Q1 2024 Stifel Financial Corp Earnings Call

Good day and welcome to the Stifel Financial first quarter 'twenty 'twenty four conference call.

Operator: Good day and welcome to the Stifel Financial first quarter 2024 conference call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Mr. Joel Jeffrey, head of investor relations at Stifel Financial. Please go ahead.

Today's call is being recorded at this time I'd like to turn the call over to Mr. Joel Jeffrey head of Investor Relations at Stifel Financial. Please go ahead.

Joel Jeffrey: Thanks, Operator. I'd like to welcome everyone to Stifel Financial's first quarter 2024 conference call. I'm joined on the call today by our Chairman and CEO, Ron Kruszewski, our Co-Presidents, Victor Neesey and Jim Zemlach, and our CFO, Jim Marischen. Earlier this morning, we issued an earnings release and posted a slide deck and financial supplement to our website, which can be found on the investor relations page at www.stifel.com. I would note that some of the numbers that we state throughout our presentation are presented on a non-GAAP basis, and I would refer to our reconciliation of GAAP to non-GAAP as disclosed in our press release.

Joel Jeffrey: Thanks, operator.

Joel Jeffrey: Welcome everyone to Stifel Financial's first quarter 2024 conference call I'm joined on the call today by our chairman and CEO, Ron Kruszewski, our co presidents Victor Nissan James <unk>, and our CFO Jim Morrison.

Joel Jeffrey: Earlier. This morning, we issued an earnings release and posted a slide deck and financial supplement to our website, which can be found on the investor Relations page at Www Dot Stifel Dot Com I would note that some of the numbers that we state throughout our presentation are presented on a non-GAAP basis, and I would refer to our reconciliation of GAAP to non-GAAP as disclosed in our press release.

Joel Jeffrey: I would also remind listeners to refer to our earnings release, financial supplement, and our slide presentation for information on forward-looking statements and non-GAAP measures. This audio cast is copyrighted material of Stifel Financial and may not be duplicated, reproduced, or rebroadcast without the consent of Stifel Financial. I will now turn the call over to our Chairman and CEO, Ron Kruszewski.

Joel Jeffrey: I would also remind listeners to refer to our earnings release financial supplement and our slide presentation for information on forward looking statements and non-GAAP measures. This audiocast is copyrighted material of Stifel financial and may not be duplicated reproduced or rebroadcast without the consent of Stifel Financial Corp. I will now turn the call over to our chairman and CEO Ron Kruszewski.

Ronald James Kruszewski: Thanks, Joel. To our guests, good morning, and thank you for taking the time to listen to our first quarter 2024 conference call. The momentum we had exiting 2023 continued as we generated the second highest quarterly revenue in our history. We benefited from market conditions that included strong equity markets, recovering capital markets, and an improving U.S. economy. Total net revenue of more than $1.16 billion was driven by record global wealth management revenue as well as continued improvement in our institutional group.

Ronald James Kruszewski: Thanks, Joe or I guess, good morning, and thank you for taking the time to listen to our first quarter 2024 conference call.

The momentum we had exiting 2023 continued as we generated the second highest quarterly revenues in our history.

Ronald James Kruszewski: We benefited from market conditions that included strong equity markets recovering capital markets and an improving U S economy.

Ronald James Kruszewski: Total net revenue of more than 1.16 billion was driven by record global wealth management revenue as well as the continued improvement in our institutional group.

Ronald James Kruszewski: As revenues improved, we maintained a focus on expense discipline, and this approach resulted in a 20% pre-tax margin, operating earnings per share of $1.49, which was a 6% increase year on year, as well as a return on tangible common equity of 21%. This resulted in another quarter of substantial excess capital generation, which we deploy primarily via share repurchases. Even with the substantial share repurchase activity and our increased dividend, our Tier 1 leverage ratio increased by 10 basis points during the quarter. I'd also note that the strength of our business was recognized by the credit agency upgrade we received from Standard & Poor's earlier this month. Slide 2 is a variance table for the consensus estimates.

As revenues improve we maintained our focus on expense discipline and this approach resulted in a 20% pre tax margin operating earnings per share of $1 49, which was a 6% increase year on year.

Ronald James Kruszewski: As well as a return on tangible common equity up 21%.

Ronald James Kruszewski: This resulted in another quarter of substantial excess capital generation.

Ronald James Kruszewski: We deploy primarily via share repurchases, even with the substantial share repurchase activity and our increased dividend our tier one leverage ratio increased by 10 basis points during the quarter.

Ronald James Kruszewski: I'd also note that the strength of our business was recognized by the credit agency upgrade we received from standard and Poors earlier this month.

Ronald James Kruszewski: Slide two is the variance table to consensus estimates.

Ronald James Kruszewski: Our EPS of $1.49 was $0.03 higher than consensus and was the result of net revenue that came in $20 million above expectation. We beat on all revenue items except net interest income, which I note came within our guidance range. I think it's important to note that our NII for the quarter of $252 million may very well be the low point of the year as we anticipate balance sheet growth and less impact from cash sorting during the remainder of the year.

Ronald James Kruszewski: Our EPS of $1 49 was <unk> <unk> higher than consensus and what is the result of net revenue that came in $20 million above expectations. We beat on all revenue items, except net interest income, which I know came within our guidance range I think it's important to note that our NII for the quarter up 252 million in May.

Ronald James Kruszewski: Very well be the low point of the year as we anticipate balance sheet growth and less impact from cash sorting during the remainder of the year.

Ronald James Kruszewski: In terms of where we beat consensus, I'd note that investment banking came in nearly $30 million above expectations on stronger advisory and underwriting revenue as compared to consensus as we are beginning to see increased activity levels. Transactional revenue came in $5 million above the street on stronger wealth management and institutional equity revenue. Total expenses were higher than consensus, however, much of that was reflected in compensation expense as a result of higher revenue. I would note that the comp ratio remained consistent at 58% and was slightly below expectation. Non-comp expenses were $8 million higher than expectations, which Jim will discuss in greater detail later in the call.

Ronald James Kruszewski: Terms of where we beat consensus I'd note that investment banking came in nearly $30 million above expectations on stronger advisory and underwriting revenue.

Ronald James Kruszewski: Both as compared to consensus as we are beginning to see increased activity levels.

Ronald James Kruszewski: Transactional revenue came in $5 million above the street on stronger wealth management and institutional equity revenue.

Ronald James Kruszewski: Total expenses were higher than consensus however, much of that was reflected in compensation expense as a result of higher revenues I would note that the comp ratio remained consistent at 58%.

Ronald James Kruszewski: Lightly below expectations.

Speaker Change: Non comp expenses were $8 million higher than expectations, which Jim will discuss in greater detail later in the call, but I'd point out that excluding credit provision in investment banking gross ups are non comp operating ratio was essentially in our guidance.

Ronald James Kruszewski: But I'd point out that, excluding credit provision and investment banking gross-ups, our non-comp operating ratio was essentially in our guidance. Slide 3 compares operating metrics since 2019, starting with net interest income. I would note that this has increased over 100%. This is noteworthy because it represents a consistent source of revenue that, along with our other fee-based revenues, offsets the volatility of our institutional business. In 2019, global wealth management revenue was $2.2 billion, which compares to approximately $3.2 billion based on our annualized first quarter 2024 global wealth revenue.

Speaker Change: Slide three compares operating metrics since 2019, starting with net interest income I would note that this has increased over 100%. This is noteworthy because it represents a consistent source of revenue that along with our other fee based revenues offset the volatility of our institutional business.

Speaker Change: In 2019 global wealth management revenue was $2 2 billion, which compares to approximately $3 2 billion based on our annualized first quarter 2024 global wealth revenue on a percentage basis global wealth management is up 45% since 2019.

Ronald James Kruszewski: On a percentage basis, global wealth management is up 45% since 2019. This growth offsets a deep industry-wide recession in capital markets that reduced the pre-tax income of our institutional group from $560 million in 2021 to essentially break even in 2023. Our results in the first quarter indicate the onset of a rebound in investment banking, but it is far from a normalized run rate. As market conditions improve, we anticipate returning to more historical levels of profitability in this segment. For example, in 2022, we generated $254 million in pre-tax income, which I would note was not even a particularly strong market for investment banks.

This growth offset a deep industry wide recession in capital markets that reduce the pre tax income of our institutional group from $560 million in 2021 to essentially breakeven in 2023.

Speaker Change: Our results in the first quarter indicate the onset of a rebound in investment banking, but it is far from a normalized run rate as market conditions improve we anticipate returning to more historical levels of profitability. In this segment. For example in 2022, we generated $254 million pre tax.

Income, which I would note was not even a particularly strong market for investment banking.

Ronald James Kruszewski: As revenue and margins continue to return to more historical norms, we will also benefit from the investments we've made in our wealth management segment. One item I would like to note is the benefits we've seen from our Smart Rate product, which enabled us to maintain our client cash within Stifel as interest rates rose. The increased levels of cash and the Smart Rate make Stifel less sensitive to the impact of lower interest rates when the Fed begins to cut. Last year, we noted that a 100 basis point decline in rates would result in a $65 million reduction in net interest income.

Speaker Change: As revenue and margins continue to return to more historical norms. We will also benefit from the investments we've made in our wealth management segment.

Speaker Change: One item I would like to note is the benefits we've seen from our smart rate product, which enabled us to maintain our client cash within Stifel as interest rates rose and increased levels of cash and smart rate makes depot less sensitive to the impact of lower interest rates. When the fed begins to cut last year, we noted that.

Speaker Change: 100 basis point decline in rates would result in a $65 million reduction in net interest income.

