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Executives

Alan Oshiki - Investor Relation

Robert Giambrone - Chief Financial Officer

John Duffy - Chairman and Chief Executive Officer

Analysts

Steve Stelmach - FBR Capital Markets

Erin Caddell - Hovde Capital Advisors

Horst Hueniken - Thomas Weisel Partners

Hugh Miller - Sidoti & Co.

KBW, Inc. (KBW) Q308 Earnings Call October 22, 2008 9:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the KBW, Inc. Third Quarter 2008 Earnings Conference Call. My name is Madge and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Alan Oshiki. Please proceed, sir.

Alan Oshiki - Investor Relations

Thank you, Madge, and good morning everyone. This is Alan Oshiki, KBW's Investor Relations contact. Joining us on the call this morning are John Duffy, Chairman and Chief Executive Officer of KBW; and Robert Giambrone, the Company's Chief Financial Officer.

Before we start, I want to briefly remind everyone that some of the statements made during this conference call constitute forward-looking statements within the meaning of the Federal Securities Laws. Such statements, those regarding expectations and future results, general financial performance, future business prospects, and strategies. These statements are based on management's current expectations and are subject to a number of risks and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements.

Investors are cautioned not to place undue reliance on these statements. Additional information about factors that could cause our results to differ materially from those in the forward-looking statements can be found in the company's filings with the US Securities and Exchange Commission.

At this time, I would like to turn the call over to Mr. John Duffy. John?

John Duffy - Chairman and Chief Executive Officer

Thank you, Alan. Good morning everyone and thank you for joining us today. I assume everyone has seen this morning's press release and I would like to say first that we normally have not planned to do a conference call after the third quarter. However, given the truly extraordinary events of the past quarter, we thought such a call was in order.

While the amount of the loss for the quarter was larger than the losses for the first two quarters combined, we are confident and excited about our competitive position and the opportunities that either exist today or will exist for our franchise in the future. The reasons for the loss in the third quarter were the unrealized and realized losses on our inventory and PreTSL securities and trust preferred and capital securities held in our warehouse facility. While we made progress during the quarter reducing the amount of original par value that we honor these securities, the credit markets effectively remain closed for most types of CDO securities and the quarter-end valuations of these positions in inventory reflect the current disarray in those markets. Our belief is that the intrinsic or real value of most of these securities is well above the current market value, where there is a market, and we have adequate capital to conduct our businesses so that our decision has been, in most cases, to continue to own and not sell these securities. Away from those markets we are very pleased with our performance and our results. Our cash equities business continued to post extremely strong growth numbers.

We are up 27.6% for the first nine months of the year. We benefited from increased penetration of accounts, increased trading volumes of stocks in the financial services sector and increased usage of our branded ETF products. While our investment banking results for the quarter were down from the prior year period and are down 22% for the first three quarters due to the absence of revenues from our trust preferred securitization business, our revenues for the third quarter were down less than 3% from the prior quarter and exceeded the average revenues for the first two quarters of the year. We are actively discussing with many clients the feasibility of both public and private capital markets transactions and believe the recent actions that the treasury and other regulators have taken will strengthen certain institutions and improve their chances of being able to access the capital markets. While the M&A environment remains quiet with the exception of government intervened transactions, we believe that further consolidation in the banking industry is inevitable and that access to capital and the thawing of the credit markets will lead to a heightened level of activity.

Some of you may have questions about our compensation expense for the quarter and the nine months. We have continued to accrue total compensation in our previously disclosed range of 55% to 60% of total revenues, but we've adjusted our revenues to account for the unusual losses, both realized and unrealized, that we have experienced this year. Those losses approximate $50 million for the quarter and $100 million for the nine months. We have every intent to continue to pay our employees for their production and our employees and our cash equities business and investment banking business have generated $289 million in revenues for the first three quarters, down 1.6% from the comparable 2007 period. Accrued compensation and benefits are down 6.2%, our employees are our most valuable assets and they currently own 74% of the Company's stock, so they are as disappointed with the bottom line as anyone is.

I'll be happy to go into more detail later, but at this point I'd like to turn it over to our Chief Financial Officer, Bob Giambrone.

Robert Giambrone - Chief Financial Officer

Thank you, John, and good morning to all of you. As I usually do, I will be addressing our results on a non-GAAP or operating basis for the most part and the difference between our GAAP results and our non-GAAP results is related only to IPO restricted stock awards from November 2006 initial public offering of our stock net for non-GAAP purchases is backed out.

