncertainties, both known and unknown, and important factors could cause actual results to differ materially from those anticipated or discussed in the forward-looking statements, including (1) market and economic conditions or developments may be unfavorable, including in specific sectors in which we operate (including the municipal market), and these conditions or developments, such as market fluctuations or volatility, may adversely affect our business, revenue levels and profitability, (2) the volume of anticipated investment banking transactions as reflected in our deal pipelines (and the net revenues we earn from such transactions) may differ from expected results if any transactions are delayed or not completed at all or if the terms of any transactions are modified, (3) we may not be able to compete successfully with other companies in the financial services industry, which may impact our ability to achieve our growth priorities and objectives, (4) our ability to manage expenses may be limited by the fixed nature of certain expenses as well as the impact from unanticipated expenses, (5) the business operations that we conduct outside of the United States, including in Asia, subject us to unique risks, (6) hiring of additional senior talent may not yield the benefits we anticipate or yield them within expected timeframes, and (7) the other factors described under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009, and updated in our subsequent reports filed with the SEC (available at our Web site at www.piperjaffray.com and at the SEC Web site at www.sec.gov). Forward-looking statements speak only as of the date they are made, and readers are cautioned not to place undue reliance on them. We undertake no obligation to update them in light of new information or future events.

© 2011 Piper Jaffray & Co., 800 Nicollet Mall, Suite 800, Minneapolis, Minnesota 55402-7020

Piper Jaffray Companies
Preliminary Unaudited Results of Operations
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '10 4Q '10 Dec. 31, Dec. 31, Percent
(Amounts in thousands, except per share data) 2010 2010 2009 vs. 3Q '10 vs. 4Q '09 2010 2009 Inc/(Dec)

Revenues:

Investment banking $ 94,650 $ 56,243 $ 73,086 68.3 % 29.5 % $ 266,386 $ 207,701 28.3 %
Institutional brokerage 46,343 40,432 45,662 14.6 1.5 167,954 221,117 (24.0 )
Interest 12,592 11,497 11,627 9.5 8.3 51,851 40,651 27.6
Asset management 24,988 16,812 4,864 48.6 413.7 66,827 14,681 355.2

Other income/(loss)

