pipr-20240630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-31720

PIPER SANDLER COMPANIES

(Exact Name of Registrant as specified in its Charter)

Delaware

30-0168701

(State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification No.)

800 Nicollet Mall, Suite 900

Minneapolis, Minnesota

55402

(Address of Principal Executive Offices)

(Zip Code)

(612)

303-6000

(Registrant's Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share	PIPR	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of July 30, 2024, the registrant had 17,697,079 shares of Common Stock outstanding.

Table of Contents

Part I. Financial Information


Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	64

Part II. Other Information


Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	66
	Signatures	67

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Table of Contents

Part I. Financial Information

Item 1. Financial Statements.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS


Consolidated Statements of Financial Condition		4
Consolidated Statements of Operations		5
Consolidated Statements of Comprehensive Income		6
Consolidated Statements of Changes in Shareholders' Equity		7
Consolidated Statements of Cash Flows		9
Notes to the Consolidated Financial Statements		10
Note 1	Organization and Basis of Presentation	10
Note 2	Summary of Significant Accounting Policies	10
Note 3	Recent Accounting Pronouncements	11
Note 4	Acquisitions	11
Note 5	Receivables from and Payables to Brokers, Dealers and Clearing Organizations	11
Note 6	Fair Value of Financial Instruments	12
Note 7	Financial Instruments and Other Inventory Positions	20
Note 8	Investments	22
Note 9	Variable Interest Entities	22


Note 10	Other Assets	23
Note 11	Short-Term Financing	24


Note 12	Legal Contingencies	24
Note 13	Shareholders' Equity	25
Note 14	Revenues and Business Information	26
Note 15	Compensation Plans	27
Note 16	Restructuring and Integration Costs	34

Note 17	Earnings Per Share	34
Note 18	Net Capital Requirements and Other Regulatory Matters	35

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Piper Sandler Companies

Consolidated Statements of Financial Condition


	June 30,		December 31,
	2024		2023
(Amounts in thousands, except share data)	(Unaudited)
Assets
Cash and cash equivalents	$	320,935	$	383,098
Receivables from brokers, dealers and clearing organizations	117,351		212,004

Financial instruments and other inventory positions owned:
Financial instruments and other inventory positions owned	329,184		341,780
Financial instruments and other inventory positions owned and pledged as collateral	89,061		92,777
Total financial instruments and other inventory positions owned	418,245		434,557

Investments (including noncontrolling interests of $183,293 and $211,096, respectively)	266,558		298,048
Fixed assets (net of accumulated depreciation and amortization of $99,721 and $91,378, respectively)	56,887		60,770
Right-of-use lease assets	66,550		69,387
Goodwill	301,760		301,760
Intangible assets (net of accumulated amortization of $155,209 and $150,487, respectively)	111,475		116,197
Net deferred income tax assets	147,260		179,207
Other assets	113,042		85,955
Total assets	$	1,920,063	$	2,140,983

Liabilities and Shareholders' Equity
Short-term financing	$	—	$	30,000

Payables to brokers, dealers and clearing organizations	21,950		979
Financial instruments and other inventory positions sold, but not yet purchased	117,994		148,980
Accrued compensation	275,964		486,145
Accrued lease liabilities	90,099		93,727
Other liabilities and accrued expenses	73,248		81,679
Total liabilities	579,255		841,510

Shareholders' equity:
Common stock, $0.01 par value:
Shares authorized: 100,000,000 at June 30, 2024 and December 31, 2023;
Shares issued: 19,556,198 at June 30, 2024 and 19,553,101 at December 31, 2023;
Shares outstanding: 15,902,131 at June 30, 2024 and 15,200,149 at December 31, 2023	195		195
Additional paid-in capital	973,070		988,136
Retained earnings	481,177		454,358
Less: Common stock held in treasury, at cost: 3,654,067 shares at June 30, 2024 and 4,352,952 shares at December 31, 2023	(327,392)		(356,297)
Accumulated other comprehensive loss	(792)		(894)
Total common shareholders' equity	1,126,258		1,085,498
Noncontrolling interests	214,550		213,975
Total shareholders' equity	1,340,808		1,299,473

