PIPER SANDLER COMPANIES

Previous wording

We have included financial measures that are not prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). Adjustments to these non-GAAP financial measures include (1) the exclusion of investment income and non-compensation expenses related to noncontrolling interests, (2) the exclusion of interest expense on long-term financing from net revenues, (3) the exclusion of amortization of intangible assets related to acquisitions, (4) the exclusion of compensation expenses from acquisition-related agreements, (4) the exclusion of non-compensation expenses from potential regulatory settlements (see Note 11 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information) and (5) the income tax impact allocated to the adjustments. The adjusted weighted average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains an adjustment to include the common shares for unvested restricted stock awards with service conditions granted pursuant to all acquisitions since January 1, 2020. These adjustments affect the following financial measures: net revenues, compensation expenses, non-compensation expenses, income tax expense/(benefit), net income attributable to Piper Sandler Companies, earnings per diluted common share, total non-interest expenses, pre-tax income and pre-tax margin. Management believes that presenting these results and measures on an adjusted basis in conjunction with the corresponding U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.

Current wording

We have included financial measures that are not prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). Adjustments to these non-GAAP financial measures include (1) the exclusion of investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) the exclusion of interest expense on long-term financing from net revenues, (3) the exclusion of amortization of intangible assets related to acquisitions, (4) the exclusion of compensation expenses from acquisition-related agreements, (5) the exclusion of restructuring and integration costs related to acquisitions and/or headcount reductions, (6) the exclusion of non-compensation expenses from proposed regulatory settlements (see Note 12 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information) and (7) the income tax impact allocated to the adjustments. The non-compensation expenses from proposed regulatory settlements for the three and six months ended June 30, 2024 include the reversal of other operating expenses of $0.5 million and $4.0 million, respectively, as we reduced the accrual for civil penalties related to proposed regulatory settlements with the SEC and Commodity Futures Trading Commission. Additionally, we incurred $0.4 million of outside services expenses for the three and six months ended June 30, 2024 in connection with these matters. The adjusted weighted average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains an adjustment to include the common shares for unvested restricted stock awards with service conditions granted pursuant to all acquisitions since January 1, 2020. These adjustments affect the following financial measures: net revenues, compensation expenses, non-compensation expenses, income tax expense/(benefit), net income attributable to Piper Sandler Companies, earnings per diluted common share, total non-interest expenses, pre-tax income and pre-tax margin. Management believes that presenting these results and measures on an adjusted basis in conjunction with the corresponding U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.

Previous wording

We believe U.S. monetary policy will remain a factor impacting the economy and financial markets throughout the remainder of 2024. The U.S. Federal Reserve continued to hold its short-term benchmark interest rate steady in the first quarter of 2024. Inflation moderated during the quarter, albeit at a slower pace resulting in uncertainty in the direction of interest rates. The economy continues to be strained from elevated prices for goods and services, labor shortages and tightened lending standards. Geopolitical concerns, including the conflicts in the Middle East and Eastern Europe, could negatively impact financial market activity. Additionally, the 2024 U.S. presidential election may influence the volatility or direction of the markets in the second half of the year based on investors' assessment of the outcome and the overall political outlook in the U.S.

Current wording

U.S. monetary policy remains a more prevalent factor impacting the economy and financial markets. The U.S. Federal Reserve continued to hold its short-term benchmark interest rate steady in the second quarter of 2024 and is expected to begin reducing benchmark rates in the second half of the year as inflation moderates. The 2024 U.S. presidential election may influence the volatility or direction of the markets in the second half of the year based on investors' assessment of the outcome and the overall political outlook in the U.S. Additionally, geopolitical concerns, including the conflicts in the Middle East and Eastern Europe, could negatively impact financial market activity.

Previous wording

Our advisory services results continue to benefit from our sector and product diversification along with our focus on advising on larger transactions to generate a higher average fee. The outlook for mergers and acquisitions ("M&A") activity has improved as CEO confidence strengthens. We expect our second quarter advisory services revenues to be consistent with the first quarter of 2024 before improving in the second half of the year.