Ronald James Kruszewski: Given the growth in the smart rate, which carries a higher deposit beta, our updated disclosure in 2024 reduces the impact on net interest income to $15 million on the same 100 basis point decline in rate. As we look to the future, we can see improving results from our institutional group, consistent growth from our wealth management franchise, and elevated levels of NII contribution. This combination leads me to believe that we will continue to generate strong performance for 2024 and as we transition to 2025. With that, let me turn the call over to Jim Marischen to discuss our most recent quarter results.

Speaker Change: Given the growth in smart rate, which carries a higher deposit beta or updated disclosure in 2024 reduces the impact on that net interest income to $15 million on the same 100 basis point decline in rates.

Speaker Change: So as we look to the future we see improving results from our institutional group consistent growth from our wealth management franchise and elevated levels of NII com contribution.

Speaker Change: This combination leads me to believe that we will continue to generate strong performance for 2024 and as we transition to 2025.

Speaker Change: With that let me turn the call over to Jim Morrison to discuss our most recent quarter results.

James M. Marischen: Thanks, Ron, and good morning, everyone. Looking at the details of our first quarter results on slide four, our quarterly net revenue of $1.16 billion was up 5% year on year. The increase was driven by stronger client facilitation, trading, and underwriting revenue, that was partially offset by lower net interest income and advisory revenue. Our EPS was up 6% from the prior year, because higher revenues and a lower share count more than offset modest expense growth. Moving on, to our Cigna results.

James M. Marischen: Thanks, Ron and good morning, everyone.

James M. Marischen: Looking at the details of our first quarter results on slide four.

James M. Marischen: Quarterly net revenue of $1 6 billion was up 5% year on year.

James M. Marischen: The increase was driven by stronger client facilitation trading and underwriting revenue that was partially offset by lower net interest income and advisory revenue.

James M. Marischen: Our EPS was up 6% from the prior year as higher revenues and a lower share count more than offset modest expense growth.

James M. Marischen: Moving on to our segment results Global wealth management revenue was a record $791 million and a pre tax margins were 37% on record asset management revenue and strong growth in transactional revenue.

James M. Marischen: Global Wealth Management revenue was a record $791 million, and our pre-tax margins were 37% on record asset management revenue and strong growth in transactional revenue. We continue to add new advisors to our platform. During the quarter, we added a total of 22 advisors.

James M. Marischen: We continue to add new advisers to our platform.

James M. Marischen: During the quarter, we added a total of 22 advisors. This.

James M. Marischen: This included 15 experienced advisors with trailing 12-month production of $6.8 million. We ended the quarter with record fee-based assets and total client assets of $177 billion and $468 billion, respectively. The sequential increases were due to higher equity markets and organic growth, as their net new assets grew in the mid single digits. We highlight our longer-term growth drivers for our wealth management business on slide six. Our focus on recruiting and supporting our advisors with best-in-class service has been the key to our long-term success.

James M. Marischen: This included 15 experienced advisors with trailing 12 month production of $6 8 million.

James M. Marischen: We ended the quarter the record fee based assets and total client assets of 177 billion and 468 billion respectively.

James M. Marischen: The sequential increases were due to higher equity markets and organic growth.

James M. Marischen: Our net new assets grew in the mid single digits.

James M. Marischen: We highlight our longer longer term growth drivers of our wealth management business on slide six.

James M. Marischen: Our focus on recruiting and supporting our advisors with best in Class service has been the approach to our long term success.

James M. Marischen: Not only is our revenue contribution from this segment continuing to increase, but the percentage of revenue generated by recurring sources, such as asset management and net interest income, has increased significantly and now stands at 77%. Moving on to slide seven, where we highlight the solid trends of debate, net interest income of $252 million was in the lower half of our guidance range as the bank's net interest margin was impacted by higher deposit costs.

James M. Marischen: Not only as a revenue contribution from this segment continue to increase but the percentage of revenue generated by recurring sources, such as asset management and net interest income has increased significantly and now stands at 77%.

James M. Marischen: Moving on to slide seven where we highlight the solid trends at the bank.

James M. Marischen: Net interest income of 252 million was in the lower half of our guidance range as bank net interest margin was impacted by higher deposit costs larger average cash balances and the movement of sweep deposits back into third party banks.

James M. Marischen: Unknown Speaker, larger average cash balances, and the movement of sweep deposits back into third-party banks. Given the timing of the move to third-party banks at the end of the fourth quarter of 2023, we recognize the bulk of this impact on NII and asset management revenue in the first quarter, as asset management revenue from third-party banks increased $7.5 million sequentially. As we had forecasted, cash sorting was impacted by seasonality in the first quarter but continues to slow. Bank sweep deposits increased during the quarter by $130 million but were more than offset by the reduction of third-party sweep balances by $872 million.

James M. Marischen: Given the timing of the move to third party banks at the end of the fourth quarter of 2023.

James M. Marischen: We recognize the bulk of this impact on NII and asset management revenue in the first quarter as asset management revenue from third party banks increased $7 $5 million sequentially.

James M. Marischen: As we have forecasted cash sorting was impacted by seasonality in the first quarter, but continues to slow.

James M. Marischen: Sweep deposits increased during the quarter by $130 million, but were more than offset by the reduction of third party sweep balances by $872 million.

James M. Marischen: Given our expectations for similar cash sorting and modestly higher bank NIM, we expect that NII in the second quarter will be similar to our first quarter results and as such we're forecasting a range of $250 million to $260 million.

James M. Marischen: Given our expectations for similar cash sorting and modestly higher bank NIM, we expect that NII in the second quarter will be similar to our first quarter results. And as such, we're forecasting a range of 250 to 260 million dollars. Her credit metrics and reserve profile remain strong. The non-performing asset ratio stands at 20 basis points. Our credit loss provision totaled $5.3 million for the quarter, and our consolidated allowance to total loans ratio was 89 basis points, which was impacted by the decline in loan balances as a result of paydowns in fund banking.

James M. Marischen: Our credit metrics and reserve profile remains strong.

James M. Marischen: The nonperforming asset ratio stands at 20 basis points, our credit loss provision totaled $5 3 million for the quarter and our consolidated allowance to total loans ratio was 89 basis points, which was impacted by the decline in loan balances as a result of Paydowns and fund banking.

James M. Marischen: Lastly, our balance sheet continues to be well capitalized tier one leverage capital increased 10 basis points sequentially to 10, 6%.

James M. Marischen: Lastly, our balance sheet continues to be well capitalized. Tier 1 leverage capital increased 10 basis points sequentially to 10.6%. I also note that the unrealized losses in our bond portfolio continue to improve. Credit spreads tightened in the CLO market.

James M. Marischen: I'd also note that the unrealized losses in our bond portfolio continue to improve as credit spreads tightened in the CLO market.

James M. Marischen: On the next slide I will discuss our institutional group, where we saw continued improvement as the operating environment continues to recover.

James M. Marischen: On the next slide, I'll discuss our institutional group, where we saw continued improvement as the operating environment continues to recover. Total revenue for the segment was $351 million in the first quarter, up 6% year-on-year, led by a strong increase in capital raising and transactional revenue. Firm-wide investment banking revenue totaled $213 million, and substantial growth in capital raising more than offset a decline in advisory revenue. In terms of equity underwriting, the $40 million we generated was our strongest quarter since the fourth quarter of 2021. As we had a meaningful contribution from our healthcare vertical, we've made significant investments in recent years. Advisory revenue was $119 million, as we had solid results in our industrial and healthcare verticals.

James M. Marischen: Total revenue for the segment was $351 million in the first quarter.

James M. Marischen: Up 6% year on year led by a strong increase in capital raising and transactional revenue.

James M. Marischen: Firm wide investment banking revenue totaled $213 million and substantial growth in capital raising more than offset a decline in advisory revenue.

In terms of equity underwriting the $40 million, we generated was our strongest quarter since the fourth quarter of 2021 as.

James M. Marischen: As we had a meaningful contribution from our healthcare vertical where we've made significant investments in recent years.

James M. Marischen: Advisory revenue was $119 million as we had solid results in our industrial and health care verticals.

James M. Marischen: We were again impacted by the delay in deal closings, however, our pipelines are improving as the U.S. M&A market is showing signs of strength. Equity transactional revenue totaled $54 million, which is up 3% from the first quarter of 2023, which was a tough comparison as last year's commissions were positively impacted by the volatility that resulted from bank failures during that quarter. We continue to gain traction in our electronic offerings, as well as strong engagement with our high-touch trading and best in class Fixed Income business. Fixed income generated net revenue of $139 million, an increase of $36 million year on year.

James M. Marischen: We were again impacted by the delay in deal closings. However, our pipelines are improving as the U S. M&A market is showing signs of strength.

James M. Marischen: Equity transactional revenue totaled $54 million, which was up 3% from the first quarter of 2023.

James M. Marischen: Which was a tough comparison as last year's commissions were positively impacted by the volatility that resulted from bank failures during that quarter.

James M. Marischen: We continue to gain traction and our electronic offerings as well as strong engagement with our high touch trading and best in class research.

James M. Marischen: Fixed income generated net revenue of $139 million, an increase of $36 million year on year.

James M. Marischen: We experienced strong growth in transactional and capital raising revenues, as both increased $18 million from 1Q23. I would note that we continue to see strong flow activity in our transactional business, but our trading gains in fixed income were significantly lower than what we experienced in the fourth quarter. Fixed income underwriting revenue increased 57% from 1Q23, as we continue to be a leader in the municipal underwriting business as activity increased, and we continue to be ranked number one in the number of negotiated transactions, as our market share was greater than 15% in 2024.

James M. Marischen: We experienced strong growth in transactional and capital raising revenues as both increased $18 million from <unk> to 'twenty three.