Total liabilities and shareholders' equity	$	1,920,063	$	2,140,983

See Notes to the Consolidated Financial Statements

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Piper Sandler Companies

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Amounts in thousands, except per share data)	2024		2023		2024		2023
Revenues
Investment banking	$	259,782	$	183,967	$	490,305	$	368,371
Institutional brokerage	91,737		87,838		183,179		184,151
Interest income	6,676		3,729		14,982		12,441
Investment income/(loss)	(17,351)		15,797		(3,183)		26,912
Total revenues	340,844		291,331		685,283		591,875
Interest expense	1,665		2,605		3,048		5,244
Net revenues	339,179		288,726		682,235		586,631

Non-interest expenses
Compensation and benefits	234,709		189,204		457,155		388,598
Outside services	13,974		13,456		26,396		25,582
Occupancy and equipment	16,757		16,020		32,793		31,748
Communications	14,568		13,047		27,797		27,358
Marketing and business development	11,372		10,930		22,135		20,982
Deal-related expenses	5,943		7,505		12,330		13,519
Trade execution and clearance	4,515		4,854		9,381		9,768
Restructuring and integration costs	977		3,903		977		3,903
Intangible asset amortization	2,361		4,904		4,722		9,808
Other operating expenses	5,757		10,522		7,881		15,175
Total non-interest expenses	310,933		274,345		601,567		546,441

Income before income tax expense/(benefit)	28,246		14,381		80,668		40,190
Income tax expense/(benefit)	13,276		(250)		16,120		(7,887)
Net income	14,970		14,631		64,548		48,077
Net income/(loss) attributable to noncontrolling interests	(19,803)		10,677		(12,718)		18,489
Net income attributable to Piper Sandler Companies	$	34,773	$	3,954	$	77,266	$	29,588

Earnings per common share
Basic	$	2.19	$	0.26	$	4.92	$	2.00
Diluted	$	1.97	$	0.23	$	4.40	$	1.73

Dividends declared per common share	$	0.60	$	0.60	$	2.20	$	2.45

Weighted average number of common shares outstanding
Basic	15,879		15,066		15,689		14,788
Diluted	17,633		17,084		17,569		17,134

See Notes to the Consolidated Financial Statements

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Piper Sandler Companies

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Amounts in thousands)	2024		2023		2024		2023
Net income	$	14,970	$	14,631	$	64,548	$	48,077
Other comprehensive income, net of tax — Foreign currency translation adjustment	58		779		102		1,734
Comprehensive income	15,028		15,410		64,650		49,811
Comprehensive income/(loss) attributable to noncontrolling interests	(19,803)		10,677		(12,718)		18,489
Comprehensive income attributable to Piper Sandler Companies	$	34,831	$	4,733	$	77,368	$	31,322

See Notes to the Consolidated Financial Statements

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Piper Sandler Companies

Consolidated Statements of Changes in Shareholders' Equity

(Unaudited)


										Accumulated		Total
	Common			Additional						Other		Common				Total
(Amounts in thousands,	Shares	Common		Paid-In		Retained		Treasury		Comprehensive		Shareholders'		Noncontrolling		Shareholders'
except share amounts)	Outstanding	Stock		Capital		Earnings		Stock		Loss		Equity		Interests		Equity
Balance at December 31, 2023	15,200,149	$	195	$	988,136	$	454,358	$	(356,297)	$	(894)	$	1,085,498	$	213,975	$	1,299,473
Net income	—	—		—		42,493		—		—		42,493		7,085		49,578
Dividends	—	—		—		(35,660)		—		—		(35,660)		—		(35,660)
Amortization/issuance of restricted stock (1)	—	—		60,185		—		—		—		60,185		—		60,185


