Q1 2026 Stifel Financial Corp Earnings Call

April 22, 2026

Operator: Good day, and welcome to the Stifel Financial Q1 2026 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joel Jeffrey, Head of Investor Relations. Please go ahead.

Speaker #3: Please go ahead.

Speaker #2: Thank you, operator. Good morning and welcome to STIFEL's first quarter 2026 earnings call. On behalf of STIFEL Financial Corp, I will begin the call with the following information and disclaimers.

Joel Jeffrey: Thank you, operator. Good morning and welcome to Stifel's Q1 2026 Earnings Call. On behalf of Stifel Financial Corp., I will begin the call with the following information and disclaimers. This call is being recorded. During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at stifel.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Stifel Financial Corp. does not undertake to update the forward-looking statements in this discussion. Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. I will now turn the call over to our Chairman and Chief Executive Officer, Ron Kruszewski.

Speaker #2: This call is being recorded. During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at STIFEL.com.

Speaker #2: Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. STIFEL Financial Corp does not undertake to update the forward-looking statements in this discussion.

Joel Jeffrey: Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Stifel Financial Corp. does not undertake to update the forward-looking statements in this discussion.

Speaker #2: Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. I will now turn the call over to our chairman and chief executive officer, Ron Kruszewski.

Joel Jeffrey: Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. I will now turn the call over to our Chairman and Chief Executive Officer, Ron Kruszewski.

Speaker #3: Thanks, Joel. Good morning and thanks to everyone for joining us. In the first quarter, we delivered very strong performance. Net revenues of $1.48 billion were up 18% from a year ago.

Ron Kruszewski: Thanks, Joel. Good morning and thanks to everyone for joining us. In Q1, we delivered very strong performance. Net revenues of $1.48 billion were up 18% from a year ago. That includes a non-recurring gain from the sale of Stifel Independent Advisors, which closed in February, which was partially offset by interest on a legal judgment. We've excluded both from our core results. Excluding the SIA gain, revenue grew 15%. Either way, it was a record Q1, and regardless, it's a growth rate comparable to the best firms on The Street. Earnings per share were $1.48 on a GAAP basis and $1.45 on a non-GAAP basis, compared to $0.33 last year. That's a significant improvement. I want to be transparent. Last year's results were impacted by $180 million legal accrual, which was unusual, to say the least.

Speaker #3: That includes a non-recurring gain from the sale of Stifel and independent advisors, which closed in February, which was partially offset by interest on a legal judgment.

Speaker #3: We've excluded both from our core results. Excluding the SIA gain, revenue grew 15%. Either way, it was a record first, comparable to the best firms on the street.

Ron Kruszewski: We've excluded both from our core results. Excluding the SIA gain, revenue grew 15%. Either way, it was a record Q1, and regardless, it's a growth rate comparable to the best firms on The Street.

Speaker #3: Earnings per share were $1.48 on a GAAP basis and $1.45 on a non-GAAP basis, compared to $0.33 last year. That's a significant improvement, so I want to be transparent.

Ron Kruszewski: Earnings per share were $1.48 on a GAAP basis and $1.45 on a non-GAAP basis, compared to $0.33 last year. That's a significant improvement. I want to be transparent. Last year's results were impacted by $180 million legal accrual, which was unusual, to say the least.

Speaker #3: Last year's results were impacted by a $180 million legal accrual, which was unusual, to say the least. Adjusting for that, EPS was up 32% on a comparable basis.

Ron Kruszewski: Adjusting for that, EPS was up 32% on a comparable basis. Our annualized return on tangible equity was nearly 25%. We expect 2026 to be a good year, and Q1 reflects that. Yet, the environment has become more uncertain. Against a backdrop of escalating geopolitical risk, energy prices have risen, credit spreads have widened, and interest rate uncertainty has increased. The wild card remains the conflict in Iran and its potential impact on energy prices, inflation, and ultimately growth. I'd like to note that unlike some of our larger peers, Stifel's business model isn't built around trading volatility. We have a trading business, but it's client-driven and relationship-oriented, not structured to capitalize on market dislocations. Delivering these results in a volatile quarter tells you something important about the durability and diversification of what we've built. Our growth was broad-based.

Speaker #3: Our annualized return on tangible equity was nearly 25%. We expect 2026 to be a good year, and the first quarter reflects that. Yet the environment has become more uncertain.

Speaker #3: Against a backdrop of escalating geopolitical risk, energy prices have risen, credit spreads have widened, and interest rate uncertainty has increased. The wild card remains the conflict in Iran and its potential impact on energy prices, inflation, and ultimately growth.