James M. Marischen: I would note that we continue to see strong flow activity in our transactional business, but our trading gains in fixed income were significantly lower than what we experienced in the fourth quarter.

James M. Marischen: Fixed income underwriting revenue increased 57% from <unk> 23, as we continue to be a leader in the municipal underwriting business as activity increased and we continue to be ranked number one and the number of negotiated transactions as our market share was greater than 15% in 2024.

James M. Marischen: We're also seeing improved traction in our taxable capital raising activities, which improves year on year. On the next slide, we go through our expenses. Our comp-to-revenue ratio in the first quarter was 58%, which is at the high end of our full year guidance as we accrue conservatively early in the year. Non-compensation operating expenses. Excluding the credit loss provision and expenses related to investment banking transactions, our non-comp op-ex as a percentage of revenue was 21.1%. The effective tax rate during the quarter came in at 25.2%.

James M. Marischen: We're also seeing improved traction in our taxable capital raising activities, which improved year on year.

James M. Marischen: On the next slide we go through expenses, our comp to revenue ratio in the first quarter was 58%, which was at the high end of our full year guidance as we accrue conservatively early in the year.

James M. Marischen: Non compensation operating expenses, excluding the credit loss provision and expenses related to investment banking transactions totaled approximately $245 million.

James M. Marischen: Our non comp opex as a percentage of revenue was 21, 1%.

James M. Marischen: The effective tax rate during the quarter came in at 25, 2%.

James M. Marischen: The tax rate was positively impacted by the excess tax benefit related to stock-based compensation, but it was offset by non-deductible foreign law. Before I turn the call back over to Ron, let me discuss our capital position. In the first quarter, we repurchased approximately 2.3 million shares through both net settling of equity-based compensation and open market purchases. As of the end of the quarter, we have 11 million shares remaining on our authorization. We have approximately $210 million of excess capital based on a 10% Tier 1 leveraged target.

James M. Marischen: The tax rate was positively impacted by the excess tax benefit related to stock based compensation.

James M. Marischen: It was offset by nondeductible foreign losses.

James M. Marischen: Before I turn the call back over to Ron Let me discuss our capital position in the first quarter, we repurchased approximately two 3 million shares through both net settling of equity based compensation and open market purchases.

Ronald James Kruszewski: As of the end of the quarter, we have 11 million shares remaining on our authorization.

Ronald James Kruszewski: We have approximately $210 million of excess capital based on a 10% tier one leverage target.

Ronald James Kruszewski: Additionally, we continue to generate substantial amounts of excess cash as illustrated by our first quarter net income of $154 million.

James M. Marischen: Additionally, we continue to generate substantial amounts of excess cash, as illustrated by our first quarter net income of $154 million. Additionally, we remain focused on generating strong risk-adjusted returns when deploying capital. And we've done this by reinvesting in the business, making acquisitions, as well as through share a person. Without any assumption for additional share purchases and assuming a stable stock price, we'd expect the second quarter fully diluted share count to be on 109.9 million shares. And with that, I will turn the call back over to Ron.

Ronald James Kruszewski: We remain focused on generating strong risk adjusted returns when deploying capital and we've done this to reinvesting in the business, making acquisitions as well as through share repurchases.

Ronald James Kruszewski: Absent any assumption for additional share repurchases and assuming a stable stock price.

Ronald James Kruszewski: We would expect the second quarter fully diluted share count to be at $109 9 million shares.

Ronald James Kruszewski: And with that let me turn the call back over to Rod.

Rod: Thanks, Jim.

Rod: At the end of last year, I said 2024 would be a transition year and that my outlook for 2024 was optimistic I standby those statements I would add that so far in 2024, we're off to a good start as both revenue and EPS in the first quarter exceeded consensus estimates.

Ronald James Kruszewski: At the end of last year, I said 2024 would be a transition year and that my outlook for 2024 was optimistic. I stand by those statements.

Rod: Simply looking at our annualized first quarter revenue, we are already near the midpoint of our full year guidance despite market conditions that arent overly accommodating.

Ronald James Kruszewski: I would add that so far in 2024, we're off to a good start as both revenue and EPS in the first quarter exceeded consensus estimates. Simply looking at our annualized first quarter revenue, we are already near the midpoint of our full year guidance, despite market conditions that aren't overly accommodating. The outlook for the remainder of the year is certainly not without risks, as our performance could be negatively impacted by the ongoing geopolitical crises, the uncertainty of the U.S. presidential elections, potential credit market deterioration, and persistent elevated inflation, just to name a few. But speaking of inflation and Fed policy, I would note that at the beginning of 2024, the market anticipated six to seven rate cuts. Stifel was not in this camp, and we projected two to three rate cuts.

Rod: The outlook for the remainder of the year is certainly not without risk as our performance could be negatively impacted by the ongoing geopolitical crises. The uncertainty of the U S presidential elections potential credit market deterioration and persistent elevated inflation just to name a few speaking of inflation and fed policy.

Rod: I would note that at the beginning of 2024 the market anticipated six to seven rate cuts Stifel was not in this cap and we projected two to three rate cuts. We standby. This view, although we now believe that zero to one rate cuts and even a rate increase are also in the cart look the federal.

Rod: <unk> finds itself in a precarious position navigating the tight rope between controlling inflation and preventing recession.

Rod: Not an easy task the fed's unprecedented series of rate hikes in 2022 were successful at slowing the inflation that reached 40 year highs. If the market has numerous reasons to justify the fed to begin a cycle of rate reductions chief among them a desire to achieve a soft economic landing.

Ronald James Kruszewski: We stand by this view, although now believe that zero to one rate cuts and even a rate increase are also in the cards. Look, the Federal Reserve finds itself in a precarious position, navigating the tight rope between controlling inflation and preventing recession. It's not an easy task.

Rod: While we and everyone. It seems would like lower rates the fed should recognize that reducing rates now as both unnecessary and risky for the economy. We believe that inflation will prove sticky and cutting rates too soon may reignite inflationary pressures on doing the progress made so far simply ensuring that.

Ronald James Kruszewski: The Fed's unprecedented series of rate hikes in 2022 were successful at slowing inflation that reached 40-year highs. Yet the market has numerous reasons to justify the Fed beginning a cycle of rate reduction. Chief among them is a desire to achieve a soft economic landing. While we and everyone, it seems, would like lower rates, the Fed should recognize that reducing rates now is both unnecessary and risky for the economy. We believe inflation will prove sticky, and cutting rates too soon may reignite inflationary pressures, undoing the progress made so far.

Rod: <unk> is at or near the Fed stated target of 2% is more important than trying to ensure a soft landing. The fed has plenty of freight flexibility if the economy slow significantly and in our opinion should not attempt preemptive rate cuts at the risk of invigorating inflation.

That said, we are seeing market conditions continue to improve specifically I'd point to improved sentiment for investment banking strong year to data equity market performance and increase client transactional activity. If these trends continue we would expect to see increased revenue growth and improved operating efficiency throughout the remainder of the year.

Ronald James Kruszewski: Simply, ensuring that inflation is at or near the Fed's stated target of 2% is more important than trying to ensure a soft landing. The Fed has plenty of rate flexibility if the economy slows significantly and, in our opinion, should not attempt preemptive rate cuts at the risk of invigorating inflation.

Rod: This would put Steve on a very strong position heading into 2025.

Rod: Let me conclude by saying that we are committed to create value and maximize returns for our shareholders through all market cycles, we have and will continue to do this by reinvesting in our business through strategic hiring and acquisitions deploying capital based on generating the best risk adjusted returns and always putting our clients' needs first.

Ronald James Kruszewski: That said, we are seeing market conditions continue to improve. Specifically, I'd point to improved sentiment for investment banking, strong year-to-date equity market performance, and increased client transactional activity. If these trends continue, we'd expect to see increased revenue growth and improved operating efficiency throughout the remainder of the year. This would put Stifel in a very strong position heading into 2025. Let me conclude by saying that we are committed to creating value and maximizing returns for our shareholders through all market cycles.

Rod: This approach is essential to Stifel, reaching our near term targets that I've discussed of over $5 billion in revenue and about $8 of earnings per share I would note that this is essentially 2025 consensus analyst projections. Additionally, you have heard me talk about our longer term goal of one <unk>.

Rod: And in client assets under management, while at that level of asset growth I believe our business would it be at the scale to generate roughly $10 billion in annual revenue.

Ronald James Kruszewski: We have and will continue to do this by reinvesting in our business through strategic hiring and acquisitions, deploying capital based on generating the best risk-adjusted returns, and always putting our clients' needs first. This approach is essential to Stifel reaching our near-term targets that I've discussed of over $5 billion in revenue and about $8 in earnings per share. I would note that this is essentially a 2025 consensus analyst projection. Additionally, you've heard me talk about our longer-term goal of $1 trillion in client assets under management.

I recognize that this is essentially twice our current size. However, my confidence in reaching these levels was bolstered by our historical growth rates as recently as the period between 2015 and 2021, we've doubled our annual net revenue as we continue to attract high quality individuals and as we as an organization continue to adapt.

Rod: <unk> and constantly think like a growth company I believe that over the next decade. These revenue and client asset milestones are achievable, if not exceed a ball and with that operator. Please open the lines for questions.

Ronald James Kruszewski: Well, at that level of asset growth, I believe our business would be at the scale to generate roughly $10 billion in annual revenue. I recognize that this is essentially twice our current size. However, my confidence in reaching these levels is bolstered by our historical growth rate. For example, during the period between 2015 and 2021, we doubled our annual net revenue. As we continue to attract high-quality individuals and as we as an organization continue to adapt and constantly think like a growth company, I believe that over the next decade, these revenue and client asset milestones are achievable, if not exceedable. And with that, Operator, please open the lines for questions. Thank you.

Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Speaker Change: A speaker phone. Please make sure your mute function is turned off July your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment everyone an opportunity to signal for questions.

Speaker Change: We will take our first question from Devin Ryan with citizens JMP.

Devin Ryan: Good morning, Gary. Thanks, So much good morning, how are you Rob.

Devin Ryan: Yes.

Devin Ryan: Okay. Great. So first question just wanted to take a step back.

Devin Ryan: And look at the investment banking business.

You guys had built here and I'm, just really thinking about kind of the evolution in recent years.

Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first question from Devin Ryan with Citizens JMP.

Devin Ryan: And it would be great just to maybe give some perspective around how you guys have increased the size and capabilities of that business relative to where you were in pre COVID-19 because revenues have clearly been anything.

Devin Ryan: Normal asking a few years from 2021 extreme good.

Speaker Change: Yes, the last couple of years, maybe on the other side of that.

Speaker Change: And so just trying to think about what kind of a normalization for Stifel could look like.

Unknown Attendee: Morning, Gary. Thanks so much for watching.

Ronald James Kruszewski: How are you, Ron? Good. First question, we just want to take a step back and look at the investment banking business that you guys have built here. And we're just really thinking about the kind of evolution in recent years. And it would be great just to maybe give some perspective around how you guys have increased the size and capabilities of that business relative to where you were pre-COVID, because revenues have clearly been anything, you know, from normal the last few years from 2021 extremely good to the last couple years, maybe on the other side of that.

Speaker Change: Cause of all those investments it would seem that you don't need a 2021 like environment to get back to something in that ballpark of revenues. Thanks.

Sure.

I think it's a great question requires a little bit of a crystal ball Devin.

Speaker Change: But what I, what I'm confident in saying is that as you look and compare to 2019.

Speaker Change: Capabilities of the firm across our institutional business not just in investment banking.

But are significantly greater.

In terms of <unk>.

Speaker Change: Senior producing people managing directors.

Ronald James Kruszewski: And so to try to think about what kind of a normalization for Stifel could look like because of all those investments. It would seem that you don't need a 2021-like environment to get back to something in that ballpark of revenues. Thanks.

<unk> services and just the evolution of the business as you as you continue to do more business and are more relevant to your clients that leads to more business.

Speaker Change: The cycle of the business.

Speaker Change: I don't think Theres any question that we'll look I think for a little while as 2021 being a high watermark.

Speaker Change: Everything that came together at that time.

Ronald James Kruszewski: You know, I think it's a great question. It requires a little bit of a crystal ball, Devin. But what I'm confident in saying is that as you compare 2019 to 2018, the capabilities of the firm across our institutional business, not just in investment banking, are significantly greater in terms of senior producing people, managing directors, products, services, and just the evolution of the business, you know, as you continue to do more business and are more relevant to your clients, that leads to more business.

Speaker Change: Including the phenomenon of Spacs and everything that happen that'll be a high watermark in revenue at least for a little while in my opinion.

Speaker Change: As we've looked at it.

Speaker Change: We can get back to acceptable margins in this business and we've said that instead of 2021 being $2 2 billion, we say more like one seven to $1 8 billion I think that thats.

Ronald James Kruszewski: That's just the cycle of the business. I don't think there's any question that, you know, we'll look, I think, for a little while, at 2021, being a high watermark. Everything that came together at that time, including, you know, the phenomenon of SPACs and everything that happened, well, that'll be a high watermark and revenue, at least for a little while, in my opinion. But as we've looked at it, you know, we can get back to acceptable margins in this business.

Speaker Change: Easily attainable and the important thing is going back to some profitability from a business, where we essentially broke EBIT last year and yet still achieved great corporate results as that business improves the profitability of growth and of course that will be part of getting to.

Speaker Change: The targets that I mentioned in my remarks.

So Ron talked about increased capabilities more managing directors just put some numbers behind that we've increased the number of many directors by 65 people from 2018. So it's a fairly significant investment you talked about a lot of our capabilities we've added I.

Ronald James Kruszewski: And we've said that instead of 2021 being $2.2 billion, we say more like $1.7 to $1.8 billion. I think that that's easily attainable. And the important thing is going back to some profitability from a business where we essentially broke even last year and yet still achieved great corporate results. As that business improves, the profitability improves. And of course, that'll be part of getting to the targets that I mentioned in my remarks.

Speaker Change: I would say we've also made investments in some of our key verticals. We've got a best in class product and our financials group with <unk> and you've heard us reference multiple times on this call some of the investments and the results being generated by the investments we've made in our healthcare and our industrial franchises. So I would just add to that.

Speaker Change: Okay.

Speaker Change: Okay, great color. Thank you both.

Speaker Change: Just a real quick follow up here for Jim.

Speaker Change: In the bank, obviously loan balances declined a bit from last quarter, Bob just get some flavor for kind of the environment Youre seeing.

Unknown Executive: [inaudible]

Unknown Executive: So Ron talked about increased capabilities, more managing directors, and just put some numbers behind that. We've increased the number of managing directors by 65 people from 2018, so it's a fairly significant investment. He talked about a lot of our capabilities we've added. I would say we've also made investments in some of our key verticals. We've got a best-in-class product in our financials group with KBW, and you heard us reference multiple times during this call some of the investments and the results being generated by the investments we've made in our healthcare and our industrial franchises, so I'd just add to that.

Speaker Change: Round, the loan book or appetite to grow the loan book from here what type of risk adjusted returns in the market today and then just also in kind of the interplay between kind of growing the balance sheet versus just leaning in on buybacks you guys. Thanks.

Bob: Yes, I mean, I think we've kind of hinted to this in the prepared remarks as well is that we do anticipate seeing some balance sheet growth specifically in the loan portfolio. I think you will see more loan growth in the areas. We've historically grown if you think about fund banking and venture banking as well as our mortgage portfolio. Those are all areas, we're going to continue to invest in.

Bob: And I think you can look at the yield table and see the kind of returns we can generate there and I think as we sit here in balance today, we are generating a lot of excess capital and thinking about balancing some of the some of the buyback versus balance sheet growth is part of that consideration. It does take some time to start to generate and get those things go.

Unknown Attendee: Okay, great color. Thank you both.

Unknown Attendee: Just a real quick follow-up here for Jim. In the bank, you know, obviously, the loan balance has declined a bit from last quarter. Let's just get some flavor for kind of the environment you're seeing around the loan book or appetite to grow the loan book from here, what type of risk-adjusted returns are in the market today, and then also kind of an interplay between kind of growing the balance sheet versus just leaning in on buybacks as you guys have been doing. Thanks. Yeah, man.

Bob: <unk> in terms of adding loan balances, but that's something we're definitely focused on.

Speaker Change: Alright, thanks very much.

Speaker Change: We will take our next question from Bill Katz with Citi Cowen.

William Raymond Katz: Okay. Thank you very much I appreciate it.

William Raymond Katz: Just following up on those last set of questions. As you think through the interplay between your NII Guide how do we think about to the extent that if rates are sort of higher for longer the interplay between the NIM looking ahead versus the opportunity to grow the balance sheet sort of calculate too.

James M. Marischen: Yeah, I mean, I think we kind of hinted at this in the prepared remarks as well, that we do anticipate seeing some balance sheet growth, specifically in the loan portfolio. I think you will see more loan growth in the areas we've historically grown. If you think about fund banking and venture banking, as well as our mortgage portfolio, those are all areas we're going to continue to invest in. And I think you can look at the yield table and see the kind of returns we can generate there.

William Raymond Katz: NII outlook. Thank you.

William Raymond Katz: I think the answer to that is a little bit hard to predict because understanding and predicting client behavior in that environment is going to have an impact on the NIM.

William Raymond Katz: As we've said we continue to see cash sorting continue to slow, but obviously there was an impact associated with tax season that we see every year I think the key thing to think about there as we continue to monitor this what happens to these balances not just as Steve across the industry as we continue to get further and further away from tax season.

James M. Marischen: As we sit here in balance today, we are generating a lot of excess capital, and thinking about balancing some of the buyback versus balance sheet growth is part of that consideration. It does take some time to start to generate and get those things going in terms of adding loan balances, but that's something we're definitely focused on.

William Raymond Katz: That said, even if we saw additional sorting pressures the capabilities, we've built and the yield opportunity on the loan portfolio.

Unknown Attendee: All right, thanks very much.

Unknown Attendee: We will take our next question from Bill Katz of TD Cowen.

William Raymond Katz: Would allow us to continue to grow and make the reasonable risk adjusted returns that we target. So even if there is continued pressure there we do feel comfortable with what that environment looks like.

Unknown Attendee: Okay, thank you very much. I appreciate it. As you think through the interplay between your NII guide, how do we think about to the extent that if rates are sort of higher for longer, the interplay between the NIM looking ahead versus the opportunity to grow the balance sheet to sort of calculate through to that NII outlook? Thank you.

Speaker Change: Yes, I would just add that.

Speaker Change: Yes.

Speaker Change: I've always cautious and an inverted yield curve environment, both as it relates to the behavior on cash.

Unknown Executive: I think the answer to that is a little bit hard to predict because understanding and predicting client behavior in that environment is going to have an impact on NIM. As we've said, we continue to see cash sorting continue to slow, but obviously, there was an impact associated with tax season that we see every year. I think the key thing to think about there is that we continue to monitor this, what happens to these balances, not just at Stifel, but across the industry, as we continue to get further and further away from tax season.

Speaker Change: <unk> sorting activities and frankly.