5,989 (368 ) 3,940 N/M 52.0 12,043 2,731 341.0
Total revenues 184,562 124,616 139,179 48.1 32.6 565,061 486,881 16.1
Interest expense 8,190 8,153 6,230 0.5 31.5 34,987 18,091 93.4
Net revenues 176,372 116,463 132,949 51.4 32.7 530,074 468,790 13.1
Non-interest expenses:
Compensation and benefits 106,371 66,058 79,774 61.0 33.3 315,203 281,277 12.1
Occupancy and equipment 9,019 8,853 7,804 1.9 15.6 33,597 29,705 13.1
Communications 5,983 5,943 5,679 0.7 5.4 24,614 22,682 8.5
Floor brokerage and clearance 2,823 2,879 2,860 (1.9 ) (1.3 ) 11,626 11,948 (2.7 )
Marketing and business development 6,435 5,863 5,607 9.8 14.8 23,715 18,969 25.0
Outside services 8,436 7,945 8,489 6.2 (0.6 ) 32,120 29,657 8.3
Restructuring-related expenses 9,530 1,333 - 614.9 N/M 10,863 3,572 204.1
Other operating expenses 4,628 4,011 3,728 15.4 24.1 20,620 14,428 42.9
Total non-interest expenses 153,225 102,885 113,941 48.9 34.5 472,358 412,238 14.6
Income before income tax expense 23,147 13,578 19,008 70.5 21.8 57,716 56,552 2.1
Income tax expense 13,727 6,524 6,756 110.4 103.2 33,354 26,183 27.4
Net income 9,420 7,054 12,252 33.5 (23.1 ) 24,362 30,369 (19.8 )
Net income allocated to restricted participating shares (2,222 ) (1,639 ) (2,243 ) 35.6 (0.9 ) (5,433 ) (5,481 ) (0.9 )
Net income applicable to common shareholders $ 7,198 $ 5,415 $ 10,009 32.9 % (28.1 ) % $ 18,929 $ 24,888 (23.9 ) %
Earnings per common share
Basic $ 0.49 $ 0.36 $ 0.63 36.6 % (22.3 ) % $ 1.23 $ 1.56 (21.0 ) %
Diluted $ 0.49 $ 0.36 $ 0.63 36.6 % (21.9 ) % $ 1.23 $ 1.55 (20.8 ) %
Weighted average number of common shares outstanding
Basic 14,635 15,035 15,803 (2.7 ) % (7.4 ) % 15,348 15,952 (3.8 ) %
Diluted 14,639 15,038 15,908 (2.7 ) % (8.0 ) % 15,378 16,007 (3.9 ) %
N/M - Not meaningful
Piper Jaffray Companies
Preliminary Unaudited Segment Data
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '10 4Q '10 Dec. 31, Dec. 31, Percent
(Dollars in thousands) 2010 2010 2009 vs. 3Q '10 vs. 4Q '09 2010 2009 Inc/(Dec)
Capital Markets
Investment banking
Financing
Equities $ 42,108 $ 19,839 $ 36,542 112.2 % 15.2 % $ 113,711 $ 81,668 39.2 %
Debt 19,936 16,486 26,097 20.9 (23.6 ) 65,958 79,104 (16.6 )
Advisory services 34,629 20,595 10,991 68.1 215.1 90,396 49,518 82.6
Total investment banking 96,673 56,920 73,630 69.8 31.3 270,065 210,290 28.4
Institutional sales and trading
Equities 27,486 24,292 28,004 13.1 (1.8 ) 106,206 120,488 (11.9 )
Fixed income 22,565 20,159 22,104 11.9 2.1 79,833 117,176 (31.9 )
Total institutional sales and trading 50,051 44,451 50,108 12.6 (0.1 ) 186,039 237,664 (21.7 )
Other income/(loss) 4,311 (1,956 ) 4,278 N/M 0.8 6,763 5,922 14.2
Net revenues 151,035 99,415 128,016 51.9 18.0 462,867 453,876 2.0
Operating expenses 134,999 90,136 109,319 49.8 23.5 421,275 394,566 6.8
Segment pre-tax operating income $ 16,036 $ 9,279 $ 18,697 72.8 % (14.2 ) % $ 41,592 $ 59,310 (29.9 ) %
Segment pre-tax operating margin 10.6 % 9.3 % 14.6 % 9.0 % 13.1 %
Asset Management
Management and performance fees $ 24,988 $ 16,812 $ 4,864 48.6 % 413.7 % $ 66,827 $ 14,681 355.2 %
Other income 349 236 69 47.9 405.8 380 233 63.1
Net revenues 25,337 17,048 4,933 48.6 413.6 67,207 14,914 350.6
Operating expenses 18,226 12,749 4,622 43.0 294.3 % 51,083 17,672 189.1 %
Segment pre-tax operating income/(loss) $ 7,111 $ 4,299 $ 311 65.4 % N/M $ 16,124 $ (2,758 ) N/M
Segment pre-tax operating margin 28.1 % 25.2 % 6.3 % 24.0 % N/M
Total
Net revenues $ 176,372 $ 116,463 $ 132,949 51.4 % 32.7 % $ 530,074 $ 468,790 13.1 %
Operating expenses 153,225 102,885 113,941 48.9 34.5 472,358 412,238 14.6
Total segment pre-tax operating income $ 23,147 $ 13,578 $ 19,008 70.5 % 21.8 % $ 57,716 $ 56,552 2.1 %
Pre-tax operating margin 13.1 % 11.7 % 14.3 % 10.9 % 12.1 %
N/M - Not meaningful

SOURCE: Piper Jaffray Companies

Piper Jaffray Companies
Jennifer A. Olson-Goude, 612-303-6277
Investor and Media Relations