Current wording

Our advisory services results continue to benefit from our sector and product diversification along with our focus on advising on larger transactions to generate a higher average fee. The market outlook for mergers and acquisitions ("M&A") activity is gradually improving as CEO confidence strengthens. We expect our third quarter advisory services revenues to be largely consistent with the second quarter of 2024, with the potential to build into a strong fourth quarter.

Previous wording

The equity markets experienced muted volatility during the quarter as markets ground higher with indexes hitting new highs. Our client research votes continue to increase, which we believe will drive further market share gains over time. We expect near-term results to be relatively consistent with the first quarter of 2024 and anticipate increased volumes and activity in the second half of the year.

Current wording

The equity markets experienced muted volatility during the quarter as market indices ground higher, albeit with limited breadth. Our client research votes continue to increase, which we believe will drive further market share gains over time and offset the impact from the declining research and trading services fee pool. Absent a consistent increase in volatility, we anticipate near-term results to be consistent with the second quarter of 2024.

Previous wording

For the three months ended March 31, 2024, we recorded net income attributable to Piper Sandler Companies of $42.5 million. Net revenues for the three months ended March 31, 2024 were $343.1 million, a 15.2 percent increase compared with $297.9 million in the year-ago period. In the first quarter of 2024, investment banking revenues were $230.5 million, up 25.0 percent compared to $184.4 million in the prior-year period, resulting from increases in corporate financing and advisory services revenues, as well as higher municipal financing revenues. For the three months ended March 31, 2024, institutional brokerage revenues were $91.4 million, a 5.1 percent decrease compared with $96.3 million in the first quarter of 2023, primarily due to lower equity brokerage revenues. For the three months ended March 31, 2024, net interest income was $6.9 million, compared to $6.1 million in the prior-year period. In the first quarter of 2024, we recorded investment income of $14.2 million, compared to $11.1 million in the first quarter of 2023. In the current quarter, we recorded higher unrealized gains on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Non-interest expenses were $290.6 million for the three months ended March 31, 2024, up 6.8 percent compared with $272.1 million in the prior-year period, primarily due to increased compensation expenses resulting from higher revenues and profitability.

Current wording

For the three months ended June 30, 2024, we recorded net income attributable to Piper Sandler Companies of $34.8 million. Net revenues for the three months ended June 30, 2024 were $339.2 million, a 17.5 percent increase compared with $288.7 million in the year-ago period. In the second quarter of 2024, investment banking revenues were $259.8 million, up 41.2 percent compared to $184.0 million in the prior-year period, resulting from an increase in advisory services revenues, as well as higher corporate financing and municipal financing revenues. For the three months ended June 30, 2024, institutional brokerage revenues were $91.7 million, a 4.4 percent increase compared with $87.8 million in the second quarter of 2023, resulting from modest increases in both our fixed income services and equity brokerage businesses. For the three months ended June 30, 2024, net interest income increased to $5.0 million, compared to $1.1 million in the prior-year period, driven by higher interest income on our cash balances and lower interest expense as we repaid our long-term financing arrangement in the fourth quarter of 2023. In the second quarter of 2024, we recorded an investment loss of $17.4 million, compared to investment income of $15.8 million in the second quarter of 2023. In the current quarter, we recorded unrealized losses on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Non-interest expenses were $310.9 million for the three months ended June 30, 2024, up 13.3 percent compared with $274.3 million in the prior-year period, primarily due to increased compensation expenses resulting from higher revenues and profitability.

Previous wording

For the three months ended March 31, 2024, compensation and benefits expenses increased 11.6 percent to $222.4 million, compared with $199.4 million in the corresponding period of 2023, due to higher revenues and profitability. Compensation and benefits expenses as a percentage of net revenues was 64.8 percent in the first quarter of 2024, compared to 66.9 percent in the first quarter of 2023. Excluding the impact of noncontrolling interests, our compensation ratio decreased to 66.6 percent in the first quarter of 2024, compared with 69.3 percent in the first quarter of 2023, primarily due to higher revenues and a decrease in acquisition-related compensation expenses.