Speaker Change: Is that the sofa rate is significantly inverted and the pressure that could put on various credit metrics. So we see though from this point, we have been eliminating our balance sheet growth and we see a lot of quality demand. So as I said in my remarks.

Speaker Change: <unk>.

Speaker Change: We believe that.

Speaker Change: Whatever cash sorting is locked in as it impacts our NII will be offset by balance sheet growth. So that we think that we're at all were at a low point.

Unknown Executive: That said, even if we saw additional sorting pressures, the capabilities we've built and the yield opportunity on the loan portfolio would allow us to continue to grow and make the reasonable risk-adjusted returns that we target. So even if there is continued pressure there, we do feel comfortable with what that environment looks like.

Speaker Change: With NII.

Speaker Change: Great and just sticking with that theme just just one one level deeper as you sort of think through April and sort of wondering if you can comment on.

Speaker Change: Heavily how how clients are funding any tax liabilities and then as you look in a world where rates sort of stay here and we stay sort of in your framework, maybe plus or minus one right.

Ronald James Kruszewski: Yeah, I would just add that. You know, I've always been cautious in an inverted yield curve environment, both as it relates to the behavior of cash client sorting activities and, frankly, just that the SOFR rate is significantly inverted and the pressure that can put on various, you know, credit metrics. So, you know, we see, though, from this point, we have been limiting our balance sheet growth, and we see a lot of quality demand. So, as I said in my remarks, you know, we believe that whatever cash sorting impacts our NII will be offset by balance sheet growth, so we think that we're at a low point at NII.

Speaker Change: Move.

Speaker Change: How do you think the mix of client assets might migrate from here that is what percent might stick in the sweep vehicles versus what might stay in more of the money market higher cost vehicles and when might you start to see more stable inflection to that thank you.

Speaker Change: Well two things first of all every year.

Speaker Change: Clients.

Unknown Attendee: Great, just sticking with that theme, just one level deeper, as you sort of think through April, I was wondering if you could comment on how clients are funding any tax liabilities, and then as you look in a world where rates sort of stay here, and we stay sort of in your framework of maybe plus or minus one rate move. How do you think the mix of client assets might migrate from here? That is, what percent might stick in the sweep vehicles versus what might stay in the money market higher cost vehicles? And when might you start to see more favorable inflection on that?

Speaker Change: They they deal with Taxane and by wiring money to the federal government generally out of our accounts and out of every brokerage account.

Speaker Change: Can be exasperated in years, where you also have to make estimated tax payments. So you had a strong first quarter you might have some more capital gains.

Speaker Change: We see what I would say normal.

Speaker Change: Activity whereby.

Speaker Change: And just take it out of our various cash products.

Speaker Change: In wire it to the federal government. Thank you very much so.

Speaker Change: It's just taxes.

As it relates to client behavior it'll be interesting because.

Unknown Attendee: Thank you.

Speaker Change: And if at some point the fed will.

Ronald James Kruszewski: Well, two things. First of all, every year, you know, the clients deal with tax season by wiring money to the federal government generally out of our accounts and out of every brokerage account. That's something that can be exasperated in years where, you know, you also have to make estimated tax payments. So if you had a strong first quarter; you might have some more capital gains. So we, you know, we see what I would call normal activity whereby clients just take money out of our various cash products and wire it to the federal government. Thank you very much.

Speaker Change: Begin to cut rates.

Speaker Change: I will say as an aside.

Speaker Change: If if I could be fed chairman for the day I don't really think that we need rate cuts as much as we need a rate adjustment, meaning that if you could just snap your fingers and not signal to the market that you are getting a rate cycle.

Speaker Change: We want the fed funds rate to be about $4, 75, which would be flat to the two year. It wouldnt be inverted that'd be ideal I think but probably not going to happen, but what will happen as rates do start to decline.

Clients like the 5% handle on short term rates when they might reach for some duration.

Ronald James Kruszewski: So, you know, it's just tax. As it relates to client behavior, it'll be interesting because when and if, at some point the Fed will begin to cut rates, you know, I'll say as an aside, you know, if I could, you know, be Fed Chairman for the day, I don't really think that we need rate cuts as much as we need a rate adjustment, meaning that if you could just snap your fingers and not signal to the market that you're beginning a rate cycle, you'd probably want the Fed funds rate to be about 475, which would, you know, be flat to the two year, it wouldn't be inverted.

Speaker Change: To maintain.

Speaker Change: Right.

Speaker Change: We've been we've been thinking about that and have some products to make sure that we have that alternative for our clients. Just like we got ahead of the curve of smart rate, we will in terms of what the yield curve might want our clients might want to do as the yield curve begins to normalize.

Speaker Change: One other thing I think I'd add to that is we already have about $18 billion of client assets that have moved into short term treasuries in money market mutual funds and obviously that number can go up some from here, but that's a pretty big allocation relative to historical norms and obviously if rates stayed higher for longer those are probably going to stay somewhat elevated if we turn around at some point in <unk>.

Ronald James Kruszewski: That'd be ideal, I think, but probably not going to happen. But what will happen as rates do start to decline, as clients like the 5% handle on short-term rates, and they might reach for some duration, to maintain rates. We've been thinking about that and have some products to make sure that we have that alternative for our clients. Just like we got ahead of the curve on smart rate, we will in terms of what the yield curve might want, our clients might want to do as the yield curve begins to normalize.

Speaker Change: Rates come back down that's a fair amount of investable dollars that arent really earning much today, that's potential revenue within our private client group thats kind of sitting on the sidelines today.

Speaker Change: Thank you so much.

Speaker Change: Okay.

Speaker Change: We will take our next question from Stephen <unk> with Wolfe Research.

Stephen: Hey, good morning, Ron and Jim.

Speaker Change: Michael and I'm going to start on for Stephen.

Stephen: I wanted to start off with one on <unk>.

Stephen: Dol fiduciary rule, Ron you had been relatively cautious versus some of the peers on on the implications of the rule.

Unknown Executive: One of the things I think would add to that is we already have about $18 billion of client assets that have moved into short-term treasuries and money market mutual funds. And obviously, that number can go up some from here, but that's a pretty big allocation relative to historical norms. And obviously, if rates stay higher for longer, those are probably going to stay somewhat elevated. But if we turn around at some point and see rates come back down, that's a fair amount of investable dollars that aren't really earning much today. That's potential revenue within our private client group that's kind of sitting on the sidelines today.

Michael: At the conference in November with the final rule now published maybe you can remind us your views there and what this means for the industry any implications that you would highlight for Stifel <unk> earnings as well thanks.

Michael: Yes.

Michael: It was published yesterday, it's about 500 pages.

Michael: Numerous preamble and various things.

Michael: As a first blush I want to say that was somewhat may.

Michael: It may be surprised that they at least an initial review of the rule appears to.

Unknown Attendee: We will take our next question from Steven Chubak with Wolf Research.

Unknown Attendee: Hey, good morning, Ron and Jim. It's Michael, and I'm gonna start this on for Steven.

Michael: <unk> be less restrictive than what was proposed.

Michael: Thanks.

Michael: A number of people in the administration and are trying to not create a rule that is so similar to the one that was struck down by the fifth circuit back in 2018.

Ronald James Kruszewski: I wanted to start off with one on the DOL fiduciary rule. Ron, you had been relatively cautious versus some of the peers on the implications of the rule back at the conference in November. With the final rule now published, maybe you could remind us your views there, what this means for the industry, and any implications that you would highlight for Stifel's earnings as well. Thanks.

Michael: Or whatever it was and so.

Michael: I was I would say that.

Michael: We're all really targets just to say that it is primarily fixed indexed annuities, which we don't really solid Stifel. However, I would say that probably is going to draw a legal channel talent from the insurance groups. The.

Ronald James Kruszewski: Yeah, look, I mean, it was published yesterday. It's about 500 pages long with, you know, numerous preambles and, and various things I, you know, as a first blush, I want to say I was somewhat maybe surprised that, at least an initial review of the rule appears to be less restrictive than what was proposed. I think that a number of people in the administration are trying to not create a rule that is so similar to the one that was struck down by the Fifth Circuit back in 2018, or whatever it was.

Michael: The rule, probably is still susceptible to legal challenge.

Michael: But they did some things like that you can continue to have education for IRA rollovers.

Michael: And.

Michael: I thought that it was interesting that.

Michael: They expanded the principal transaction, which was always a concern of ours, mostly from Investor choice that you should be able to do an IPO in your IRA If you wanted to and it appears they put that back in so on balance I think the rule.

Ronald James Kruszewski: And so I would say that, you know, what the rule really targets, just to say that it is primarily fixed index annuities, which we don't really sell at Stifel. However, I would say that that probably is going to draw legal channel challenge from the insurance groups; the rule probably is still susceptible to legal challenge. You know, but they did some things like that so you can continue to have education for IRA rollovers.

Michael: Have a.

Patient period of about a year.

Michael: I think it is going to get challenged.

Michael: I see it today I think the it doesn't really significantly impact our business as I've seen it now and we've done a lot to implement <unk>.

Michael: Bye.

Michael: Overall, I always say the same thing that to the extent that a very good it has a lot of variance to rugby I.

Ronald James Kruszewski: And, you know, I thought that it was interesting that they expanded the principal transaction, which was always a concern of ours, mostly from an investor choice perspective, that you should be able to, you know, do an IPO in your IRA if you wanted to, and it appears they put that back in. So on balance, I think the rule has an implementation period of about a year. I think it's going to be challenged, but as I see it today, I think it doesn't really significantly impact our business as I see it now.

And that just becomes very difficult to manage most of our clients have.

Michael: Retirement, Iras and have taxable accounts and we can't be operating under two standards.