I would like to go over some of the highlights of our results for the third quarter and the nine months and this September 30. Although we had significant principal transaction losses as John said, core investment banking and cash equity revenues were solid in the base of very difficult environment for many financial services company. Equity commissions were $55.5 million for the third quarter, up $10.1 million or 22.7% over the $44.5 million reported in last years third quarter, and a $152.9 million for the first nine months of '08 compared to a $119.9 million for the same period of 2007, an increase of $33 million or 27.6 %. Equity in debt capital market revenues totaled $35.4 million for the third quarter of '08, compared to $38.9 million for the third quarter of ’07, a decrease of $3.5 million or 9%.

For the first nine months of ‘08 this revenue was $72.9 million compared to $82.9 million, a decrease of $10 million or 12.1%. Personal transaction losses reflect the continued significant lack of liquidity and declining valuations in many securities market and in particular the CDO market. This had significant effect on the market value of certain securities owned by the company, including trust preferred securities of banks and insurance companies and CDOs backed by such securities. Compensation expense as a percentage of gross revenue without the trust preferred backed CDO and related to security losses is in our target range. Our capital, which is all tangible, remains very strong, our balance sheet leverage remains very low at less than 1.6 times. The net loss for the third quarter was $21.3 million or $0.69 per diluted share, compared to a net loss of $7.8 million, or $0.25 per diluted share for the second quarter of ‘08. For the first nine months of 2008 the net loss was $35.1 million or $1.14 per diluted share compared to net income of $28.9 million or $0.91 per diluted share for the first nine months of '07. Now I’m going to go into a little more detail on specific items.

Investment banking revenues for the third quarter were $46 million, a decrease of $14.1 million from the third quarter '07 which had a total of $60.1 million. Underwriting and private placement revenues of $35.4 million decreased $3.5 million compared to the third quarter of '07. While M&A fees decreased $13.4 million to $10.6 million in the third quarter of '08. Investment banking revenues decrease 21.7% to $136.4 million for the first nine months of '08 compared to a $174.1 million of revenue for the second period of ‘07. Underwriting and private placement is $71.4 million compared to $82.9 million for the first nine months of '07, a decrease of $38.2 million or 34.8%, which reflects the fact that in the first three quarters of '07, we had two very large PreTSL transactions and recorded revenues of about $30 million in the ’07 period.

M&A advisory fee revenues were $65 million compared to $64.5 million for the first nine month of ’07, relatively the same amount. As far as commissions, that we have commissions for the third quarter of ‘08 increase 22.7% to a quarterly record of $54.5 million. US equity commission totaled $36.8 million and commissions on European equity securities were $17.7 million. Equity commission increased 27.6% to $152.9 million, 99 million in USA equity securities of 53 million and European equity securities for the first nine month of ’08, compared to a total of $119 million for the same period of ‘07.

Principal transactions resulted in net losses of $53.8 million for the third quarter largely as the result of further significant declines in market value of securities owned. Losses on CDO or related securities, all of which involved bank and insurance company trust preferreds were approximately $50.3 million. The first nine months loss on principal transaction was $113 million, which included over $95 million, approximately $58 million after tax benefit in negative marks total market again on trust preferred back CDOs and related securities. Remaining balance of trust preferred and other capital securities of bank and insurance companies at September 30 was $35 million or 42% of the original par amount and the remaining balance of trust preferred backed CDOs was $27 million, which also resulted in the valuation of about 42% of our original cost. All of these securities are performing with the exception of about million dollars of unrated CDO equity securities.

Interest and dividends decreased 42.9% or $4.4 million at 26.1% with $7.2 million for the third quarter and first nine months of ‘08 respectively. The reduced levels of revenue and interest and dividend reflects lower levels of interest bearing assets as well as lower interest rates in 2008.

That concludes my remarks and at this point I would like to turn it back to John Duffy.

John Duffy – Chairman and Chief Executive Officer

Thanks Bob. At this point we will queue up some questions and those of you who are on the line. Before we do that I would just like to make comment or two, I think we're very enthusiastic about where we stand on the competitive landscape. Clearly the financial services sector has gone through some unprecedented shocks and change, we think we are well positioned to capitalize on opportunities and we will be happy to go into that in more detail during the Q&A. And if you'll if you open up the lines for questions, we are ready to take them.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Steve Stelmach. Please proceed.