Issuance of treasury shares for restricted stock vestings	730,695	—		(61,232)		—		61,232		—		—		—		—
Repurchase of common stock from employees	(288,977)	—		—		—		(52,091)		—		(52,091)		—		(52,091)
Shares reserved/issued for director compensation	555	—		106		—		—		—		106		—		106
Other comprehensive income	—	—		—		—		—		44		44		—		44
Fund capital contributions, net	—	—		—		—		—		—		—		3,395		3,395
Balance at March 31, 2024	15,642,422	$	195	$	987,195	$	461,191	$	(347,156)	$	(850)	$	1,100,575	$	224,455	$	1,325,030
Net income/(loss)	—	—		—		34,773		—		—		34,773		(19,803)		14,970
Dividends	—	—		—		(14,787)		—		—		(14,787)		—		(14,787)
Amortization/issuance of restricted stock (1)	—	—		10,608		—		—		—		10,608		—		10,608


Issuance of treasury shares for restricted stock vestings	284,320	—		(25,260)		—		25,260		—		—		—		—
Repurchase of common stock from employees	(27,153)	—		—		—		(5,496)		—		(5,496)		—		(5,496)
Shares reserved/issued for director compensation	2,542	—		527		—		—		—		527		—		527
Other comprehensive income	—	—		—		—		—		58		58		—		58
Fund capital contributions, net	—	—		—		—		—		—		—		9,898		9,898
Balance at June 30, 2024	15,902,131	$	195	$	973,070	$	481,177	$	(327,392)	$	(792)	$	1,126,258	$	214,550	$	1,340,808












Continued on next page

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Piper Sandler Companies

Consolidated Statements of Changes in Shareholders' Equity - Continued

(Unaudited)


										Accumulated		Total
	Common			Additional						Other		Common				Total
(Amounts in thousands,	Shares	Common		Paid-In		Retained		Treasury		Comprehensive		Shareholders'		Noncontrolling		Shareholders'
except share amounts)	Outstanding	Stock		Capital		Earnings		Stock		Loss		Equity		Interests		Equity
Balance at December 31, 2022	13,673,064	$	195	$	1,044,719	$	453,311	$	(441,653)	$	(2,499)	$	1,054,073	$	199,955	$	1,254,028
Net income	—	—		—		25,634		—		—		25,634		7,812		33,446
Dividends	—	—		—		(50,861)		—		—		(50,861)		—		(50,861)
Amortization/issuance of restricted stock (1)	—	—		67,682		—		—		—		67,682		—		67,682


Issuance of treasury shares for restricted stock vestings	1,584,696	—		(121,284)		—		121,284		—		—		—		—
Repurchase of common stock from employees	(426,031)	—		—		—		(60,831)		—		(60,831)		—		(60,831)
Shares reserved/issued for director compensation	1,398	—		192		—		—		—		192		—		192
Other comprehensive income	—	—		—		—		—		955		955		—		955
Fund capital distributions, net	—	—		—		—		—		—		—		(5,048)		(5,048)
Balance at March 31, 2023	14,833,127	$	195	$	991,309	$	428,084	$	(381,200)	$	(1,544)	$	1,036,844	$	202,719	$	1,239,563
Net income	—	—		—		3,954		—		—		3,954		10,677		14,631
Dividends	—	—		—		(13,271)		—		—		(13,271)		—		(13,271)
Amortization/issuance of restricted stock (1)	—	—		6,693		—		—		—		6,693		—		6,693


Issuance of treasury shares for restricted stock vestings	261,531	—		(21,158)		—		21,158		—		—		—		—
Repurchase of common stock from employees	(21,423)	—		—		—		(2,886)		—		(2,886)		—		(2,886)
Shares reserved/issued for director compensation	4,930	—		639		—		—		—		639		—		639
Other comprehensive income	—	—		—		—		—		779		779		—		779
Fund capital contributions, net	—	—		—		—		—		—		—		12,323		12,323
Balance at June 30, 2023	15,078,165	$	195	$	977,483	$	418,767	$	(362,928)	$	(765)	$	1,032,752	$	225,719	$	1,258,471

(1)Includes amortization of restricted stock issued in conjunction with the Company's acquisitions.