Michael: We will continue to be looking at that I know the industry is going to look at that but I guess my my first blush reaction was that it appeared to dial back from the proposal that came out.

Michael: A month or so ago.

Speaker Change: Great. That's very helpful. And then just one on on Bank M&A.

Ronald James Kruszewski: We've done a lot to implement REGBI. Overall, I always say the same thing, that to the extent that it has a lot of variance from REGBI, then that just becomes very difficult to manage. Most of our clients have retirement IRAs and they have taxable accounts, and we can't be operating under two standards. I'll continue to look into that. I know the industry is going to look at that, but I guess my first reaction was that it appeared to dial back from the proposal that came out a month or so ago.

Speaker Change: Following the close of the Lake Linde merger that had lingered for for quite a while are dialogues among potential deal candidates in the bank space picking up or is the view that the current administration will continue to cause headwinds there and then maybe just to round. It out can you give us a sense as how do you. How you expect the environment for bank M&A to evolve to.

Ronald James Kruszewski: Great, that's very helpful. And then, you know, just one on bank M&A, following the close of the Lakeland merger that had lingered for quite a while, are conversations among potential deal candidates in the bank space picking up, or is the view that the current administration will continue to cause headwinds there? And then maybe just to round it out, can you give us a sense of how you expect the environment for bank M&A to evolve depending on the election outcome?

Speaker Change: Pending on the election outcome.

Speaker Change: <unk>.

Speaker Change: I don't know maybe you gave me some information I wasn't sure that like Glen had had closed.

Speaker Change: That deal has been sitting around for a while I think we think it will close.

Speaker Change: Maybe I misspoke, I'm, sorry about that but that's alright, that's alright, I think we do expect it to close in general look I think the.

Speaker Change: Overall.

Speaker Change: <unk>.

Unknown Attendee: I don't know. Maybe you gave me some information. I wasn't sure that Likeland had closed. That deal's been sitting around for a while. I think we think it will close. Maybe I misspoke.

Speaker Change: The guidelines and what's been put out and the FDIC and a number of guidelines and having different.

Speaker Change: This administration is clearly.

Unknown Attendee: I'm sorry about that. That's all right. That's all right. That's all right.

Speaker Change: Put a delay in and transaction.

Ronald James Kruszewski: I think we do expect it to close. In general, look, I think the overall guidelines and what's been put out by the FDIC and a number of guidelines and having different, this administration has clearly put a delay in transactions. That, you know, that'll continue. I don't see why that's not going to continue.

Speaker Change: That will continue.

Speaker Change: I don't see why why that's not going to continue and if it does anything as it relates to M&A if I'm on the board.

Speaker Change: I'm, considering putting a risk factor into my thought process as to.

Ronald James Kruszewski: And if it does anything as it relates to M&A, you know, if I'm on a board, I'm considering and putting a risk factor into my thought process as to, you know, how to manage a delay in closing. That's, that's part of assessing price and the ability to do transactions. So I'm hopeful that the administration, whoever it could be after November, will recognize that a lot of mid-sized banks need to combine to meet enhanced regulatory, enhanced liquidity, and everything else.

Speaker Change: How to manage a delay in closing.

Speaker Change: As part of Us.

Speaker Change: Assessing price and the ability to do transactions, so I am hopeful.

Speaker Change: <unk>.

Speaker Change: That the administration.

Speaker Change: Ever it will would could be after November will.

Speaker Change: We will recognize that a lot of mid sized banks.

Speaker Change: Need to combine to meet enhanced regulatory enhanced liquidity.

Speaker Change: And everything else, we don't and we don't need.

Ronald James Kruszewski: We don't need over 4,000 banks. We need more than 10, but there is a lot of M&A activity that's going to occur, and I'm hopeful that the administration will encourage bank mergers because it's good not only for shareholders but also for communities and for the fabric of the United States capital markets, which has at its foundation community and regional banks.

Speaker Change: Over 4000 banks, we need more than 10, but there is a lot of M&A activity, that's going to occur and I am hopeful that.

Speaker Change: The administration will encourage.

Speaker Change: Bank mergers because it's good not only for shareholders, but also communities and for the fabric of the United States capital markets, which has at its foundation.

Community and regional banks.

Unknown Executive: I think one thing to add there is obviously the timeline from announcement to close has extended significantly. We are hearing from clients that they feel like they've gotten to the point where they don't feel like that's going to get any longer from here. And I think I would just say that if the environment switches to be more conducive for financial M&A, we're very well positioned to take advantage of that.

Speaker Change: I think one thing to add there is obviously the timeline of the from announcement to close has extended significantly we are hearing from clients that we feel like they've gotten to the point, where they don't feel like that's going to get any longer from here and I think I would just say that if the environment, which is too to be more conducive for <unk>.

Speaker Change: Financial M&A, we're very well positioned to take advantage of that.

Unknown Attendee: Got it. Thank you for taking my questions.

Speaker Change: Got it thank you for taking my questions.

Speaker Change: We will take our next question from Brennan Hawken with UBS.

Unknown Attendee: We will take our next question from Brennan Hawken with UBS.

Unknown Attendee: Morning, thanks for taking my question. Hey, how are you, Ron? So, Jim, in your prepared remarks, you commented that you added, I believe, 22 advisors in the quarter, but the FAA headcount dropped by about 30 quarter over quarter. Can you speak to what drove that drop despite the healthy growth ads?

Brennan Hawken: Good morning, Thanks for taking my questions.

Brennan Hawken: Hey, how are you Ron.

Brennan Hawken: So Jim in your prepared remarks, you commented that you added I believe 22 advisers in the quarter, but the FAA head count dropped by about 30% quarter over quarter can you speak to what drove that drop despite the.

Brennan Hawken: Healthy gross adds.

James M. Marischen: Yeah, I was primarily driven by retirements. I think you often see that early in the year. I think, you know, generally speaking, the pace of recruiting has slowed a little bit, and so some of the natural attrition from retirements has been, you know, more of a similar number to what we added in terms of net new advisors, and that is really the trend we're seeing there. I think when you see markets moving like they have moved, typically, advisors take a little time to make the decision to transition, and I think that's something you're seeing kind of across the industry today.

James M. Marischen: Yes. It was primarily driven by retirements I think you you see that early in the year often.

James M. Marischen: I think generally speaking the pace of recruiting has slowed a little bit and so some of the natural attrition from retirements.

James M. Marischen: Was more of a similar number to what we added in terms of net new advisors and that is really the trend. We're seeing there I think when you see markets moving like they have moved typically advisors take a little time to make the decision to transition and I think thats, something youre seeing kind of across the industry today.

And when you have those.

Unknown Attendee: When you have those FAA retirements, do you have any stats around what portion of those retiring advisors' books you are able to retain or maybe finance to move to a younger advisor or anything like that?

James M. Marischen: Retirements.

James M. Marischen: Have any stats around what portion of those retiring advisors books, you are able to retain or maybe finance to move to a younger advisor or anything like that.

Speaker Change: We don't have staff.

James M. Marischen: We don't have stats that we publish, but we obviously look at that. I would say, you know, with retirements, you know, most advisors, we have programs for them to transition their books. We give them incentives to do so. And those assets are generally retained at the firm. If there's a challenge, it's that those assets, like our advisors that are going through retirement, are often going through intergenerational changes too. And so, you know, there's sometimes those higher challenges; you go from parents to kids, but we have programs to do that too.

Speaker Change: We that we publish we obviously.

Speaker Change: Look at that I would say with retirements.

Speaker Change: Most advisors, we have programs for them to transition their books, we give them incentives to do so and.

Speaker Change: Those assets are generally retained at the firm if there's a challenge it's that those assets like our advisors that are going through retirement those assets are often gone through inter generational changes too and so there is some time the higher challenge as you go from parents to kids, but.

Speaker Change: We have programs to do that too. So net net we believe that when someone retires at Steve Paul Thats, a good thing when you want to look at whats not necessarily a good thing, it's a regrettable attrition, which has been well when someone leaving to retire somewhere else or something that's not good but when they retire here that's a good thing.

Ronald James Kruszewski: So, net-net, we believe that when someone retires at Stifel, that's a good thing. But when you want to look at what's not necessarily a good thing, it's our regrettable attrition, which has been low. You know, when someone's leaving to retire somewhere else or something, that's bad.

Speaker Change: <unk>.

Speaker Change: Got it if I could squeeze in one more just somewhat maybe technical or nitty gritty, but.

Unknown Attendee: Got it. If I could squeeze in one more, just somewhat, maybe technical or nitty-gritty, but it seems as though the other deposits were net of $1.3 billion at third-party banks. Are those balances that are third-party banks reflected elsewhere in the supplement? And, you know, Why?

Speaker Change: It seems as though the other deposits were net of $1 3 billion at third party banks.

Speaker Change: Are those.

Speaker Change: The balances that are at third party banks reflected elsewhere in the supplement and.

Speaker Change: Why what drove the decision to move those.

James M. Marischen: What drove the decision to move those off? So if you look at page nine of the supplement, you can see the roughly $2 billion of other bank deposits. So, in essence, late in the quarter, we moved about 1.3 of primarily venture deposits over to third-party banks. Some of that was a function of just the cash on hand at the bank and the lack of growth that we saw in the first quarter. So we can move deposits off the balance sheet either through the suite program or through these venture deposits. This is the first time we did that.

Speaker Change: All right.

Speaker Change: So if you look at page nine of the supplement you can see the roughly $2 billion of other bank deposits. So.

Speaker Change: So in essence late in the quarter, we moved about one three of primarily venture deposits over to third party banks. Some of that was a function of just the cash on hand at the bank and the lack of growth that we saw in the first quarter. So we can move deposits off balance sheet either through the sweep program or through these venture depart.

