PIPER SANDLER COMPANIES

Non-interest expenses on a U.S. GAAP basis were $386.5 million for the three months ended March 31, 2026, compared to $327.8 million in the prior-year period. For the three months ended March 31, 2026, adjusted non-interest expenses were $375.7 million, compared with $314.8 million for the first quarter of 2025. 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 three months ended March 31, 2026, compensation and benefits expenses increased 19.2 percent to $296.1 million, compared with $248.5 million in the corresponding period of 2025, due to higher revenues. Compensation and benefits expenses as a percentage of net revenues decreased to 62.4 percent in the first quarter of 2026, compared to 69.5 percent in the first quarter of 2025, 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 quarter compared to an investment loss in the first quarter of 2025. Our adjusted compensation ratio decreased to 61.6 percent in the first quarter of 2026, compared with 62.5 percent in the first quarter of 2025, primarily due to higher adjusted net revenues.

Occupancy and Equipment

For the three months ended March 31, 2026, occupancy and equipment expenses decreased slightly to $18.1 million, compared with $18.2 million in the corresponding period of 2025. We expect our occupancy and equipment expenses will increase in 2026 as a result of relocating our office space in New York City, New York.

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. Outside services expenses decreased 11.3 percent to $13.7 million in the first quarter of 2026, compared with $15.5 million in the corresponding period of 2025, primarily due to lower professional fees.

Communications

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, 2026, communication expenses decreased 3.4 percent to $14.9 million, compared with $15.4 million in the corresponding period of 2025, primarily due to lower 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 three months ended March 31, 2026, marketing and business development expenses increased modestly to $15.2 million, compared with $14.9 million in the corresponding period of 2025.

Trade Execution and Clearance

For the three months ended March 31, 2026, trade execution and clearance expenses decreased slightly to $5.0 million, compared with $5.2 million in the corresponding period of 2025.

Intangible Asset Amortization

Amortization of definite-lived intangible assets was $2.1 million for the three months ended March 31, 2026 and 2025.

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

Other Operating Expenses

Other operating expenses primarily include underwriting expenses, 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. The amount of underwriting expenses is dependent on the level of financing deal activity and may vary from period to period. Other operating expenses were $21.5 million in the first quarter of 2026, compared with $8.1 million in the corresponding period of 2025. Other operating expenses for the first quarter of 2026 included $8.5 million in litigation-related expenses as well as higher underwriting costs associated with increased corporate financing deal activity.