See Notes to the Consolidated Financial Statements

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Piper Sandler Companies

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
	June 30,
(Amounts in thousands)	2024		2023
Operating Activities
Net income	$	64,548	$	48,077
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization of fixed assets	8,494		8,980
Deferred income taxes	31,947		(10,583)
Stock-based compensation	50,590		41,177
Amortization of intangible assets	4,722		9,808
Amortization of forgivable loans	7,039		5,399
Decrease/(increase) in operating assets:
Receivables from brokers, dealers and clearing organizations	94,653		86,964
Net financial instruments and other inventory positions owned	(14,674)		(28,894)
Investments	31,490		(31,530)
Other assets	(30,850)		(12,449)
Increase/(decrease) in operating liabilities:
Payables to brokers, dealers and clearing organizations	20,971		(3,350)
Accrued compensation	(187,687)		(298,361)
Other liabilities and accrued expenses	(11,954)		10,129
Net cash provided by/(used in) operating activities	69,289		(174,633)

Investing Activities

Purchases of fixed assets, net	(4,652)		(4,698)
Net cash used in investing activities	(4,652)		(4,698)

Financing Activities
Net change in short-term financing	(30,000)		—


Payment of contingent consideration	(1,550)		—
Payment of cash dividend	(50,447)		(64,132)
Increase in noncontrolling interests	13,293		7,275
Repurchase of common stock	(57,587)		(63,717)

Net cash used in financing activities	(126,291)		(120,574)

Currency adjustment:
Effect of exchange rate changes on cash	(509)		1,501

Net decrease in cash and cash equivalents	(62,163)		(298,404)

Cash and cash equivalents at beginning of period	383,098		365,624
Cash and cash equivalents at end of period	$	320,935	$	67,220

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	2,953	$	5,124
Income taxes	$	4,747	$	20,206

See Notes to the Consolidated Financial Statements

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Piper Sandler Companies

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1 | ORGANIZATION AND BASIS OF PRESENTATION

Organization

Piper Sandler Companies is the parent company of Piper Sandler & Co. ("Piper Sandler"), a securities broker dealer and investment banking firm; Piper Sandler Ltd., a firm providing securities brokerage and mergers and acquisitions services in the United Kingdom ("U.K."); Piper Sandler Finance LLC, which facilitates corporate debt underwriting in conjunction with affiliated credit vehicles; Piper Sandler Investment Group Inc., PSC Capital Management LLC, PSC Capital Management II LLC and PSC Capital Management III LLC, entities providing alternative asset management services; Piper Sandler Hedging Services, LLC, an entity that assists clients with hedging strategies; Piper Sandler Financial Products Inc. and Piper Sandler Financial Products II Inc., entities that facilitate derivative transactions; and other immaterial subsidiaries.

Piper Sandler Companies and its subsidiaries (collectively, the "Company") operate in one reporting segment providing investment banking services and institutional sales, trading and research services. Investment banking services include financial advisory services, management of and participation in underwritings, and municipal financing activities. Revenues are generated through the receipt of advisory and financing fees. Institutional sales, trading and research services focus on the trading of equity and fixed income products with institutions, corporations, government and non-profit entities. Revenues are generated through commissions and sales credits earned on equity and fixed income institutional sales activities, net interest revenues on trading securities held in inventory, profits and losses from trading these securities, and fees for research services and corporate access offerings. Also, the Company has created alternative asset management funds in merchant banking and healthcare in order to invest firm capital and to manage capital from outside investors. The Company records gains and losses from investments in these funds and receives management and performance fees.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC"). Pursuant to this guidance, certain information and disclosures have been omitted that are included within the complete annual financial statements. Except as disclosed herein, there have been no material changes in the information reported in the financial statements and related disclosures in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The consolidated financial statements include the accounts of Piper Sandler Companies, its wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest. Noncontrolling interests represent equity interests in consolidated entities that are not attributable, either directly or indirectly, to Piper Sandler Companies. Noncontrolling interests include the minority equity holders' proportionate share of the equity in the Company's alternative asset management funds. All material intercompany balances have been eliminated.