Current wording

For the three months ended June 30, 2024, compensation and benefits expenses increased 24.1 percent to $234.7 million, compared with $189.2 million in the corresponding period of 2023, due to higher revenues and profitability. Compensation and benefits expenses as a percentage of net revenues was 69.2 percent in the second quarter of 2024, compared to 65.5 percent in the second quarter of 2023. Excluding the impact of noncontrolling interests, our compensation ratio decreased to 65.8 percent in the second quarter of 2024, compared with 68.6 percent in the second quarter of 2023, primarily due to higher revenues and a decrease in acquisition-related compensation expenses.

Previous wording

Outside services expenses include securities processing expenses, outsourced technology functions, outside legal fees, fund expenses associated with our consolidated alternative asset management funds and other professional fees. Outside services expenses increased slightly to $12.4 million in the first quarter of 2024, compared with $12.1 million in the corresponding period of 2023.

Current wording

Outside services expenses include securities processing expenses, outsourced technology functions, outside legal fees, fund expenses associated with our consolidated alternative asset management funds and other professional fees. Outside services expenses increased slightly to $14.0 million in the second quarter of 2024, compared with $13.5 million in the corresponding period of 2023.

Previous wording

For the three months ended March 31, 2024, occupancy and equipment expenses increased slightly to $16.0 million, compared with $15.7 million in the corresponding period of 2023.

Current wording

For the three months ended June 30, 2024, occupancy and equipment expenses increased to $16.8 million, compared with $16.0 million in the corresponding period of 2023.

Previous wording

Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third-party market data information. For the three months ended March 31, 2024, communication expenses decreased 7.6 percent to $13.2 million, compared with $14.3 million in the corresponding period of 2023, primarily due to lower market data services expenses.

Current wording

Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third-party market data information. For the three months ended June 30, 2024, communication expenses increased 11.7 percent to $14.6 million, compared with $13.0 million in the corresponding period of 2023, primarily due to higher market data services expenses.

Previous wording

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the three months ended March 31, 2024, marketing and business development expenses increased 7.1 percent to $10.8 million, compared with $10.1 million in the corresponding period of 2023. The increase was primarily due to higher travel expenses.

Current wording

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the three months ended June 30, 2024, marketing and business development expenses increased slightly to $11.4 million, compared with $10.9 million in the corresponding period of 2023.

Previous wording

Deal-related expenses include costs we incurred over the course of a completed investment banking deal, which primarily consist of legal fees, offering expenses, and travel costs. For the three months ended March 31, 2024, deal-related expenses were $6.4 million, compared with $6.0 million for the three months ended March 31, 2023. The amount of deal-related expenses is principally dependent on the level and mix of deal activity and may vary from period to period as the recognition of deal-related costs typically coincides with the closing of a transaction.

Current wording

Deal-related expenses include costs we incurred over the course of a completed investment banking deal, which primarily consist of legal fees, offering expenses, and travel costs. For the three months ended June 30, 2024, deal-related expenses were $5.9 million, compared with $7.5 million for the three months ended June 30, 2023. The amount of deal-related expenses is principally dependent on the level and mix of deal activity and may vary from period to period as the recognition of deal-related costs typically coincides with the closing of a transaction.

Previous wording

For the three months ended March 31, 2024, trade execution and clearance expenses were $4.9 million, essentially flat compared to the corresponding period of 2023.

Current wording

For the three months ended June 30, 2024, trade execution and clearance expenses decreased slightly to $4.5 million, compared with $4.9 million in the corresponding period of 2023.

Previous wording

Intangible asset amortization includes the amortization of definite-lived intangible assets. For the three months ended March 31, 2024, intangible asset amortization was $2.4 million, compared to $4.9 million for the three months ended March 31, 2023. The decrease was primarily due to lower intangible asset amortization expense associated with our 2022 acquisition of DBO Partners Holding LLC, including its subsidiary, DBO Partners LLC.

Current wording

Intangible asset amortization includes the amortization of definite-lived intangible assets. For the three months ended June 30, 2024, intangible asset amortization was $2.4 million, compared to $4.9 million for the three months ended June 30, 2023. The decrease was primarily due to lower intangible asset amortization expense associated with our 2022 acquisition of DBO Partners Holding LLC. We anticipate incurring additional intangible asset amortization expense upon completion of the acquisition of Aviditi Advisors.