Ron Kruszewski: The wild card remains the conflict in Iran and its potential impact on energy prices, inflation, and ultimately growth. I'd like to note that unlike some of our larger peers, Stifel's business model isn't built around trading volatility.

Speaker #3: But I'd like to note that unlike some of our larger peers, STIFEL's business model isn't built around trading volatility. We have a trading business, but its client-driven and relationship-oriented.

Ron Kruszewski: We have a trading business, but it's client-driven and relationship-oriented, not structured to capitalize on market dislocations. Delivering these results in a volatile quarter tells you something important about the durability and diversification of what we've built. Our growth was broad-based.

Speaker #3: Not structured to capitalize on market dislocations. Delivering these results in a volatile quarter tells you something important about the durability and diversification of what we've built.

Speaker #3: Our growth was broad-based. Global Wealth Management delivered record first quarter net revenue, driven by record asset management revenues and growing advisor productivity. We also generated record first quarter investment banking revenue, producing a record first quarter for our institutional business.

Ron Kruszewski: Global Wealth Management delivered record Q1 net revenue, driven by record asset management revenues and growing advisor productivity. We also generated record Q1 investment banking revenue, producing a record Q1 for our institutional business. Our firm-wide pre-tax margin was more than 22%, reflecting continued robust wealth management margins, coupled with an institutional pre-tax margin of nearly 20%. It is noteworthy that this metric improved nearly 1,300 basis points from last year, benefiting from both revenue growth and our international equities restructuring. Jim will provide more detail on that. Look, if the risks I cite remain within a range of market expectations, we are confident in a strong 2026. That confidence is grounded in something more than one quarter. Let me put these results in the longer context. Stifel is a company that both grows and understands the concept of return on invested capital.

Speaker #3: Our firm-wide pre-tax margin was more than 22%, reflecting continued robust wealth management margins coupled with an institutional pre-tax margin of nearly 20%. It is noteworthy that this metric improved nearly 1,300 basis points from last year, benefiting from both revenue growth and our international equities restructuring.

Speaker #3: Jim will provide more detail on that. Look, if the risk I cite remains within a range of market expectation, we are confident in a strong 2026.

Speaker #3: That confidence is grounded in something more than one quarter. Let me put these results in the longer context. STIFEL is a company that both grows and understands the concept of return on invested capital.

Speaker #3: We've scaled revenue from about $100 million in 1996 to roughly $6 billion today. And we're targeting $10 billion in revenue in $1 trillion in client assets.

Ron Kruszewski: We've scaled revenue from about $100 million in 1996 to roughly $6 billion today, and we're targeting $10 billion in revenue and $1 trillion in client assets. We grow, and we grow the right way. That long-term philosophy also informs how I think about some of the questions dominating every earnings call so far this season. For each one, I want to tell you what Stifel is doing and share my observations about what I'm seeing in the market around us. The first is AI. Across Stifel, we're seeing real benefit from our AI investments. The technology enables our advisors, our investment bankers, our commercial lenders, and support teams to work faster and smarter. In every case, we're working to enhance client relationships with AI, keeping our professionals at the center of the value proposition. The opportunity here is significant.

Speaker #3: We grow and we grow the right way. That long-term philosophy also informs how I think about some of the questions dominating every earnings call so far this season.

Speaker #3: For each one, I want to tell you what STIFEL is doing and share my observations about what I'm seeing in the market around us.

Speaker #3: The first is AI. Across STIFEL, we're seeing real benefit from our AI investments. The technology enables our advisors, our investment bankers, our commercial lenders, and support teams to work faster and smarter.

Speaker #3: And in every case, we're working to enhance client relationships with AI, keeping our professionals at the center of the value proposition. The opportunity here is significant.

Speaker #3: We are in the early process of linking our data to these new tools. And there is a lot of work ahead. But the early results give me confidence that we're on the right path.

Ron Kruszewski: We are in the early process of linking our data to these new tools, and there is a lot of work ahead. The early results give me confidence that we're on the right path. I'd be less than candid if I didn't raise a concern about frontier models like Mythos that are becoming an entirely new category of technology. As recently as a few weeks ago, I'm not sure any of us really fully understood what Mythos was, possibly even those that created it. The next version, as I understand it, is already in development. Models this powerful increase capability on both sides of the table, for those defending and for those who would do harm. If you ask me what our industry needs to get right before anything else, the answer is cyber. Not just for Wall Street. This requires a national response.

Speaker #3: But I'd be less than candid if I didn't raise a concern about frontier models like Mithos that are becoming an entirely new category of technology.

Speaker #3: As recently as a few weeks ago, I'm not sure any of us really fully understood what Mithos was. Possibly even those that created it.