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates and assumptions are based on the best information available, actual results could differ from those estimates.

NOTE 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a full description of the Company's significant accounting policies.

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Piper Sandler Companies

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 3 | RECENT ACCOUNTING PRONOUNCEMENTS

Future Adoption of New Applicable Accounting Standards

Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). This guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the impact of ASU 2023-07 on its financial statement disclosures.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures" ("ASU 2023-09"). This guidance enhances the annual income tax disclosure requirements by requiring disaggregated information related to the effective tax rate reconciliation and income taxes paid, as well as other disclosure requirements. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of ASU 2023-09 on its financial statement disclosures.

NOTE 4 | ACQUISITIONS

Definitive Agreement to Acquire Aviditi Advisors

On June 6, 2024, the Company announced a definitive agreement to acquire Aviditi Advisors, an alternative investment bank providing full lifecycle services to financial sponsors, global alternative investment managers and limited partner investors. The purchase price consists of cash and equity consideration, and additional cash consideration may be earned if certain revenue targets are achieved. Restricted compensation arrangements will also be granted for retention purposes. The transaction is expected to close late in the third quarter or early in the fourth quarter of 2024, subject to obtaining required regulatory approvals and other customary closing conditions.

NOTE 5 | RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS


	June 30,		December 31,
(Amounts in thousands)	2024		2023
Receivables from brokers, dealers and clearing organizations

Receivable from clearing organizations	$	108,075	$	199,143

Receivable from brokers and dealers	5,913		9,176


Other	3,363		3,685
Total receivables from brokers, dealers and clearing organizations	$	117,351	$	212,004

Payables to brokers, dealers and clearing organizations
Payable to brokers and dealers	$	21,950	$	979




Total payables to brokers, dealers and clearing organizations	$	21,950	$	979

Under the Company's fully disclosed clearing agreement, all of its securities inventories with the exception of convertible securities, and all of its customer activities are held by or cleared through Pershing LLC ("Pershing"). The Company has established an arrangement to obtain financing from Pershing related to the majority of its trading activities. The Company also has a clearing arrangement with bank financing related to its convertible securities inventories. Financing under these arrangements is secured primarily by securities, and collateral limitations could reduce the amount of funding available under these arrangements. The funding is at their discretion and could be denied. The Company's clearing arrangement activities are recorded net of trading activity. The Company's fully disclosed clearing agreement includes a covenant requiring Piper Sandler to maintain excess net capital of $120 million.

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Piper Sandler Companies

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 6 | FAIR VALUE OF FINANCIAL INSTRUMENTS

Based on the nature of the Company's business and its role as a "dealer" in the securities industry or as a manager of alternative asset management funds, the fair values of its financial instruments are determined internally. The Company's processes are designed to ensure that the fair values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, unobservable inputs are developed based on an evaluation of all relevant empirical market data, including prices evidenced by market transactions, interest rates, credit spreads, volatilities and correlations and other security-specific information. Valuation adjustments related to illiquidity or counterparty credit risk are also considered. In estimating fair value, the Company may utilize information provided by third-party pricing vendors to corroborate internally-developed fair value estimates.

The Company employs specific control processes to determine the reasonableness of the fair value of its financial instruments. The Company's processes are designed to ensure that the internally-estimated fair values are accurately recorded and that the data inputs and the valuation techniques used are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. Individuals outside of the trading departments perform independent pricing verification reviews as of each reporting date. The Company has established parameters which set forth when the fair value of securities is independently verified. The selection parameters are generally based upon the type of security, the level of estimation risk of a security, the materiality of the security to the Company's consolidated financial statements, changes in fair value from period to period, and other specific facts and circumstances of the Company's securities portfolio. In evaluating the initial internally-estimated fair values made by the Company's traders, the nature and complexity of securities involved (e.g., term, coupon, collateral, and other key drivers of value), level of market activity for securities, and availability of market data are considered. The independent price verification procedures include, but are not limited to, analysis of trade data (both internal and external where available), corroboration to the valuation of positions with similar characteristics, risks and components, or comparison to an alternative pricing source, such as a discounted cash flow model. The Company's valuation committees, comprised of members of senior management and risk management, provide oversight and overall responsibility for the internal control processes and procedures related to fair value measurements.