Steve Stelmach - FBR Capital Markets

Hi Good morning.

John Duffy

Good morning,

Steve Stelmach - FBR Capital Markets

Just real quick on the PreTSL business, those marks obviously were taken as of September 30th. The TARP was initiated post September 30th. What’s your take in terms of ; are we past the worse of the PreTSL write-down’s? I know it’s tough to say but I would presume that the TARP would have a positive impact on those evaluations, is that correct?

John Duffy

Yeah that’s a good question, clearly the TARP has been announced, not yet implemented. We are in active conversations with scores, if not hundreds of banks. Our expectation is that there will be a very large participation rate by the industry, this is cheap capital that the government is affording it. You are right the marks were all done on September 30, which was before the TARP was announced, or the capital part of it. So, yes, we view what the regulators are during here, the treasury, very positively from a variety of aspects. One, it’s going to give some institution access to capital that they wouldn’t have. The trust preferreds that we own are all senior to any preferred stock the government would issue to any of these institutions. So, we are obviously hopeful that the regulatory movement would eventually freeze up the credit markets, and we’ve got some mild anecdotal evidence in terms of why over the last couple of days that’s happening but I think it’s very too early to declare victory.

But clearly Institutions that can avail themselves to the TARP, if we happen to own a senior security to those in those institutions capital structures, we are going to feel better about that institution from a credit quality perspective. Everything that we have in the warehouse, the $80 odd million dollars of principal value has all been paying through the nine months, you know there are a couple of institutions there I think have suffered some damage from a credit prospective but nothing that is non-performing. So we feel good about what we have got in inventory and I think the TARP program should make us feel better I think when we actually see some of these institutions draw down on the capital, we’ll feel a lot wonder. But we are hoping the marks on September 30th represent the low water mark..

Steve Stelmach - FBR Capital Markets

Okay. And then on the flip side of the TARP is a $125 billion for the remaining banking sector sort of fills a bit of a hole in terms of capital levels. Granted we can argue whether it’s permanent or not? I would just love to hear your comments on your take on banks’ ability to raise further capital above and beyond that or does that essentially solve a lot of problems for these guys?

John Duffy

I would say, first of all we are very busy in the equity capital markets segments of our business. There are obviously hundreds of institutions that need access to the capital markets and I think the TARP program will solve some institutions needs. I think there are some institutions out there that don’t need capital that still will avail themselves to the TARP program because it’s cheap. And I think that event will help spur some M&A activity. I think some other institutions that we’ve been talking to where I would say the degree of difficulty in terms of completing the financing, you know, we view as fairly high. In September I think what’s likely to happen in many of these situations is those institutions will get some TARP money and they will supplement with capital from the capital markets. We would view it as combination event, may be the most likely scenario for many institutions. The capital is cheap, especially for the first five years, but I think many of the institutions that we are talking about really don’t view it as permanent, because it gets more expensive after last five years. So they haven’t completely abandoned their thoughts about should they go to the capital markets for permanent capital?

Steve Stelmach - FBR Capital Markets

Okay. Is the absolute dollar size they contemplating lower than it was couple of weeks ago or is it pretty much a same dollar amounts in terms of private capital.

Robert Giambrone

Well, I would say it’s probably less in terms of private capital. Clearly whatever portion of that $125 billion that gets taken down works against the amount of capital raised in the private sector. So I guess we would say the amount of capital raised is probably going to be smaller, but I think in terms of number of deals that actually get done, the percentage is probably going up because the cost of capital from the portion they get from the government is cheaper then it would have been from the public markets. So I think it makes it more palatable for them to raise capital from the public markets. And I think also the fact that the government is giving money to these institutions probably is somewhat reassuring to the investment community that these banks have been deemed to be kind of survivors.

Steve Stelmach - FBR Capital Markets

Okay. Guys I appreciate. Thank you.

John Duffy

Sure.

Operator

And your next question comes from the line of Erin Caddell. Please proceed.

Erin Caddell - Hovde Capital Advisors

Hey can you hear me okay

John Duffy

Yes fine Aaron.

Erin Caddell - Hovde Capital Advisors

Thanks for taking my questions. First of all, what was the grantee fee the quarter in investment banking revenue?

Robert Giambrone

Guaranteed financial?

