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MINNEAPOLIS, Oct. 19 /PRNewswire-FirstCall/ -- 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
SOURCE  Piper Jaffray Companies
    -0-                             10/19/2005
    /CONTACT:  Jennifer A. Olson-Goude, Investor Relations, +1-612-303-6277,
or Susan L. Beatty, Media Relations, +1-612-303-5680, both of Piper Jaffray
Companies/
    /Web site:  http://www.piperjaffray.com /
    (PJC)

CO:  Piper Jaffray Companies
ST:  Minnesota
IN:  FIN
SU:  ERN CCA

SH-CS
-- CGW003 --
7397 10/19/2005 08:00 EDT http://www.prnewswire.com

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