PIPER SANDLER COMPANIES

Non-interest expenses on a U.S. GAAP basis were $1.52 billion for the year ended December 31, 2025, compared to $1.31 billion in the prior-year period. For the year ended December 31, 2025, adjusted non-interest expenses were $1.47 billion, compared with $1.24 billion for the year ended December 31, 2024. The variance explanations for non-interest expenses and adjusted non-interest expenses are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise. See "Explanation and Reconciliation of Non-GAAP Financial Measures" for a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures and a reconciliation of U.S. GAAP to adjusted, non-GAAP financial information.

Compensation and Benefits

Compensation and benefits expenses, which are the largest component of our expenses, include salaries, incentive compensation, benefits, stock-based compensation, employment taxes, the reversal of expenses associated with the forfeiture of stock-based compensation and other employee-related costs. A significant portion of compensation expense is comprised of variable incentive arrangements, including discretionary incentive compensation, the amount of which fluctuates in proportion to the level of business activity, increasing with higher revenues and operating profits and decreasing with lower revenues and operating profits. Other compensation costs, primarily base salaries and benefits, are more fixed in nature. In conjunction with our acquisitions, we have granted restricted stock, restricted cash with service conditions, and restricted mutual fund shares of investment funds ("MFRS Awards") which are amortized to compensation expense over the service period. We have also entered into forgivable loans with service conditions, which are amortized to compensation expense over the loan term. Additionally, expense estimates related to revenue-based earnout arrangements with service conditions entered into as part of our acquisitions are amortized to compensation expense over the service period.

The following table summarizes our expected future acquisition-related compensation expense for restricted stock, restricted cash with service conditions, MFRS Awards and forgivable loans with service conditions, as well as expense estimates related to revenue-based earnout arrangements:

For the year ended December 31, 2025, compensation and benefits expenses increased 18.1 percent to $1.19 billion, compared with $1.00 billion in 2024, due to higher revenues and profitability. Compensation and benefits expenses as a percentage of net revenues decreased to 62.5 percent in 2025, compared to 65.8 percent in 2024, primarily due to higher net revenues, including investment income on our investments and the noncontrolling interests in the alternative asset management funds that we manage in the current year compared to an investment loss in 2024. Our adjusted compensation ratio decreased to 61.4 percent in 2025, compared with 62.0 percent in 2024, primarily due to higher adjusted net revenues.

Outside Services

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. For the year ended December 31, 2025, outside services expenses increased 5.2 percent to $58.7 million, compared with $55.8 million in 2024, primarily due to higher legal fees and increased professional fees associated with technology consulting services.

Occupancy and Equipment

For the year ended December 31, 2025, occupancy and equipment expenses increased 10.4 percent to $73.5 million, compared with $66.5 million in 2024, primarily due to incremental expenses as a result of relocating our Minneapolis corporate headquarters to a new building. Our occupancy and equipment expenses will increase in 2026 as a result of relocating our office space in New York City, New York.

Communications

Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third-party market data information. For the year ended December 31, 2025, communication expenses increased 2.4 percent to $56.2 million, compared with $54.9 million in 2024, primarily due to higher market data services expenses.

Marketing and Business Development

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the year ended December 31, 2025, marketing and business development expenses increased 11.7 percent to $47.2 million, compared with $42.2 million in 2024, primarily due to higher travel expenses associated with increased business activity.

Deal-Related Expenses

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 year ended December 31, 2025, deal-related expenses were $43.5 million, compared with $30.5 million for the year ended December 31, 2024. 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.

Trade Execution and Clearance

For the year ended December 31, 2025, trade execution and clearance expenses decreased slightly to $19.6 million, compared with $19.8 million for the year ended December 31, 2024.

Restructuring and Integration Costs

For the year ended December 31, 2025, we incurred restructuring and integration costs of $6.1 million. The expenses principally consisted of $2.8 million of severance benefits related to headcount reductions, $1.8 million for vacated leased office space associated with our acquisition of Aviditi Advisors, as well as $1.5 million of integration costs related principally to our acquisition of G Squared.

For the year ended December 31, 2024, we incurred restructuring and integration costs of $2.6 million, primarily consisting of integration costs related to our acquisition of Aviditi Advisors.

Intangible Asset Amortization

For the year ended December 31, 2025, amortization of definite-lived intangible assets was $10.0 million, compared with $10.3 million in 2024.

The following table summarizes the future aggregate amortization expense of our intangible assets with determinable lives:

Other Operating Expenses

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. For the year ended December 31, 2025, other operating expenses were $23.7 million, compared with $20.7 million in 2024. Other operating expenses for 2024 included a $4.0 million reduction in the accrual for civil penalties related to our regulatory settlements regarding recordkeeping requirements for business-related communications.