Previous wording

Other operating expenses primarily include insurance costs, license and registration fees, expenses related to our charitable giving program and litigation-related expenses, which consist of the amounts we accrue for and/or pay out related to legal and regulatory matters. Other operating expenses were $2.1 million in the first quarter of 2024, compared with $4.7 million in the corresponding period in 2023. The decrease was primarily due to a $3.5 million reduction in the accrual for estimated civil penalties related to our potential regulatory settlements regarding recordkeeping requirements for business-related communications.

Current wording

Other operating expenses primarily include insurance costs, license and registration fees, expenses related to our charitable giving program and litigation-related expenses, which consist of the amounts we accrue for and/or pay out related to legal and regulatory matters. Other operating expenses were $5.8 million in the second quarter of 2024, compared with $10.5 million in the corresponding period in 2023. The decrease was primarily due to the write-off of a $7.5 million uncollectible receivable in our municipal financing business in the second quarter of 2023, partially offset by an increase in expense related to our charitable giving program in the current period driven by higher operating profits.

Previous wording

The adjusted financial results exclude (1) investment income and non-compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from net revenues, (3) amortization of intangible assets related to acquisitions, (4) compensation expenses from acquisition-related agreements and (5) non-compensation expenses from potential regulatory settlements. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.

Current wording

The adjusted financial results exclude (1) investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from net revenues, (3) amortization of intangible assets related to acquisitions, (4) compensation expenses from acquisition-related agreements, (5) restructuring and integration costs related to acquisitions and/or headcount reductions and (6) non-compensation expenses from proposed regulatory settlements. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.

Previous wording

Net revenues on a U.S. GAAP basis were $343.1 million for the three months ended March 31, 2024, compared with $297.9 million in the prior-year period. For the three months ended March 31, 2024, adjusted net revenues were $333.9 million, compared with $289.2 million in the first quarter of 2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.

Current wording

Net revenues on a U.S. GAAP basis were $339.2 million for the three months ended June 30, 2024, compared with $288.7 million in the prior-year period. For the three months ended June 30, 2024, adjusted net revenues were $356.7 million, compared with $277.4 million in the second quarter of 2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.

Previous wording

In the first quarter of 2024, investment banking revenues increased 25.0 percent to $230.5 million, compared with $184.4 million in the prior-year period. For the three months ended March 31, 2024, advisory services revenues were $157.2 million, up 11.7 percent compared to $140.7 million in the first quarter of 2023, driven by a higher average fee, which more than offset the decline in completed transactions. During the first quarter of 2024, our activity was broad based across sectors, led by our energy & power group with solid contributions from the financial services, consumer and healthcare sectors. In addition, both our restructuring and debt advisory product teams registered strong results in the quarter. For the three months ended March 31, 2024, corporate financing revenues were $52.6 million, up 96.2 percent compared with $26.8 million for the three months ended March 31, 2023, due to both a higher average fee and more completed corporate financings. Equity financing activity improved significantly during the quarter driven by a more accommodative backdrop and increased demand from companies needing to raise capital, particularly biopharma companies. Activity for us during the first quarter of 2024 was principally in the healthcare sector, and we served as book runner on 19 of the 20 completed healthcare equity deals. In the prior-year period, the overall market activity for equity capital raising was below historic levels. Municipal financing revenues for the three months ended March 31, 2024 were $20.8 million, up 22.5 percent compared to $16.9 million in the prior-year period as we executed more specialty sector financings driven by increased investor demand.