The following is a description of the valuation techniques used to measure fair value.

Cash Equivalents

Cash equivalents include highly liquid investments with original maturities of 90 days or less. Actively traded money market funds are measured at their net asset value and classified as Level I.

Financial Instruments and Other Inventory Positions

The Company records financial instruments and other inventory positions owned and financial instruments and other inventory positions sold, but not yet purchased at fair value on the consolidated statements of financial condition with unrealized gains and losses reflected on the consolidated statements of operations.

Equity Securities

Exchange traded equity securities are valued based on quoted prices from the exchange for identical assets or liabilities as of the period-end date. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level I. Non-exchange traded equity securities are measured primarily using broker quotations, prices observed for recently executed market transactions and internally-developed fair value estimates based on observable inputs and are categorized within Level II of the fair value hierarchy.

Convertible Securities

Convertible securities are valued based on observable trades, when available, and therefore are generally categorized as Level II.

Corporate Fixed Income Securities

Fixed income securities include corporate bonds which are valued based on recently executed market transactions of comparable size, internally-developed fair value estimates based on observable inputs, or broker quotations. Accordingly, these corporate bonds are categorized as Level II.

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Notes to the Consolidated Financial Statements

(Unaudited)

Taxable Municipal Securities

Taxable municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II.

Tax-Exempt Municipal Securities

Tax-exempt municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II. Certain illiquid tax-exempt municipal securities are valued using market data for comparable securities (e.g., maturity and sector) and management judgment to infer an appropriate current yield or other model-based valuation techniques deemed appropriate by management based on the specific nature of the individual security and therefore are categorized as Level III.

Short-Term Municipal Securities

Short-term municipal securities include variable rate demand notes and other short-term municipal securities. Variable rate demand notes and other short-term municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II.

Asset-Backed Securities

Asset-backed securities are valued using recently executed observable trades, when available, and therefore are generally categorized as Level II. Certain asset-backed securities are valued using models where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data. Accordingly, these asset-backed securities are categorized as Level II.

U.S. Government Agency Securities

U.S. government agency securities include agency debt bonds and mortgage bonds. Agency debt bonds are valued by using either direct price quotes or price quotes for comparable bond securities and are categorized as Level II. Mortgage bonds include bonds secured by mortgages, mortgage pass-through securities, agency collateralized mortgage-obligation ("CMO") securities and agency interest-only securities. Mortgage pass-through securities, CMO securities and interest-only securities are valued using recently executed observable trades or other observable inputs, such as prepayment speeds and therefore are generally categorized as Level II. Mortgage bonds are valued using observable market inputs, such as market yields on spreads over U.S. treasury securities, or models based upon prepayment expectations. These securities are categorized as Level II.

U.S. Government Securities

U.S. government securities include highly liquid U.S. treasury securities which are generally valued using quoted market prices and therefore are categorized as Level I. The Company does not transact in securities of countries other than the U.S. government.

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Notes to the Consolidated Financial Statements

(Unaudited)

Derivative Contracts

Derivative contracts include interest rate swaps, interest rate locks, and U.S. treasury bond futures. These instruments derive their value from underlying assets, reference rates, indices or a combination of these factors. The majority of the Company's interest rate derivative contracts, including both interest rate swaps and interest rate locks, are valued using market standard pricing models based on the net present value of estimated future cash flows. The valuation models used do not involve material subjectivity as the methodologies do not entail significant judgment and the pricing inputs are market observable, including contractual terms, yield curves and measures of volatility. These instruments are classified as Level II within the fair value hierarchy. Certain interest rate locks transact in less active markets and are valued using valuation models that include the previously mentioned observable inputs and certain unobservable inputs that require significant judgment, such as the premium over the Municipal Market Data ("MMD") curve. These instruments are classified as Level III.