Erin Caddell - Hovde Capital Advisors

Yeah

Robert Giambrone

Yeah, I think we have disclosed that via private deal, I would say it was very large fee. They have the saying fees over $5 million or large fees over 10 million are very large and this is a very large fee.

Erin Caddell - Hovde Capital Advisors

Okay. And then you obviously have a lockup coming up I guess coming up in next month’s for some insider shares, is there any thought on whether there would be any kind of an organized effort to give employees some liquidity or would it just be kind of one off situation or have you not decided that yet?

John Duffy

That’s good question for those of you who may not be familiar. The two year anniversary of the IPO is November 9th,.and our employees who owned stock at the time of the IPO were locked up for a period of five years, couldn’t sell any stock for the first two years and on the two year anniversary, which is now a few weeks away, they can sell 25 % of the shares that they owned at the time of the IPO. That translates into about 5 million shares, and we have been in communication with all of those employees in recent months about either about their desire of intent to gain some liquidity. For many of them, it’s their first opportunity to sell stock.

So we certainly expect there would be some supply and I think especially in light of the events in Bear Stearns and Lehman where there was heavy employee ownership, not as heavy as our company, but heavy employee ownership I think almost in the category of prudence we would expect some employees would want to sell.

We had conversations internally and externally regarding an organized offering and other options and we’re continuing to explore that. Obviously the turmoil in the marketplace has some bearing what we might decide to do there eventually. But I think it’s safe to say we are considering any and all options.

We instituted a program of stock compensation as part of our year end compensation beginning in 2006. So even though some shareholder may want to sell, they probably get reloaded with some stock at year end. So we think there is, we think there is certainly some potential supply coming out. Obviously an individual’s outlook on what might happen to the capital gains tax rate might have some bearing on their financial planning. But we want to do something in an orderly fashion, if we do something. And the employees are going to continue to own northward of 60% of the stock. So we’re very much conscious of what impact any transaction or series of transactions might have upon stock price. One last point is a number of weeks ago we filed the shelf offering and we are a well known seasoned issuer (inaudible), so we could do something quickly if we thought that it would make sense for both the stock price and the employees.

Erin Caddell - Hovde Capital Advisors

Okay. Now that’s very helpful commentary. Thank you very much.

John Duffy

Thank you, very much

Operator

(Operator Instructions) And your next question comes from the line of Horst Hueniken Thomas Weisel Partners. Please proceed.

Horst Hueniken - Thomas Weisel Partners

Good morning.

Robert Giambrone

Good morning Horst.

Horst Hueniken - Thomas Weisel Partners

I am trying to reconcile the marks, you have a negative revenue of $53.00 million, yet I see from the press release that the book value has fallen by about $70 million. So there seems to be a $20 million difference that I can quite explain?

Robert Giambrone

The book value per share.

Horst Hueniken - Thomas Weisel Partners

No, actually what you are saying that in the press release that the trust preferred in other capital securities of bank and insurance companies is down $40 million or its fair value?

Robert Giambrone

Right. We sold $20 million of the warehouse during the quarter

Horst Hueniken - Thomas Weisel Partners

That’s okay. So that explains that.

Robert Giambrone

And there were sales of CDO securities as well.

Horst Hueniken - Thomas Weisel Partners

Got it.

Robert Giambrone

So the total decrease is the combination of the writing down, marking down and sales.

Horst Hueniken - Thomas Weisel Partners

Understood okay. Could you give shed some light on what the credit ratings of the remaining securities are today and have those changed in the last month or two?

John Duffy

Most of these securities in the warehouse. Let me first of all handle the CDO's. I am not aware of downgrades in the last quarter on any of the graded pieces. I believe a couple of pieces are under watch. The rating agencies and I think we have Fitch and Moody rating in most cases, their tendency has been to put stuff on watch and then a quarter to later decide whether they are going to downgrade.

But I don’t believe in the third quarter there were any downgrades on anything that we have in inventory on the CDO desk. On the securities that we have in the warehouse and I think that is something like 14 different names, might be one or two less than that because we sold some stuff as I said in the quarter. I don’t believe any of those companies have got public rating, they all tend to be smaller companies than asked us, you know the pool mechanism because they were too small to go to the public markets on their own right.

I might be wrong in one or two cases and we will check on that, but I don’t believe any of them have public ratings. So consequently none of them would have been downgraded. Now and we have our internal staff looking at the credit quality of all these institutions and of those 13 or 14 names, I think there are two or three that we probably spend most time looking at credit worthiness.