Current wording

In the second quarter of 2024, investment banking revenues increased 41.2 percent to $259.8 million, compared with $184.0 million in the prior-year period. For the three months ended June 30, 2024, advisory services revenues were $183.9 million, up 41.7 percent compared to $129.8 million in the second quarter of 2023, driven by a higher average fee and more completed transactions. During the second quarter of 2024, our activity was broad based across sectors, led by our financial services group with solid contributions from the services & industrials and chemicals sectors. In addition, our debt advisory product team registered strong results in the quarter. For the three months ended June 30, 2024, corporate financing revenues were $50.6 million, up 37.2 percent compared with $36.9 million for the three months ended June 30, 2023, due to a higher average fee. Activity for us during the second quarter of 2024 was principally in the healthcare and financial services sectors. We served as book runner on all nine completed healthcare equity deals during the quarter and our financial services group completed two large equity capital raises for our depository clients. In the prior-year period, the overall market activity for equity capital raising was below historic levels. Municipal financing revenues for the three months ended June 30, 2024 were $25.2 million, up 46.1 percent compared to $17.3 million in the prior-year period driven by increased issuance activity across both our governmental and specialty sector businesses as market conditions improved.

Previous wording

Institutional brokerage revenues comprise all of the revenues generated through trading activities, which principally consist of facilitating customer trades, as well as fees received for our research services and corporate access offerings. Our results may vary from quarter to quarter as a result of changes in trading margins, trading gains and losses, net interest spreads, trading volumes and the timing of fees received for research services.

Current wording

Institutional brokerage revenues comprise all of the revenues generated through trading activities, which principally consist of facilitating customer trades, as well as fees received for our research services and corporate access offerings. Our results may vary from quarter to quarter as a result of changes in trading margins, trading gains and losses, net interest spreads, trading volumes and the amount of fees received for research services.

Previous wording

Interest income represents amounts earned from holding long inventory positions and cash balances. For the three months ended March 31, 2024, interest income decreased slightly to $8.3 million, compared with $8.7 million for the three months ended March 31, 2023.

Current wording

Interest income represents amounts earned from holding long inventory positions and cash balances. For the three months ended June 30, 2024, interest income increased to $6.7 million, compared with $3.7 million for the three months ended June 30, 2023, reflecting higher interest on our cash balances.

Previous wording

Investment income includes realized and unrealized gains and losses on investments, including amounts attributable to noncontrolling interests, in our alternative asset management funds, as well as management and performance fees generated from those funds. For the three months ended March 31, 2024, we recorded investment income of $14.2 million, compared with $11.1 million in the corresponding period of 2023. In the first quarter of 2024, we recorded higher unrealized gains on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Excluding the impact of noncontrolling interests, adjusted investment income was $5.0 million for the three months ended March 31, 2024, compared with $0.8 million for the three months ended March 31, 2023.

Current wording

Investment income/(loss) includes realized and unrealized gains and losses on investments, including amounts attributable to noncontrolling interests, in our alternative asset management funds, as well as management and performance fees generated from those funds. For the three months ended June 30, 2024, we recorded an investment loss of $17.4 million, compared with investment income of $15.8 million in the corresponding period of 2023. In the second quarter of 2024, we recorded unrealized losses on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Excluding the impact of noncontrolling interests, adjusted investment income was $0.2 million for the three months ended June 30, 2024, compared with $2.8 million for the three months ended June 30, 2023.

Previous wording

Interest expense represents amounts associated with financing, economically hedging and holding short inventory positions, including interest paid on our short- and long-term financing arrangements, as well as commitment fees on our committed line and revolving credit facility. For the three months ended March 31, 2024, interest expense decreased to $1.4 million, compared with $2.6 million in the prior-year period. The decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid our $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.

Current wording

Interest expense represents amounts associated with financing, economically hedging and holding short inventory positions, including interest paid on our short- and long-term financing arrangements, as well as commitment fees on our committed line and revolving credit facility. For the three months ended June 30, 2024, interest expense decreased to $1.7 million, compared with $2.6 million in the prior-year period. The decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid our $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.

Previous wording

For the three months ended March 31, 2023, our provision for income taxes was a benefit of $7.6 million, which included $14.1 million of tax benefits related to stock-based compensation awards vesting at values greater than the grant price and accrued forfeitable dividends paid on vested restricted stock related to acquisitions. Excluding the impact of these benefits and noncontrolling interests, our effective tax rate was 35.9 percent.

Current wording

For the six months ended June 30, 2023, our provision for income taxes was a benefit of $7.9 million, which included $14.8 million of tax benefits related to stock-based compensation awards vesting at values greater than the grant price and accrued forfeitable dividends paid on vested restricted stock related to acquisitions. Excluding the impact of these benefits and noncontrolling interests, our effective tax rate was 31.9 percent.