Speaker #3: And the next version, as I understand it, is already in development. Models this powerful increase capability on both sides of the table to those defending and for those who would do harm.

Speaker #3: And if you ask me what our industry needs to get right before anything else, the answer is cyber. Not just for Wall Street. This requires a national response.

Speaker #3: I have consistently said that this is an issue of national security. The second is credit. At STIFEL, our lending philosophy has never been built around chasing yield.

Ron Kruszewski: I have consistently said that this is an issue of national security. The second is credit. At Stifel, our lending philosophy has never been built around chasing yield. We treat lending as a relationship-oriented business, not a volume-driven growth engine. The headlines this season involved specific credit situations. First Brands, Tricolor, Medallia, where aggressive structures, weak collateral monitoring, and in some cases, fraud drove the losses. People had essentially zero exposure to any of them. As an aside, the more recent concern has been about liquidity in private credit vehicles. Some funds are limiting withdrawals, and we're seeing secondary market participants offering liquidity at significant discounts to NAV. Reminds me of the scene in "It's a Wonderful Life," where Potter's trying to buy Bailey Brothers Building & Loan shares at 50 cents on the dollar during a run on the bank.

Speaker #3: We treat lending as a relationship-oriented business, not a volume-driven growth engine. The headlines this season involved specific credit situations. First Brands, Tricolor, and Medallia were aggressive structures.

Speaker #3: Weak collateral monitoring and, in some cases, fraud drove the losses. STIFEL had essentially zero exposure to any of them. As an aside, the more recent concern has been about liquidity in private credit vehicles.

Speaker #3: Some funds are limiting withdrawals. And we're seeing secondary market participants offering liquidity at significant discounts to NAV. It reminds me of the scene in It's a Wonderful Life where Potter is trying to buy Bailey Building and Loan shares at 50 cents on the dollar during a run on the bank.

Speaker #3: The underlying assets haven't changed, but when everyone rushes for the exit at once, the gates come down. That's a structural issue. The third consistent question surrounds software loans.

Ron Kruszewski: The underlying assets haven't changed, but when everyone rushes for the exit at once, the gates come down. That's a structural issue. The third consistent question surrounds software loans. I've read the predictions that every software loan is essentially worthless given AI disruption. To put some numbers to Stifel, our software loan exposure is approximately $500 million on a $43 billion balance sheet. Not a material number. The more important point is that we have reviewed our software exposure carefully. While there are always normal pockets of stress, we don't see the broad credit issues that the headlines suggest. The fourth is legislation and market structure. Two questions are dominating this debate right now. Stablecoin yield and tokenized equities. Let me tell you where Stifel stands on both. On stablecoins, we will offer them.

Speaker #3: I've read the predictions that every software loan is essentially worthless given AI disruption. To put some numbers to STIFEL, our software loan exposure is approximately $500 million on a $43 billion balance sheet.

Speaker #3: Not a material number. But the more important point is that we have reviewed our software exposure carefully. And while there are always normal pockets of stress, we don't see the broad credit issues that the headlines suggest.

Speaker #3: The fourth is legislation and market structure. Two questions are dominating this debate right now: stablecoin yield and tokenized equities. Let me tell you where Stifel stands on both.

Speaker #3: On stablecoins, we will offer them. But in my opinion, if a stablecoin pays yield, that's a deposit. Subject to capital requirements: AML, BSA, and the full framework of bank regulation.

Ron Kruszewski: In my opinion, if a stablecoin pays yield, that's a deposit subject to capital requirements, AML, BSA, and the full framework of bank regulation. If the yield comes from investment in the underlying fund, then it's a money market fund. Follow those rules. Legislation should not create a third option that avoids both. On tokenized equities, we will build the capability to offer, settle, and trade them. In my opinion, the regulatory framework should follow the underlying asset. A tokenized Apple share is still Apple stock. Every rule that applies to that stock, disclosure, best execution, settlement finality, investor recourse, applies to the token. The technology changes the delivery. It doesn't change the obligation. For those who say this is about protecting the incumbents, well, if that was true, we wouldn't be building the capability at all. We are building this capability.

Speaker #3: Or if the yield comes from investing the underlying funds, then it's a money market fund. Follow those rules. Legislation should not create a third option that avoids both.

Speaker #3: On tokenized equities, we will build the capability to offer, settle, and trade them. But in my opinion, the regulatory framework should follow the underlying asset.

Speaker #3: A tokenized Apple share is still Apple stock. Every rule that applies to that stock—disclosure, best execution, settlement finality, investor recourse—applies to the token.

Speaker #3: The technology changes the delivery; it doesn't change the obligation. And for those who say this is about protecting the incumbents—well, if that was true, we wouldn't be building the capability at all.

