PIPER SANDLER COMPANIES

Non-interest expenses on a U.S. GAAP basis were $376.4 million for the three months ended September 30, 2026, compared to $371.8 million in the prior-year period. For the three months ended September 30, 2026, adjusted non-interest expenses were $365.7 million, compared with $359.0 million for the third 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 September 30, 2026, compensation and benefits expenses decreased slightly to $286.6 million, compared with $288.9 million in the corresponding period of 2025. Compensation and benefits expenses as a percentage of net revenues increased to 64.7 percent in the third quarter of 2026, compared to 60.3 percent in the third quarter of 2025. The higher compensation ratio in the third quarter of 2026 was impacted by an investment loss on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Our adjusted compensation ratio decreased slightly to 61.5 percent in the third quarter of 2026, compared with 61.7 percent in the third quarter of 2025.

Occupancy and Equipment

For the three months ended September 30, 2026, occupancy and equipment expenses increased 15.3 percent to $22.4 million, compared with $19.4 million in the corresponding period of 2025, primarily due to incremental occupancy costs resulting from our planned New York City office relocation in 2027. We expect to incur additional occupancy costs through the third quarter of 2027 related to this office space.

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 increased 19.3 percent to $17.4 million in the third quarter of 2026, compared with $14.6 million in the corresponding period of 2025, primarily due to higher legal fees related to an ongoing legal matter, and increased professional fees associated with technology consulting services. We expect to incur additional legal fees related to this ongoing legal matter through 2026.

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 September 30, 2026, communication expenses increased 4.8 percent to $15.6 million, compared with $14.9 million in the corresponding period of 2025, 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 three months ended September 30, 2026, marketing and business development expenses increased 19.9 percent to $14.9 million, compared with $12.4 million in the corresponding period of 2025 due to higher travel expenses associated with increased business activity.

Trade Execution and Clearance

For the three months ended September 30, 2026, trade execution and clearance expenses increased 29.4 percent to $6.2 million, compared with $4.8 million in the corresponding period of 2025. The increase in trade execution and clearance expenses is reflective of higher trading volumes compared with the third quarter of 2025.

Restructuring and Integration Costs

For the three months ended September 30, 2025, we incurred restructuring and integration costs of $1.0 million, primarily consisting of integration costs related to our acquisition of G Squared.

Intangible Asset Amortization

Amortization of definite-lived intangible assets was $2.1 million for the three months ended September 30, 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 $11.3 million in the third quarter of 2026, compared with $13.7 million in the corresponding period of 2025. Other operating expenses for the third quarter of 2026 included lower underwriting costs associated with a decline in corporate financing deal activity.