Previous wording

For the three months ended March 31, 2024, institutional brokerage revenues were $91.4 million, down 5.1 percent compared with $96.3 million in the prior-year period. Equity brokerage revenues were $49.5 million in the first quarter of 2024, down 8.1 percent compared with $53.8 million in the corresponding period of 2023, due to lower volatility and volumes. For the three months ended March 31, 2024, fixed income services revenues were $42.0 million, essentially flat compared to $42.5 million in the prior-year period as interest rate uncertainty continues to mute client activity.

Current wording

For the six months ended June 30, 2024, institutional brokerage revenues were $183.2 million, essentially flat compared with $184.2 million in the prior-year period. Equity brokerage revenues were $101.6 million in the first half of 2024, down 2.6 percent compared with $104.3 million in the corresponding period of 2023. For the six months ended June 30, 2024, fixed income services revenues were $81.6 million, up 2.2 percent compared to $79.9 million in the prior-year period. Client activity within fixed income remains fairly muted as market participants wait for more certainty on interest rates.

Previous wording

Pre-tax margin for the three months ended March 31, 2024 increased to 15.3 percent, compared to 8.7 percent for the corresponding period of 2023. Adjusted pre-tax margin for the three months ended March 31, 2024 increased to 16.8 percent, compared with 14.1 percent for the corresponding period of 2023. In the current quarter, the increase in pre-tax margin on both a U.S. GAAP and adjusted basis was primarily due to higher net revenues.

Current wording

Pre-tax margin for the six months ended June 30, 2024 increased to 11.8 percent, compared to 6.9 percent for the six months ended June 30, 2023. Adjusted pre-tax margin for the six months ended June 30, 2024 increased to 17.0 percent, compared with 11.9 percent for the corresponding period of 2023. In the first six months of 2024, the increase in pre-tax margin on both a U.S. GAAP and adjusted basis was primarily due to higher net revenues.

Previous wording

Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million in common shares through December 31, 2024. During the three months ended March 31, 2024, we did not repurchase any shares of our common stock related to this authorization. At March 31, 2024, we had $138.2 million remaining under this authorization.

Current wording

Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million in common shares through December 31, 2024. During the six months ended June 30, 2024, we did not repurchase any shares of our common stock related to this authorization. At June 30, 2024, we had $138.2 million remaining under this authorization.

Previous wording

We also purchase shares of common stock from restricted stock award recipients upon the award vesting as recipients sell shares to meet their employment tax obligations. During the first quarter of 2024, we purchased 288,977 shares of our common stock at an average price of $180.26 per share for an aggregate purchase price of $52.1 million for these purposes.

Current wording

We also purchase shares of common stock from restricted stock award recipients upon the award vesting as recipients sell shares to meet their employment tax obligations. During the first half of 2024, we purchased 316,130 shares of our common stock at an average price of $182.16 per share for an aggregate purchase price of $57.6 million for these purposes.

Previous wording

We have established an arrangement to obtain financing from Pershing related to the majority of our trading activities. Under our fully disclosed clearing agreement, all of our securities inventories with the exception of convertible securities, and all of our customer activities are held by or cleared through Pershing. Financing under this arrangement is secured primarily by securities, and collateral limitations could reduce the amount of funding available under this arrangement. We may accommodate non-standard settlement timeframes for our clients, which can impact our funding and collateral balances. Our clearing arrangement activities are recorded net of trading activity and reported within receivables from or payables to brokers, dealers and clearing organizations. The funding is at the discretion of Pershing (i.e., uncommitted) and could be denied without a notice period. Our fully disclosed clearing agreement includes a covenant requiring Piper Sandler & Co., our U.S. broker dealer subsidiary, to maintain excess net capital of $120 million. At March 31, 2024, we had $208.6 million of financing outstanding under this arrangement.