As I said, they are all paying. But clearly the metrics or performance measures of a couple of companies are not what we would have hoped. So we’re paying especially close attention to those and we are exploring opportunities, either to do restructurings or recapitalizations with these companies, we know them well. And in one institution, conversations about them buying it back, a company that was equipped to do that. So we are trying to actively manage the portfolio, we only got out of one name in the quarter.

Horst Hueniken - Thomas Weisel Partners

So it’s like, your view is similar to what it was one quarter ago, where you are of the view that there is a good chance that we will see some recovery of values. That’s partly what you’re hanging on, correct?

John Duffy

Correct. Now if you take a look at what the effective yields are now on these securities that we own, unless you are extremely worried about the credit worthiness of underlying collateral. Yeah, I think you would have to share our opinion that these things are buys. We got too marked down to a level where the yields are extremely attractive and we’ve decided in most cases to hold them.

Horst Hueniken - Thomas Weisel Partners

That makes sense. A quick question for Bob, I do notice that two line items; business development and other expenses have been rising sequentially. I am wondering whether that is just the deal cost or what is driving that a little bit higher?

Robert Giambrone

Yeah, deal costs have not really been absorbed, at least not anything that is substantial. I think that we have not curtained any of our business development activities and I think we are in the range of inflation there. So we are doing about the same amount that we have done in the past and I don’t think there is any current plan to curtail anything.

Horst Hueniken - Thomas Weisel Partners

Okay. My final question back to John, you did mention in your press release that your pipeline looks robust and you’ve also talked the fact that you’re in touch a lot of banks, what I am wondering is that you obviously had a very large fee from Guaranteed Financial in the latest quarter. In your pipeline are there other such large deal that you’re seeing or should I be looking at Guaranteed Financial as a particularly large and one of type transaction.

John Duffy

There is one of the transaction that was working on that would be over comparable size, I would say that most of the equity capital market ones that were looking at were in the range of the capital raise between $50 million, on the low side, and $150 million on the high side. And in the most of those transactions at least to date, we’re sole manager of the raise. So there is two things there.; one, we’re seeing very little pressure on fees when banks need capital in this kind of environment where I think frankly negotiating a lot less in terms of what the appropriate fee is. Two, more of these transaction are turning out to the sole managed, because some of them are PIPES, private, and they are not all public deals.

And even some of the public deals we’re doing ourselves or are only doing with one co-manager. So I think we are getting a bigger piece of the pie when the deals are successful.

Horst Hueniken - Thomas Weisel Partners

Well I look forward to that kind of market share and improvement. Thanks for taking my question.

John Duffy

Sure Horst. Thank you.

Operator

(Operator Instructions) And your first question comes from the line of you Hugh Miller from Sidoti & Co. Please proceed.

Hugh Miller - Sidoti & Co.

Hi good afternoon and good morning.

John Duffy

Good morning Miller.

Hugh Miller - Sidoti & Co.

Just, most of my questions were asked. But I had a question about opportunities you guys might see now just to acquire some talent from some of the displacement we’re seeing within large caps?

John Duffy

Yeah. First of all, our headcount, I don’t think we have mentioned it, it’s basically flat since year end. We’ve added a few people in some areas. We got a fixed income person joining us from Lehman this week. We do hire someone on the equity side from Bear Stearns. When Bear Stearns merged in Morgan, we had a series of conversation with different groups that we thought might be additive to our franchise. Unfortunately, I think without exception, I think they all wound up getting jobs at J.P Morgan Chase and we were not able to pry them away. I would say across business lines, we had very active discussion and tried to be opportunistic, we don’t have any set goals, we are not trying to add 10% staff or any specific number, but we kind of get all our tentacles out talking to people to see if there are people that would be added to our franchise. Beside the couple of hires I just mentioned, our loan portfolio sales business has been growing as you might imagine with bank closures and banks trying to get some distressed assets. So we’ve added some people in that group just because of the activity level has gone up. So we are continuing to look around and I think the good thing is that the people that we have been to bring on board are a lot less expensive than the case was couple of years ago in terms of guarantees or commitments that you are able to attract people at more reasonable prices.

Hugh Miller - Sidoti & Co.

And does it speed up at all, the current environment speed up the opportunities or expansion, from a geographic standpoint or within, specifically I guess, the asset management segment?