Speaker Change: This is the first time, we did that I would just say if you think about that you add $1 three back to the two U.

Unknown Attendee: I would just say, if you think about that, you add the billion three back to the two, yeah, sorry, 1.3 to the two, and in essence, you can see that we were up about $500 million. Venture deposits drove about 300 million of that increase. And there were other corporate deposits driving about 200. That's probably more unusual in nature, but the 300 has been a fairly consistent pace over the last few quarters in terms of growth in venture deposits. That's more in line with the trend. Great. Thanks very much.

Speaker Change: Im sorry, $1 three to the to you in essence, you can see that we were up about $500 million.

Speaker Change: Venture deposits drove.

Speaker Change: Drove about $300 million of that increase and there were other corporate deposits you have about 200, thats probably more unusual in nature, but the 300, it's been a fairly consistent pace over the last few quarters in terms of growth in venture deposits.

Speaker Change: Yes, that's more in line with trend great. Thanks very much.

Speaker Change: No problem.

Speaker Change: Okay.

Speaker Change: We will take our next question from Alex Blaustein with Goldman Sachs.

Unknown Attendee: We will take our next question from Alex Blostein of Goldman Sachs.

Unknown Attendee: Hey guys, good morning. Just a question about your comments as far as loan growth demand goes. So it sounds like for the last couple of quarters, and we've seen that you guys have been sort of reluctant to extend the balance sheet a little bit, now it seems like you want to lean in a little more. Can you just characterize a little bit your comments surrounding sort of the high quality demand that you refer to?

Alexander Blostein: Hey, guys good morning.

Alexander Blostein: Just a question around your comments as far as loan growth demand goes so it sounds like for the last couple of quarters and we've seen that you guys have been sort of reluctant to extend the balance sheet a little bit now it seems like you wanted to lean in a little more can you just characterize a little bit on your comments surrounding sort of the high quality demand that you referred to.

Unknown Attendee: Which buckets is that likely to drive growth? And then around the same topic, the bank, the fund banking loan, I know, has been an area of focus, but that's been down. So what's kind of been driving the decline? And how do you guys expect to sort of bridge the gap to loans?

Alexander Blostein: Which bucket is that likely to drive growth and then earn.

Alexander Blostein: Round the same topic the bank the fund banking loan.

Alexander Blostein: I know it has been an area of focus but that's been down so what's kind of been driving the decline.

Alexander Blostein: How do you guys expect to sort of bridge the gap to loan growth.

Ronald James Kruszewski: Yeah, I'll let Jim give a little detail, but from my perspective, we've had and continue to have strong loan demand, primarily in our consumer-type areas. And yet, what we said that we were going to do was remix our balance sheet a little bit. So while you see some loan growth, we've not, quote, renting out our balance sheet as much. We have sold some broadly syndicated loans. We don't renew deals that were necessarily just part of a group. We want to be lending more holistically and achieving more fee income, not just net interest income, from our relationship. So you've seen a sort of remixing of that.

Alexander Blostein: Yes.

Alexander Blostein: Jim will give a little detail from from.

James M. Marischen: From my perspective, we've had and continue to have strong loan demand primarily in.

James M. Marischen: Our consumer type.

James M. Marischen: Areas and.

James M. Marischen: Yet what we said that we were going to do was remix our balance sheet, a little bit so while you see some loan growth.

James M. Marischen: Ben.

James M. Marischen: Not quote renting our balance sheet as much we have sold.

James M. Marischen: Some broadly syndicated loans, we don't renew.

James M. Marischen: The deals that are that were necessarily just part of our group we want we want to.

James M. Marischen: We want to be lending more holistically and and achieving more.

James M. Marischen: Fee income not just net interest income from from a relationship so you've seen a sort of a remixing of.

James M. Marischen: That I think that we're getting we've seen a lot of that and maybe we'll see now just net loan growth.

James M. Marischen: I think that we're getting, we've seen a lot of that, and maybe we'll see now just net loan growth, which has been going on. It just won't be offset as much by the fact that we just frankly haven't renewed some loans, I would say. I think it's fair.

James M. Marischen: Which has been going on it just won't be as offset as much by the fact that we just frankly haven't renewed some what I would say yes.

James M. Marischen: I think it's fair I mean, obviously, we've made a number of investments across both fund banking and our venture banking efforts and those are still bearing fruit on the banking side, we have been transitioning more to lending on a bilateral basis as Brian had mentioned basically, allowing us more opportunities for other fee income or other deposits.

Unknown Attendee: Obviously, we've made a number of investments across both fund banking and our venture banking efforts, and those are still bearing fruit. On the fund banking side, we have been transitioning more to lending on a bilateral basis, as Ron mentioned, basically allowing us more opportunities for either fee income or other deposits. And that's been a driver of more of the short-term changes you've seen there. And I think as we go forward, we have a fair amount of capacity from both the fund and venture banking teams.

James M. Marischen: And thats been a driver of more of the short term changes you've seen there and I think as we go forward, we see a fair amount of capacity from both the fund and venture banking teams.

Unknown Attendee: I gotcha. Thanks.

James M. Marischen: Yeah.

Got you thanks, and on the face side of things, there's been maybe a little bit more chatter around rising competition for recruiting and the pay packages I don't know Thats always part of the framework and it's always competitive but have you noticed any directional change is a degree of competition in the economics that are provided in the channel and as you.

Ronald James Kruszewski: And on the FAE side of things, there's been maybe a little bit more chatter around rising competition for recruiting and pay packages. And I know that's always part of the framework, and it's always competitive. But have you noticed any directional changes, the degree of competition and economics that are provided in the channel? And as you think about Stifel's net new asset contribution, can you help us characterize the mix between recruits versus samester sales?

James M. Marischen: Think about stifles net new asset contribution can you help us characterize the mix between recruits versus same store sales. Thanks.

Unknown Attendee: So, you know, obviously, we've not broken out a mix between recruits and same-source sales. I think it's one of those things where, you know, at what point do you consider someone no longer being recruited? Is it after six months? Is it after nine months? Or after 12 months? Where do you break it?

So obviously.

James M. Marischen: Obviously, we have not broken out our mix between recruits in same store sales.

James M. Marischen: I think it's one of those things where at what point do you consider someone no longer being recruited as it after six months that have nine months of trauma, where do you break in and where do you look at that obviously, we think we are holding our own in terms of net new assets, particularly when you look at your total assets and your total fee based assets and the way those percentage has changed.

Unknown Executive: Where do you look at that? Obviously, we think we are holding our own in terms of net new assets, particularly when you look at your total assets and your total fee-based assets and the way those percentages change period over period, both sequentially and year over year. Others are reporting higher net new asset numbers, but total assets that are managed, which drive fees, generally are moving in very competitive directions with peers there.

James M. Marischen: Period over period, both sequentially and year over year, others are reporting higher net new asset numbers, but total assets that are managed which drive fees generally are moving in very competitive directions with peers there yes.

Ronald James Kruszewski: Yeah, and look, I always look at I've commented before that I don't want to say obsession, but a lot of the net new asset metrics, you know, I can't always draw a line between that and revenue growth and profitability. I'll stick by our growth. Like I said, almost in our view, double our assets under administration to a trillion and our historical growth, and our historical improvement and productivity by person are the metrics that I really look at, and I feel very good about those.

James M. Marischen: And look I always look at.

James M. Marischen: I've commented before that I don't want to say the.

James M. Marischen: The obsession, but a lot of the.

James M. Marischen: Net new asset metrics.

James M. Marischen: I can always draw a line between that and revenue growth and profitability.

James M. Marischen: Bye.

Our growth like I said almost.

James M. Marischen: Sure.

James M. Marischen: You double our assets under administration.

James M. Marischen: Australian and our historical growth in our historical improvement in productivity.

James M. Marischen: By person or the metrics that I really look at and I feel very good about those.

Unknown Attendee: Got it. And just a clarification for Jim on the back of Brennan's question as well. The $1.3 billion that moved to sweep, what's the revenue yield on that? And just where does that show up? Because I don't think it's in your wealth.

Speaker Change: Got it and just a cleanup for Jim on the back of <unk> question as well the one $3 billion that moved to sweep whats the revenue yield on that and just where does that show up because I don't think its in your wealth business.

James M. Marischen: Well, it shows up within global wealth management because it's going to show up in the asset management line. It was de minimis for the quarter.

James M. Marischen: Well it shows up within global wealth management, because it's going to show up in the asset management line. It was de Minimis for the quarter the fee capture rate on that is significantly lower than what we get on third party sweep just given the inherent interest rate on those deposits relative to the suites, So youre talking something around 10 basis points or so.

Unknown Attendee: The fee capture rate on that is significantly lower than what we get on third-party sweeps, just given the inherent interest rate on those deposits relative to the sweeps. So you're talking about something around 10 basis points or so because it's basically an amount you're taking off the top of the yield, and there's a lot less room there to do that on venture deposits relative to sweep deposits. Got it. But you can move it back to the bank.

James M. Marischen: Because it's basically at amount youre, taking off the top of the yield and there is a lot less room, there to do that on venture deposits relative to sweep deposits.

Speaker Change: Got it.

Speaker Change: Relatively de minimus its in fee income, yes got it okay, but it seems like you could move it back to the bank whenever you want if there is loan growth you could use <unk> got it correct, but I just wanted to make sure people understood that as an additional $1 3 billion not shown on page nine of the supplement to fund loan growth as we go through I have a feeling next quarter its not going to be a netflix.