Current wording

We have established an arrangement to obtain financing from Pershing related to the majority of our trading activities. Under our fully disclosed clearing agreement, all of our securities inventories with the exception of convertible securities, and all of our customer activities are held by or cleared through Pershing. Financing under this arrangement is secured primarily by securities, and collateral limitations could reduce the amount of funding available under this arrangement. We may accommodate non-standard settlement timeframes for our clients, which can impact our funding and collateral balances. Our clearing arrangement activities are recorded net of trading activity and reported within receivables from or payables to brokers, dealers and clearing organizations. The funding is at the discretion of Pershing (i.e., uncommitted) and could be denied without a notice period. Our fully disclosed clearing agreement includes a covenant requiring Piper Sandler & Co., our U.S. broker dealer subsidiary, to maintain excess net capital of $120 million. At June 30, 2024, we had $9.4 million of financing outstanding under this arrangement.

Previous wording

We have established a financing arrangement with a U.S. branch of Canadian Imperial Bank of Commerce ("CIBC") related to our convertible securities inventories. Under this arrangement, our convertible securities inventories are cleared through a broker dealer affiliate of CIBC and held by CIBC. We generally economically hedge changes in the market value of our convertible securities inventories using the underlying common stock or the stock options of the underlying common stock. Financing under this arrangement is secured primarily by convertible securities and collateral limitations could reduce the amount of funding available. The funding is at the discretion of CIBC (i.e., uncommitted) and could be denied subject to a notice period. This arrangement is reported within receivables from or payables to brokers, dealers and clearing organizations, net of trading activity. At March 31, 2024, we had $105.5 million of financing outstanding under this arrangement.

Current wording

We have established a financing arrangement with a U.S. branch of Canadian Imperial Bank of Commerce ("CIBC") related to our convertible securities inventories. Under this arrangement, our convertible securities inventories are cleared through a broker dealer affiliate of CIBC and held by CIBC. We generally economically hedge changes in the market value of our convertible securities inventories using the underlying common stock or the stock options of the underlying common stock. Financing under this arrangement is secured primarily by convertible securities and collateral limitations could reduce the amount of funding available. The funding is at the discretion of CIBC (i.e., uncommitted) and could be denied subject to a notice period. This arrangement is reported within receivables from or payables to brokers, dealers and clearing organizations, net of trading activity. At June 30, 2024, we had $62.3 million of financing outstanding under this arrangement.

Previous wording

The following table presents the average balances outstanding for our various funding sources by quarter for 2024 and 2023:

Current wording

The following tables present the average balances outstanding for our various funding sources by quarter for 2024 and 2023:

Previous wording

The average funding in the first quarter of 2024 increased to $133.4 million, compared with $111.5 million during the fourth quarter of 2023 and $63.7 million during the first quarter of 2023, primarily due to funding non-standard settlements for certain clients. The increase compared to the fourth quarter of 2023 was also due to higher average balances of convertible securities inventories, partially offset by the repayment of the outstanding balance on our revolving credit facility.

Current wording

The average funding in the second quarter of 2024 decreased to $73.1 million, compared with $133.4 million during the first quarter of 2024, primarily due to funding fewer non-standard settlements for our clients. The average funding decreased compared with $126.4 million during the second quarter of 2023, primarily due to lower average inventory balances.

Previous wording

As a registered broker dealer and member firm of the Financial Industry Regulatory Authority, Inc. ("FINRA"), Piper Sandler & Co. is subject to the uniform net capital rule of the SEC and the net capital rule of FINRA. We have elected to use the alternative method permitted by the uniform net capital rule which requires that we maintain minimum net capital of $1.0 million. Advances to affiliates, repayment of subordinated liabilities, dividend payments and other equity withdrawals are subject to certain approvals, notifications and other provisions of the uniform net capital rules. We expect that these provisions will not impact our ability to meet current and future obligations. At March 31, 2024, our net capital under the SEC's uniform net capital rule was $188.8 million, and exceeded the minimum net capital required under the SEC rule by $187.8 million.