Speaker #3: But we are building this capability. The principle is simple. A deposit is a deposit. A security is a security. Custody is custody. Nearly a century of investor protection wasn't built to apply only to some participants.

Ron Kruszewski: The principle is simple. A deposit is a deposit. A security is a security. Custody is custody. Nearly a century of investor protection wasn't built to apply only to some participants. The technology doesn't change that. I've discussed AI and software disruption, credit markets, and legislation and market structure. In each case, I wanted you to understand both where Stifel stands and my observation about what's happening around us. Over the last 30 years, we have shown a consistent ability to adjust to economic and technology change. Global Wealth Management is growing, our institutional pipelines are strong, and our investments in the innovation economy through venture lending and deposit generation are paying dividends. Bottom line, what I see is a firm that is very well-positioned. Jim, please take us through the numbers.

Speaker #3: The technology doesn't change that. I've discussed AI and software disruption, credit markets, and legislation and market structure. In each case, I wanted you to understand both where STIFEL stands and my observation about what's happening around us.

Speaker #3: Over the last 30 years, we have shown a consistent ability to adjust to economic and technology change. Global wealth management is growing. Our institutional pipelines are

Speaker #1: A strong and our investments in the innovation economy through venture lending and deposit generation are paying dividends . Bottom line . What I see is a firm that is very well positioned .

Speaker #1: So, Jim, please take us through the numbers.

Speaker #2: Thanks , Ron , and good morning , everyone . Before I jump into the financial results , I remind everyone that the EPS numbers are reported on a split adjusted basis following our three for two stock split .

Jim Marischen: Thanks, Ron, and good morning, everyone. Before I jump into the financial results, I remind everyone that the EPS numbers are reported on a split adjusted basis following our three-for-two stock split that was effective in late February of this year. Turning to the results. Total non-GAAP revenues of $1.44 billion was right in line with consensus estimates. Investment banking was the primary upside driver, exceeding expectations by $8 million or 2% as their number of transactions closed late in the quarter. Advisory revenue was the primary driver of the beat. Transactional revenue came in 1% below expectations but increased 7% from the prior year. I'll cover the components in more detail when we get to the institutional segment. Asset management revenue was modestly above consensus and increased 12% from the prior year, and was driven by market appreciation and net new asset growth.

Speaker #2: That was effective in late February of this year Turning to the results total non-GAAP revenues of 1.44 billion was right in line with consensus estimates Investment banking was the primary upside driver , exceeding expectations by $8 million , or 2% , as a number of transactions closed late in the quarter Advisory revenue was the primary driver of the beat transactional revenue came in 1% below expectations , but increased 7% from the prior year .

Speaker #2: I'll cover the components in more detail when we get to the institutional segment Asset management revenue was modestly above consensus and increased 1,212% from the prior year , and was driven by market appreciation and net new asset growth .

Speaker #2: Net interest net interest income came in at the lower end of our guidance and $3 million below consensus I'll cover the details and the second quarter guidance when we get to the global Wealth Management section to highlight the missed consensus expectations was driven by lower corporate or non-bank net interest income .

Jim Marischen: Net interest income came in at the lower end of our guidance and $3 million below consensus. I'll cover the details and the Q2 guidance when we get to the Global Wealth Management section. To highlight the miss to consensus expectations was driven by lower corporate or non-bank net interest income. Expenses were well controlled and benefited from the strategic actions Ron referenced earlier. Both our comp ratio and non-comp expenses came in below consensus. The effective tax rate was roughly 23%, slightly below both guidance and consensus due to improved profitability from our non-US operations. Turning to slide 4. Global Wealth Management generated $932 million in net revenue, the strongest Q1 in our history, and essentially in line with last quarter's record. Results were driven by record asset management revenue and growth in net interest income.

Speaker #2: Expenses were well controlled and benefited from the strategic actions Ron referenced earlier. Both our comp ratio and non-comp expenses came in below consensus.

Speaker #2: The effective tax rate was roughly 23%, slightly below both guidance and consensus due to improved profitability from our non-U.S. operations. Turning to slide four.

Speaker #2: Global Wealth Management generated $932 million in net revenue. The strongest first quarter in our history, and essentially in line with last quarter's record results, were driven by record asset management revenue and growth in net interest income.

Speaker #2: These results are particularly strong given the sale of SAR reduced our transactional and asset management run rate for two months during the quarter We ended the quarter with total client assets of $539 billion and fee based assets of 220 billion , excluding the Sia impact , total client assets and fee based assets were essentially flat sequentially .