Investments

The Company's investments valued at fair value include equity investments in private companies and mutual funds held by a grantor trust for the Company's nonqualified deferred compensation plan. Investments in private companies are valued based on an assessment of each underlying security, considering rounds of financing, the financial condition and operating results of the private company, third-party transactions and market-based information, including comparable company transactions, trading multiples (e.g., multiples of revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA")), discounted cash flow analyses and changes in market outlook, among other factors. These securities are categorized based on the lowest level of input that is significant to the fair value measurement. Certain underlying securities, as well as investments in mutual funds, are valued based on quoted prices from the exchange for identical assets as of the period-end date. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level I. See Note 9 and Note 15 to our consolidated financial statements for additional information about the Company's nonqualified deferred compensation plan.

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Piper Sandler Companies

Notes to the Consolidated Financial Statements

(Unaudited)

The following table summarizes the valuation of the Company's financial instruments by pricing observability levels defined in FASB Accounting Standards Codification Topic 820, "Fair Value Measurement" ("ASC 820") as of June 30, 2024:


							Counterparty
							and Cash
							Collateral
(Amounts in thousands)	Level I		Level II		Level III		Netting (1)		Total
Assets
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities	$	15	$	3,425	$	—	$	—	$	3,440
Convertible securities	—		127,669		—		—		127,669
Fixed income securities	—		5,608		—		—		5,608
Municipal securities:
Taxable securities	—		36,086		—		—		36,086
Tax-exempt securities	—		140,474		270		—		140,744
Short-term securities	—		18,012		—		—		18,012
Asset-backed securities	—		33,115		—		—		33,115
U.S. government agency securities	—		36,768		—		—		36,768
U.S. government securities	7,318		—		—		—		7,318
Derivative contracts	—		38,807		2,655		(31,977)		9,485
Total financial instruments and other inventory positions owned	7,333		439,964		2,925		(31,977)		418,245

Cash equivalents	115,208		—		—		—		115,208
Investments at fair value (2)	56,585		—		195,834		—		252,419
Total assets	$	179,126	$	439,964	$	198,759	$	(31,977)	$	785,872

Liabilities
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities	$	33,558	$	—	$	—	$	—	$	33,558
Fixed income securities	—		3,079		—		—		3,079

U.S. government agency securities	—		4,193		—		—		4,193
U.S. government securities	73,752		—		—		—		73,752
Derivative contracts	—		33,521		2,974		(33,083)		3,412
Total financial instruments and other inventory positions sold, but not yet purchased	$	107,310	$	40,793	$	2,974	$	(33,083)	$	117,994

(1)Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as collateral to its counterparties.

(2)Includes noncontrolling interests of $183.3 million attributable to unrelated third-party ownership in consolidated alternative asset management funds.

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Piper Sandler Companies

Notes to the Consolidated Financial Statements

(Unaudited)

The following table summarizes the valuation of the Company's financial instruments by pricing observability levels defined in ASC 820 as of December 31, 2023:


							Counterparty
							and Cash
							Collateral
(Amounts in thousands)	Level I		Level II		Level III		Netting (1)		Total
Assets
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities	$	388	$	—	$	—	$	—	$	388
Convertible securities	—		131,375		—		—		131,375
Fixed income securities	—		1,645		—		—		1,645
Municipal securities:
Taxable securities	—		25,744		—		—		25,744
Tax-exempt securities	—		135,886		2,869		—		138,755
Short-term securities	—		7,122		—		—		7,122
Asset-backed securities	—		8,149		—		—		8,149
U.S. government agency securities	—		104,418		—		—		104,418
U.S. government securities	5,895		—		—		—		5,895
Derivative contracts	—		52,611		5,834		(47,379)		11,066
Total financial instruments and other inventory positions owned	6,283		466,950		8,703		(47,379)		434,557