Current wording

As a registered broker dealer and member firm of the Financial Industry Regulatory Authority, Inc. ("FINRA"), Piper Sandler & Co. is subject to the uniform net capital rule of the SEC and the net capital rule of FINRA. We have elected to use the alternative method permitted by the uniform net capital rule which requires that we maintain minimum net capital of $1.0 million. Advances to affiliates, repayment of subordinated liabilities, dividend payments and other equity withdrawals are subject to certain approvals, notifications and other provisions of the uniform net capital rules. We expect that these provisions will not impact our ability to meet current and future obligations. At June 30, 2024, our net capital under the SEC's uniform net capital rule was $237.2 million, and exceeded the minimum net capital required under the SEC rule by $236.2 million.

Previous wording

(1)Consists of interest rate swaps. We have minimal market risk related to these matched-book derivative contracts; however, we do have counterparty risk with one major financial institution, which is mitigated by collateral deposits. In addition, we have a limited number of counterparties (contractual amount of $78.3 million at March 31, 2024) who are not required to post collateral. The uncollateralized amounts, representing the fair value of the derivative contracts, expose us to the credit risk of these counterparties. At March 31, 2024, we had $5.0 million of credit exposure with these counterparties, including $4.6 million of credit exposure with one counterparty.

Current wording

(1)Consists of interest rate swaps. We have minimal market risk related to these matched-book derivative contracts; however, we do have counterparty risk with one major financial institution, which is mitigated by collateral deposits. In addition, we have a limited number of counterparties (contractual amount of $77.5 million at June 30, 2024) who are not required to post collateral. The uncollateralized amounts, representing the fair value of the derivative contracts, expose us to the credit risk of these counterparties. At June 30, 2024, we had $4.6 million of credit exposure with these counterparties, including $4.2 million of credit exposure with one counterparty.

Previous wording

(2)We believe the fair value of these derivative contracts is a more relevant measure of the obligations because we believe the notional or contract amount overstates the expected payout. At March 31, 2024 and December 31, 2023, the net fair value of these derivative contracts approximated $6.0 million and $6.9 million, respectively.

Current wording

(2)We believe the fair value of these derivative contracts is a more relevant measure of the obligations because we believe the notional or contract amount overstates the expected payout. At June 30, 2024 and December 31, 2023, the net fair value of these derivative contracts approximated $6.1 million and $6.9 million, respectively.

Previous wording

We have investments, including those made as part of our alternative asset management activities, in limited partnerships or limited liability companies that make direct or indirect equity or debt investments in companies. We commit capital and/or act as the managing partner of these entities. We have committed capital of $93.5 million to certain entities and these commitments generally have no specified call dates.

Current wording

We have investments, including those made as part of our alternative asset management activities, in limited partnerships or limited liability companies that make direct or indirect equity or debt investments in companies. We commit capital and/or act as the managing partner of these entities. We have committed capital of $92.0 million to certain entities and these commitments generally have no specified call dates.

Previous wording

We estimate that a parallel 50 basis point adverse change in the market would result in a decrease of approximately $0.2 million in the carrying value of our fixed income securities inventory as of March 31, 2024, including the effect of the hedging transactions.

Current wording

We estimate that a parallel 50 basis point adverse change in the market would result in a decrease of approximately $1.5 million in the carrying value of our fixed income securities inventory as of June 30, 2024, including the effect of the hedging transactions.

Previous wording

We have concentrated counterparty credit exposure with three non-publicly rated entities totaling $5.0 million at March 31, 2024. This counterparty credit exposure is part of our matched-book derivative program related to our public finance business, consisting primarily of interest rate swaps. One derivative counterparty represented 92.1 percent, or $4.6 million, of this exposure. Credit exposure associated with our derivative counterparties is driven by uncollateralized market movements in the fair value of the interest rate swap contracts and is monitored regularly by our financial risk committee. We attempt to minimize the credit (or repayment) risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically by senior management.

Current wording

We have concentrated counterparty credit exposure with three non-publicly rated entities totaling $4.6 million at June 30, 2024. This counterparty credit exposure is part of our matched-book derivative program related to our public finance business, consisting primarily of interest rate swaps. One derivative counterparty represented 91.3 percent, or $4.2 million, of this exposure. Credit exposure associated with our derivative counterparties is driven by uncollateralized market movements in the fair value of the interest rate swap contracts and is monitored regularly by our financial risk committee. We attempt to minimize the credit (or repayment) risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically by senior management.