Unknown Attendee: It's in fee income. Yeah, I got it. But the point is you can move it back to the bank whenever you want if there's loan growth. We just wanted to make sure people understood that there is an additional $1.3 billion not shown on page 9 of the supplement to fund loan growth as we go forward. I have a feeling next quarter it's not going to be in that footnote. Okay? It's just the number of questions we're getting on this. Alright, thanks guys.

Speaker Change: Okay.

Speaker Change: Got a number of questions.

Speaker Change: Yes.

Speaker Change: Alright, thanks, guys.

Speaker Change: Okay.

Speaker Change: We will take our next question from Chris Allen with Citi.

Christopher John Allen: Hey, Chris Hey, good morning, guys.

Christopher John Allen: Good morning, everyone.

Christopher John Allen: Maybe just a quick one on global wealth management brokerage revenues, obviously, a nice quarter, both commissions and principal transactions, maybe some color just on the commission and what was driven by mutual fund trails.

Unknown Attendee: All right, thanks guys. We will take our next question from Chris Allen with, Hey, Chris. Hey, morning. Morning, everyone.

Unknown Attendee: We will take our next question from Chris Allen with Citi.

Christopher John Allen: What's the outlook in principle transactions more appetite for credit or rate related products there.

Christopher John Allen: Most of the increase we saw on a sequential basis was driven by equities activity and mutual fund trails.

Unknown Executive: Most of the increase we saw on a sequential basis was driven by equities activity and mutual fund trails. Those were built up nicely. I think you saw people engaging in the market as we saw some pretty attractive returns in the market. And I think that spurred a lot of client behavior. Yeah, I mean, look, it's correlated to market levels.

Christopher John Allen: Those were built up nicely I think you saw people engaging in the market as we saw some pretty attractive returns in the market and I think that spurred a lot of client behavior.

Christopher John Allen: Yes.

Look it's correlated to market levels, and both trails and activity. So.

Ronald James Kruszewski: Yeah, I mean I look at it, it's correlated to market levels and both trails and activity, so you know, that good markets generally will result in that line item transactional improving, and this was no different.

Christopher John Allen: That's a good markets.

Christopher John Allen: Generally will result in that line item transactional improving and this was no different.

Unknown Attendee: We will take our next question from Bill Katz with T.D. Cowan.

Speaker Change: Thanks, Chris.

Speaker Change: <unk>.

Speaker Change: We will take our next question from Bill Katz with TD Cowen.

William Raymond Katz: Alright, thanks for squeezing in the follow up so Ron you have me into a newly around my calculator here a little bit on your $10 billion revenue number that you laid out.

Unknown Attendee: All right. Thanks for squeezing in the follow-up. So, Ron, you got me into a new round with my calculator here a little bit on your $10 billion revenue number that you laid out, and I appreciate that. It's rather aspirational.

William Raymond Katz: And I appreciate that's a rather aspirational. So just a couple of questions on the need that all interrelated.

Ronald James Kruszewski: So, just a couple of questions underneath that, all interrelated. What kind of time frame? Does the model compound a little more quickly today, given the commentary just about having a stronger platform versus the last couple of years, number one? And then, relatedly, what kind of aspirational margin target should we be applying against that sort of thing through the earnings power of the company?

William Raymond Katz: Timeframe does the does the model compound a little more quickly today, just given the commentary just about having a stronger platform versus the last couple of years number one.

William Raymond Katz: And then underneath that relatedly, what kind of aspirational.

William Raymond Katz: Margin target should we be applying against that so I think to the earnings power of the company.

Ronald James Kruszewski: Yeah, look, I appreciate the question, Bill. And I hope you'll understand that I'm not really going to answer it.

Speaker Change: Yes look I appreciate the question Bill and I Hope you will appreciate that I'm, not really going to answer it.

William Raymond Katz: But.

Ronald James Kruszewski: But the I mean, I you know, that's forward looking. I, you know, I first of all, I don't know how aspirational I'm going to say that that is. I, you know, I made these aspirational comments back when we had 200 million in revenue that went to 400. In 2009, we were at 900 million. I said, we doubled the firm, and we got to a billion eight. And then, you know, and then I said, we doubled the firm. And people said, Oh, my gosh, you know, by when? And we'd say, well, we wouldn't.

William Raymond Katz: I mean I.

William Raymond Katz: That's forward.

William Raymond Katz: Looking at.

William Raymond Katz: First of all I don't know, how aspirational I'm going to say that that is I've had these aspirational comment.

William Raymond Katz: Back when we had $200 million of revenue that went to 402009, we were at $900 million I said, we doubled our firm and we got to a $1 billion.

William Raymond Katz: And then I thought it would be double the firm and people said Oh, my gosh by win and say well we wouldn't then.

William Raymond Katz: And we've done that and we've continued to do that because our ability to gain market share across all of our businesses. There's still a lot of open runway.

Ronald James Kruszewski: And, and we've done that. And we've continued to do that, because our ability to gain market share across all of our businesses is still a lot of open runway. And So when I look at our historical growth rate, you know, to put not an aspirational goal, but a milestone in the ground, which in this case is 10 billion of revenue and a trillion dollars of assets, they are correlated as to if you take that calculator you were talking about and go back and look at our, you know, our wealth management, our asset center management and our institutional business, and you plot those, you'll see that 10 billion and a trillion, you know, are correlated.

William Raymond Katz: So when I look at our historical growth rate to put not an aspirational goal, but a milestone in the ground, which in this case was $10 billion of revenue in a trillion dollars of assets. They are correlated as to if you take that calculator you were talking about and go back and look at.

William Raymond Katz: Our.

William Raymond Katz: Our wealth management, our assets under management, and our institutional business, a new plot those youll see that $10 billion in a trillion are correlated.

Ronald James Kruszewski: So I just want to underscore the fact that we believe that we're a growth company, and we have been a growth company, and we're not, you know, we're not at the end of this journey. So I'm confident that, at $10 billion and $1 trillion of assets under proper capital management, our margins will be higher, just from scale, our returns will be higher, and our shareholders will be happy. Much more than that, I'm really not going to get.

William Raymond Katz: So I just want to underscore the fact that we believe that we're a growth company and we have been a growth company and we're not.

William Raymond Katz: We're not at the end of this journey.

William Raymond Katz: So.

William Raymond Katz: I'm confident that at $10 billion on a trillion dollars of assets are.

William Raymond Katz: And proper capital management, our margins will be higher just from scale, our returns will be higher.

William Raymond Katz: Our shareholders will be happy.

Speaker Change: Much more than that I'm really not going to get into.

Speaker Change: I'll give a shot thank you very much I appreciate the comment.

Unknown Attendee: I gave it a shot. Thank you very much. I appreciate the comment. Yeah, well, hey, look, I appreciate it, okay? Send me your calculator. I'll look at it.

Speaker Change: Look I appreciate it okay.

Speaker Change: Your calculator, all I'll look at it.

Speaker Change: Sure.

Speaker Change: We will take our next question from Steven <unk> with Wolfe Research.

Unknown Attendee: We will take our next question from Steven Chubak with Wolf Research.

Steven: Hey, Stephen Hey, guys.

Steven: Michael again, just just one more question here on capital.

Unknown Attendee: Hey guys, it's Michael again.

Unknown Attendee: Just one more question on capital. You know, it was nice to see improved repurchase activity during the quarter. You know, is this like the 150 to 160 million zone more reasonable in the near term? Your capital ratios are still very healthy, free cash flow generators are still quite strong, but at the same time, you guys are planning to grow the balance sheet a decent amount more this year. So I just wanted to, you know, understand whether or not we should expect it that way.

Steven: It was nice to see improved repurchase activity during the quarter.

Is this like 150 to 160 million zone more reasonable in the near term your capital ratios are still very healthy free cash flow gens.

Michael: Still quite strong but at the same time you guys are planning to grow the balance sheet, a decent amount more this year. So I just wanted to add.

Speaker Change: I understand whether or not we should expect it to return maybe to the 2023 run rate. Thank you.

James M. Marischen: So, obviously, the buyback activity is all price-dependent, and we've obviously talked about allocating more capital to balance sheet growth, so you may see that slow sum in the near term. That very well may be the case. We do have a senior debt offering that comes due in July. At this point, we may fully just pay that off, so some of that may play into this as well, but I think as we look at the back half of the year, I would anticipate that buyback activity probably returns to those more normalized levels.

Speaker Change: So obviously the buyback activity as oil price dependent and we've obviously talked about allocating more capital to balance sheet growth. So you may see that slow some in the near term that very well may be the case, we do have a senior debt offering that comes due in July at this point, we may fully just <unk>.

Speaker Change: That off so some of that May play into this as well, but I think as we look at the back half of the year I would anticipate that that buyback activity probably returns to those more normalized levels.

Unknown Attendee: Great, thanks for taking the time for the follow-up.

Speaker Change: Great. Thanks for taking the follow up.

Operator: Currently, I do not have any questions. Again, it is star number one to ask a question. We do not have any questions in the queue. I would like to turn the call back over to our speaker today for closing remarks.

Speaker Change: We currently do not have any questions again, it is star one to ask a question.

Speaker Change: Yes.

Speaker Change: We do not have any questions in the queue I would like to turn the call back over to our speaker today for closing remarks.

Ronald James Kruszewski: Well, I would again, as always, thank everyone for taking the time to listen to our first quarter results. I'm optimistic about the markets in general and look forward to reporting our second quarter results this summer. So, with that, everyone, have a great day. Thank you very much.

Speaker Change: Well I would.

Speaker Change: Again as always thank everyone for taking the time to listen to our first quarter results. So I'm optimistic.

Speaker Change: About.

Speaker Change: The markets in general and look forward to reporting our second quarter results.

Speaker Change: Summer so with that everyone have a great day, thank you very much.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

This concludes today's call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Alright.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Yes.