Jim Marischen: These results are particularly strong given the sale of SIA reduced our transactional and asset management run rate for two months during the quarter. We ended the quarter with total client assets of $539 billion and fee-based assets of $220 billion. Excluding the SIA impact, total client assets and fee-based assets were essentially flat sequentially despite the equity market decline, as net new asset growth was in the low single digits and was offset by market depreciation. Recruiting pipeline remains robust, though activity is episodic and dependent on changing competitive and market dynamics. Over the last 12 months, we've recruited trailing 12-month production totaling approximately $80 million, which does not include the impact that recruiting has on net interest income. Our client-driven balance sheet continues to enhance both earnings consistency and client engagement.

Speaker #2: Despite the equity market decline , as net new asset growth was in the low single digits and was offset by market depreciation . Our recruiting pipeline remains robust , though activity is episodic and dependent on changing , competitive and market dynamics Over the last 12 months , we've recruited trailing 12 month production totaling approximately $80 million , which does not include the impact that recruiting has on net interest income .

Speaker #2: Our client driven balance sheet continues to enhance both earnings consistency and client engagement . As I mentioned , net interest income came in at the lower end of our guidance due to slower loan growth .

Jim Marischen: As I mentioned, net interest income came into the lower end of our guidance due to slower loan growth as market volatility impacted fund banking late in the quarter, more than offsetting growth in residential mortgages, securities-based lending, and C&I loans. Noninterest income, particularly within corporate interest and securities lending, was approximately $3 million lower than originally forecast. For Q2, we expect net interest income in the range of $280 to $290 million. Client cash balances increased meaningfully during the quarter. Sweep balances increased by more than $670 million, while non-wealth client funding increased by nearly $1.2 billion, reflecting strong momentum from our venture group. Third-party money fund balances increased by nearly $200 million. We have significant funding to grow our loan book.

Speaker #2: As market volatility impacted fund banking late in the quarter , more than offsetting growth in residential mortgages , securities based lending and CNI loans Non-Bank interest income , particularly within corporate interest and securities lending , was approximately $3 million lower than originally forecast for the second quarter .

Speaker #2: We expect net interest income in the range of 280 to $290 million , client cash balances increased meaningfully during the quarter . Sweet balances increased by more than 670 million , while non Wells client funding increased by nearly 1.2 billion , reflecting strong momentum from our venture group third party money fund balances increased by nearly $200 million .

Speaker #2: We have significant funding to grow our loan book . While loan growth in the first quarter was slower than originally forecast . We've already seen fund banking activity pick up in April , and we are maintaining our full year guide of up to $4 billion in asset growth Turning to slide five .

Jim Marischen: While loan growth in Q1 was slower than originally forecast, we've already seen fund banking activity pick up in April, and we are maintaining our full year guide of up to $4 billion in asset growth. Turning to slide 5. Our institutional group posted its strongest Q1 in our history. Revenue was $495 million, up 29% year over year, driven by record Q1 investment banking. Investment banking revenue totaled $341 million, up 44% year over year, coming in slightly above our recent guidance due to a number of transactions closing late in the quarter with a particularly meaningful contribution from our new partners at Bryan, Garnier & Co. Advisory revenues increased 59% to $218 million with continued strength in financials, industrials, consumers, and healthcare. Equity capital raising was $67 million, our second strongest Q1 result, with increased issuer engagement led by healthcare, industrials, and energy.

Speaker #2: Our institutional group posted its strongest first quarter in our history Revenue was $495 million , up 29% year over year , driven by record first quarter investment banking , investment banking revenue totaled $341 million , up 44% year over year , coming in slightly above our recent guidance due to a number of transactions closing late in the quarter .

Speaker #2: With a particularly particularly meaningful contribution from our new partners at Bryan Garnier advisory revenues increased 59% to $218 million , with continued strength in financials , industrials , consumers and healthcare equity .

Speaker #2: Capital raising was 67 million . Our second strongest first quarter result with increased issuer engagement led by healthcare , industrials and energy Fixed income underwriting of 50 million was up 9% year over year , driven by increased public finance activity and higher corporate issuance We remain the number one negotiated issue manager in public finance by deal count , with nearly 15% market share , and are also seeing increased success in larger par value transactions Investment banking and advisory pipelines remain very strong That said , the pace of realization will depend on the geopolitical and economic factors that Ron mentioned earlier , including energy prices , credit spreads and interest rate uncertainty .