John Duffy

Yeah, asset management something that still has appeal to us. We are looking at some opportunities there. We are not eager to spend a lot of money unless something was very proven. So, there may be some opportunities in the asset management business, but it’s an area that we have been looking at for two years and haven’t been able to do much in terms of attracting brand new talent.

Geographically, I think the one area we continue to look at is Asia and we picked up some cross border business because we’ve more time over there in the last year. I don’t think we’re going to go there (inaudible), but if the right opportunity presented itself like it did in Asia like it did in London four or five years ago, I think we feel confident enough to do something there and we certainly have the capital to be able to expand in that fashion.

Hugh Miller - Sidoti & Co.

Okay. So, nothing near term looks very promising but it just areas you’re continuing to pursue?

John Duffy

Correct.

Hugh Miller - Sidoti & Co.

And then, I guess one last question. Looking at the M&A advisory business within the regional banks, what do you think has to really happen in order for that to start to turnaround and move forward?

John Duffy

I think the most important thing is confidence on the part of the acquirer’s that they really know what the underlying credit in the portfolio of the target is. I think we are seeing some signs of stability in terms of the liquidity side of things, the positive insurance cap and now access to capital through the TARP program, whether there have been enough people to access the capital markets, I don’t think capital is the number one impediment, I think it remains asset quality. But, I think we are getting to a situation where this capitulation on the part of some sellers that if they can’t access the capital markets themselves and are undercapitalized or under some kind of threat, regulatory threat, I think some of them maybe willing to sell franchises at values that buyers get interested. The losses are heavily discounted. So, I think the implementation of the TARP program and the access to capital that that provides will certainly accelerate M&A conversation and activity in the coming quarters.

Hugh Miller - Sidoti & Co.

Okay, great. So, in other words you think certainly it’s more a factor of asset quality non-performing asset and so on, as opposed to actually being able to access the capital markets?

John Duffy

Yeah.

Hugh Miller - Sidoti & Co.

Okay, thank you so much.

John Duffy

Sure.

Operator

And your last and follow up question comes from the line of Steve Stelmach from FBR Capital Markets. Please proceed.

Steve Stelmach - FBR Capital Markets

Hi guys. I apologize if this question has been asked, I got dropped in the call briefly. But on the trust preferred securities, I presume that the insurance was a higher proportion of the write down in this quarter than has been in the past. Is that an accurate statement and if so, can you give us little more color on what sort of proportion the insurance trust preferreds had relative to past quarters?

Robert Giambrone

I don’t really think that’s the case, Steve, if you’re talking about the trust preferred we are holding. First of all there was considerably less than that in banks. There is currently, we have two names there. We did have sales from that portion of it. But, I would say in general, the rates or the yields wind out significantly on both. And I don’t really recall what the dollars were if split up between insurance names and the bank names. But, there is 12 names, two were insurance, 10 was banks. I think the majority was still against the bank portfolio.

Steve Stelmach - FBR Capital Markets

Okay. So, on a relative basis, insurance is roughly small proportion of the total. Okay.

Robert Giambrone

Yeah, smaller than the banks.

Steve Stelmach - FBR Capital Markets

It’s helpful. Thank you.

Operator

You have no question at this time, sir. And, I would now like to turn the call over to John Duffy for closing remarks.

John Duffy

Okay, thank you Mage. First of all thanks for you interest this morning everyone. I think just to summarize, despite the fact that the losses are way larger than we would have imagined when we spoke last quarter. We do feel that September 30 may well marked the low water mark. And I would remind you all that most of these losses are unrealized, we are well capitalized and I think excited about numerous opportunities. One sector that we didn’t mention today on the call is mortgage REIT sector. We have been active in that sector, when you look at the reduced size of Fannie and Freddy looking out in the future. I think it’s got positive implications in terms of activity in this sector in capital raising. And, as I mentioned I think the events over the last couple weeks are going to accelerate when M&A is back as an active part of our business. And in the interim I think we are very active with banks in terms of assets, loan sales and balance sheet management. And, we are not playing defense here, we are being cautious here, but we are looking to add talent if it comes out of some of the bigger shops that have gone down or changed ownership here. So, we think we are well positioned and also we think the insurance industry is going to provide some capital raising opportunities here for us in the not too distant future because they clearly been impacted by both the equity and credit losses in the market.

So, with that I will wrap and again we appreciate your interest and participation. Thanks very much.

Operator

Thank you for your participation in today’s conference. This concludes the presentation, you may now disconnect. Good day.

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