Cash equivalents	343,856		—		—		—		343,856
Investments at fair value (2)	61,601		—		224,280		—		285,881
Total assets	$	411,740	$	466,950	$	232,983	$	(47,379)	$	1,064,294

Liabilities
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities	$	53,857	$	—	$	—	$	—	$	53,857
Fixed income securities	—		2,230		—		—		2,230

U.S. government agency securities	—		48,268		—		—		48,268
U.S. government securities	40,437		—		—		—		40,437
Derivative contracts	—		47,032		7,962		(50,806)		4,188
Total financial instruments and other inventory positions sold, but not yet purchased	$	94,294	$	97,530	$	7,962	$	(50,806)	$	148,980

(1)Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as collateral to its counterparties.

(2)Includes noncontrolling interests of $211.1 million attributable to unrelated third-party ownership in consolidated alternative asset management funds.

The carrying values of the Company's cash, receivables and payables either from or to brokers, dealers and clearing organizations, and short-term financings approximate fair value due to either their liquid or short-term nature.

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Piper Sandler Companies

Notes to the Consolidated Financial Statements

(Unaudited)

The Company's Level III assets were $198.8 million (including noncontrolling interests of $153.3 million) and $233.0 million (including noncontrolling interests of $177.0 million), or 25.3 percent and 21.9 percent of financial instruments measured at fair value at June 30, 2024 and December 31, 2023, respectively. There were $8.7 million and $13.2 million of transfers of financial assets out of Level III for the three and six months ended June 30, 2024, respectively, and $14.7 million of transfers of financial assets out of Level III for the six months ended June 30, 2023. Transfers out of Level III are primarily due to unobservable inputs becoming observable. At June 30, 2024, the Company's Level I investments at fair value included $26.4 million of equity securities subject to contractual sale restrictions, of which $2.6 million will expire in the third quarter of 2024 and $4.5 million will expire in the fourth quarter of 2024. The sales restrictions on the remaining equity securities are in effect during certain trading windows so long as the securities are owned.

The following tables summarize the changes in fair value associated with Level III financial instruments held at the beginning or end of the periods presented:


	Level III
	Assets						Liabilities
(Amounts in thousands)	Tax-Exempt Municipal Securities		Derivative Contracts		Investments at Fair Value		Derivative Contracts
Balance at March 31, 2024	$	276	$	2,754	$	217,693	$	4,571
Purchases	—		—		10,055		—
Sales	—		—		(30,000)		—
Settlements	—		(101)		—		(1,168)
Transfers in	—		—		—		—
Transfers out	—		—		(8,689)		—
Total realized and unrealized gains/(losses)	(6)		2		6,775		(429)
Balance at June 30, 2024	$	270	$	2,655	$	195,834	$	2,974

Balance at March 31, 2023	$	3,896	$	442	$	201,443	$	3,777
Purchases	—		—		6,188		—
Sales	—		—		—		—
Settlements	—		25		—		(2,429)
Transfers in	—		—		—		—
Transfers out	—		—		—		—
Total realized and unrealized gains/(losses)	(6)		860		1,206		(618)
Balance at June 30, 2023	$	3,890	$	1,327	$	208,837	$	730

Unrealized gains/(losses) for assets/liabilities held at:
June 30, 2024	$	(6)	$	1,472	$	(16,678)	$	418
June 30, 2023	$	(6)	$	950	$	1,206	$	21

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Notes to the Consolidated Financial Statements

(Unaudited)


	Level III
	Assets						Liabilities
(Amounts in thousands)	Tax-Exempt Municipal Securities		Derivative Contracts		Investments at Fair Value		Derivative Contracts
Balance at December 31, 2023	$	2,869	$	5,834	$	224,280	$	7,962
Purchases	—		—		12,055		—
Sales	(1,901)		—		(30,000)		—
Settlements	—		(2,842)		—		(3,156)
Transfers in	—		—		—		—
Transfers out	—		—		(13,219)		—
Total realized and unrealized gains/(losses)	(698)		(337)		2,718		(1,832)
Balance at June 30, 2024	$	270	$	2,655	$	195,834	$	2,974