Jim Marischen: Fixed income underwriting of $50 million was up 9% year over year, driven by increased public finance activity and higher corporate issuance. We remain the number one negotiated issue manager in public finance by deal count with nearly 15% market share, and are also seeing increased success in larger par value transactions. Investment banking and advisory pipelines remain very strong. That said, the pace of realization will depend on the geopolitical and economic factors that Ron mentioned earlier, including energy prices, credit spreads, and interest rate uncertainty. We continue to anticipate a strong 2026. Transactional revenue increased 4% year over year, driven by a 12% increase in fixed income revenue, reflecting increased client activity from market volatility. Equity transactional revenue was down 7%, entirely reflecting the European restructuring.

Speaker #2: We continue to anticipate a strong 2026 transactional revenue, increased 4% year over year, driven by a 12% increase in fixed income revenue, reflecting increased client activity from market volatility.

Speaker #2: Equity transactional revenue was down 7% entirely , reflecting the European restructuring . Excluding that impact of a $9 million year over year decline due to those restructuring efforts Our core equity transactional business grew by 10% .

Jim Marischen: Excluding that impact of a $9 million year-over-year decline due to those restructuring efforts, our core equity transactional business grew by 10%. This was also the primary driver of the nearly 1,300 basis point improvement in our institutional pre-tax margins year over year. While we've made significant progress in our non-US operations, Q1 2025 benefited from some larger advisory fees, and results will not be linear over the remainder of the year. Moving on to expenses. Our comp ratio of 57.5% was at the high end of our full year guidance and down from 58% a year ago. We were certainly conservative in our comp accruals early in the year, and will continue to look for leverage as the year progresses. Non-compensation expenses totaled $293 million, up 8% year over year after excluding the illegal accrual from Q1 2025.

Speaker #2: This was always . This was also the primary driver of the nearly 1300 basis point improvement in our institutional pre-tax margins year over year While we've made significant progress in our non-U.S.

Speaker #2: Operations— the first quarter benefited from some larger advisory fees, and results will not be linear over the remainder of the year. Moving on to expenses, our comp ratio of 57.5% was at the high end of our full-year guidance, and down from 58% a year ago.

Speaker #2: We were certainly conservative in our comp accruals early in the year, and will continue to look for leverage as the year progresses. Non-compensation expenses totaled $293 million, up 8% year over year.

Speaker #2: After excluding the illegal accrual from the first quarter of 2025 . Our operating Non-comp ratio was 19% and was at the midpoint of our full year guidance The declines in our comp and non-comp benefited from the strategic actions referenced earlier , and we remain confident in our full year guidance Turning to slide seven .

Jim Marischen: Our operating non-comp ratio was 19%, and it was at the midpoint of our full year guidance. The declines in our comp and non-comp ratios benefited from the strategic actions referenced earlier, and we remain confident in our full year guidance. Turning to slide seven. Our capital position remains strong and provides meaningful strategic flexibility. The Tier 1 leverage ratio increased to 11.4%, and the Tier 1 risk-based capital ratio rose to 18.7%. Based on a 10% Tier 1 leverage target, we entered the quarter with nearly $560 million of excess capital. I'd also highlight that we have thoroughly reviewed the new proposed capital rules. Based on our review, Stifel would obtain some relief across risk-based capital requirements, but these rules would have no material impact on our Tier 1 leverage capital.

Speaker #2: Our capital position remains strong and provides meaningful strategic flexibility The tier one leverage ratio increased to 11.4% , and the tier one risk based capital ratio rose to 18.7% , based on a 10% tier one leverage target .

Speaker #2: We ended the quarter with nearly $560 million of excess capital I'd also highlight that we have thoroughly reviewed the new proposed capital rules based on our review , Stiefel would obtain some relief across risk based capital requirements , but these rules would have no material impact on our tier capital Finally , we repurchased 2.8 million shares during the quarter and have 10.2 million shares remaining under the current authorization Assuming no additional repurchases and a stable stock price , our fully diluted share count for the second quarter is expected to be approximately 163.1 million shares .

Jim Marischen: Finally, we repurchased 2.8 million shares during the quarter and have 10.2 million shares remaining under the current authorization. Assuming no additional repurchases and a stable stock price, our fully diluted share count for the second quarter is expected to be approximately 163.1 million shares. With that, Ron, back to you.

Speaker #2: And with that, Ron, back to you.

Speaker #1: Thanks , Jim . I want to close by saying that I'm genuinely excited about where Stifel is headed . We have a strong business and experienced team and a model that has proven itself in good times and in challenging ones .

Ron Kruszewski: Thanks, Jim. I want to close by saying that I'm generally excited about where Stifel is headed. We have a strong business, an experienced team, and a model that has proven itself in good times and in challenging ones. The environment is uncertain. I said that at the outset, and I mean it. Uncertainty has always been the context in which Stifel has grown. Look, Global Wealth Management is growing, our institutional pipelines are strong, and I look forward to reporting our future progress. With that, operator, please open the lines for questions.

Speaker #1: The environment is uncertain . I said that at the outset , and I mean it . But uncertainty has always been the context in which steeple has grown .

Speaker #1: Look , global wealth management is growing . Our institutional pipelines are strong and I look forward to reporting our future progress . So with that , operator , please open the lines for questions

Speaker #3: Thank you . If you would like to ask a question , please signal by pressing star one on your telephone keypad . If you are using a speakerphone , please make sure the mute function is turned off to allow the signal to reach our equipment .

Operator: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure the mute function is turned off to allow the signal to reach our equipment. In the interest of time, we ask that you please limit yourself to one question and one follow-up question. Again, press star one to ask a question. We'll pause for just a moment to assemble the queue. We will take our first question from Devin Ryan with Citizens JMP.

Speaker #3: In the interest of time , we ask that you please limit yourself to one question and one follow up question Again , press star one to ask a question .

Speaker #3: We'll pause for just a moment to assemble the Q We will take our first question from Devin Ryan with citizens Bank .

Speaker #4: Hi. Good morning, Ron and Jim. How are you?

Devin Ryan: Hi. Good morning, Ron and Jim. How are you?

Speaker #1: Good morning .

Ron Kruszewski: Morning.

Speaker #2: Good morning

Jim Marischen: Good morning.

Speaker #4: Good question on AI . Ron appreciate the context you gave in the script , but but a couple questions . We're getting Obviously , you know , is the technology gets stronger and stronger and potentially agents are automating more and even transacting , you know , do fewer people seek out financial advisors or does that impact pricing ?

Devin Ryan: Good. Question on AI, Ron. Appreciate the context you gave in the script. A couple questions we're getting. Obviously, as the technology gets stronger and stronger and potentially agents are automating more and even transacting, do fewer people seek out financial advisors or does that impact pricing that advisors charge? The more pointed question that we're getting is just around kind of tools that automate kind of customer cash sweep and just does that drive balances even lower and so that's a revenue stream that firms have to think about. Love your thoughts on both of those. Thank you.

Speaker #4: The advisors charge . And then the more pointed question that we're getting is just around kind of tools that automate kind of customer cash sweep and just does that drive balances , even lower .

Speaker #4: And so that's a revenue stream that firms have to think about . Love your thoughts on both of those . Thank you

Speaker #1: Well , look , the , the technology is , is powerful . To your first question . And it just really helps advisor productivity .

Ron Kruszewski: Well, look, the technology is powerful, to your first question. It just really helps advisor productivity. I believe, as I've said in many of things I've talked about, that today at least, the models are mathematically driven, and they're great at summarizing, organizing, helping you solve math. I said it's like chess. There's a finite board, and it's very good at that. When you move to judgment, which is what our advisors do, it just really isn't that good, and I'm not really comfortable thinking that we're going to serve our clients with some consensus-building mathematical AI, to be honest with you. We can debate whether or not human judgment will matter, but investing in markets are not a finite game. It's constantly changing. Every second it changes. The participants change. Their outcomes change, their risk tolerances change. That's an ever-moving target.

Speaker #1: I believe , as I've said in many of the things I've talked about that today , at least the models are mathematically driven and they're great at summarizing , organizing .

Speaker #1: You know , putting , helping you solve math . I said , it's like chess . You know , there's a finite board and , and it's very good at that .

Speaker #1: When you move to judgment , which is what our advisors do is , is , isn't that good ? And I'm , I'm not really thinking that we're going to serve our clients with , you know , some consensus building , you know , mathematical AI to be , to be honest with you .

Speaker #1: And , and , you know , we can debate whether or not human judgment will matter , but investing in markets are not a finite game .

Speaker #1: It's constantly changing every second . It changes the participants change their their outcomes change their risk tolerances change . And so , you know that that's a ever moving target .

Speaker #1: So to answer your question , what what will happen ? I believe at least on the advisor side , is that this will make our advisors more productive .

Ron Kruszewski: To answer your question, what'll happen, I believe, at least on the advisor side, is that this will make our advisors more productive. It will unearth potentially, and it will, more opportunities, more ideas, more things on tax savings idea, more on estate, more things that will help our advisors do what they do, which is generally be the financial advisor to not only individuals, but to families. I see this as a tailwind to advice, not a headwind. It's a more sophisticated version. We've seen it in the past with robo-advisors and a number of things. Does technology make it better? Again, I'm going to say it's a tailwind to the advice business. As it relates to endemic type models and the cash optimization. Look, we've been through that, Devin Ryan. I'm going to say this.

Speaker #1: It will unearth potentially and it will more opportunities , more ideas , more , more things on , on tax savings idea , more on estate , more things that will help our advisors do what they do , which is generally be the financial advisor to not only individuals but to families .

Speaker #1: So I see this as a tailwind to advice , not not a headwind . And , you know , it's a more sophisticated version .

Speaker #1: We've seen it in the past with robo advisors and a number of things . Those technology will be better . But I , again , I'm going to say it's a tailwind to the advice business as it relates to .

Speaker #1: Angelic type models . And , you know , and the cash optimization , look , we've been through that , Devin . I mean , you know , we , we have about Jim can say this , I think when I look at it overall , we have about 60 billion of our AUM that I would say is allocated to short term , you know , cash between sweep deposits , smart rate money market funds , short term treasuries is about $60 billion , which is frankly about , you know , consistent a little 11 , 12% of our AUM toward that portion .

Ron Kruszewski: I think when I look at it overall, we have about $60 billion of our AUM that I would say is allocated to short-term cash between sweep deposits, smart rate, money market funds, and short-term treasuries, about $60 billion, which is frankly about consistent. A little 11%, 12% of our AUM toward that portion. Of that, when you get right down to it, after you take out advisor cash, we have about $7 billion that is, if you would, be unsorted. I love that industry term. Look, it's transactional cash. I look at my own accounts. I have transactional cash because I have cash and I have needs, and I'm paying bills or I'm doing things, or I'm getting a dividend, I'm reinvesting it. Will some technology come that will help optimize that? I think so. At what cost? It's not free. What kind of movement?

Speaker #1: And of that , you know , when you get right down to it , after you take out advisor cash , we have about 7 billion .

Speaker #1: That is , if you would be unsorted . I love that industry term . And it's look , it's transactional cash . It's I look at my own accounts .

Speaker #1: I , you know , I , I have transactional cash because I have cash and I have needs and I'm paying bills or I'm doing things or I'm getting a dividend .

Speaker #1: I'm reinvesting it . So will , will some , you know , technology come that will help optimize that . I think . So , you know , but at what cost ?

Speaker #1: It's not free . And and what kind of movement , what kind of transactional things are going to happen . Listen , I think it'll But do I lose sleep over that ?

Ron Kruszewski: What kind of transactional things are going to happen? Listen, I think it'll happen, but do I lose sleep over that? No. Okay? This is a business model question, and I'm hearing a lot of things. Well, you just replace it with fees and things like that. I think, well, look, if we could do that, we'd do it anyway. We're not going to do it just because of this. Not overly concerned about the second, very optimistic about the first part of your question. Jim?

Speaker #1: No . Okay . This is a business model question . And , you know , I'm hearing a lot of things . Well , you just replace it with fees and things like that .

Speaker #1: And I think , well , look , if we could do that , we'd do it anyway . We're not going to do it just because of this .

Speaker #1: So, not overly concerned about the second—very optimistic about the first part of your question, Jim.

Speaker #2: Maybe add a little bit of detail there to support what Ron was saying is, you know, of the $60 billion as of the end of the first quarter, $12 billion was in sweep.

Jim Marischen: Maybe add a little bit of detail there to support what Ron was saying is, of the $60 billion, as of the end of Q1, $12 billion was in sweep. Roughly a third of that is in advisory cash accounts. That's not subject to the same type of sweeping dynamics we're talking about here. That's how you get to that $7 or $8 billion that's remaining. I'd just say, as Ron reiterated, we've been out in front of this topic, minimizing our exposure to this. We've adjusted our balance sheet both on the asset side and the liability side to give clients the yield-seeking products they want on the liability side and having a flexible balance sheet on the asset side to earn an acceptable return. Do we have some exposure here?

Speaker #2: So, roughly a third of that is in advisory cash accounts. And so, that's not subject to the same type of sorting dynamics.

Speaker #2: We're talking about here . So that's how you get to that 7 or $8 billion . That's remaining . And I would just say , you know , as Ron reiterated , we've been out in front of this topic minimizing our exposure to this .

Speaker #2: We've adjusted our balance sheet both on the asset side and the liability side to give clients the yield-seeking products they want on the liability side, and having a flexible balance sheet on the asset side to earn an acceptable return.

Speaker #2: So do we have some exposure here ? Everyone has some exposure , but you're never going to see , as Ron said , transactional cash go to zero .

Jim Marischen: I think everyone has some exposure, but you're never going to see, as Ron said, transactional cash go to zero. I think on a relative basis, this general topic is less impactful to Stifel than to a lot of other players. If you think back 10 years ago, we funded our bank balance sheet 100% with sweep accounts. Today that's 12% of a much bigger number. We've diversified and have already seen the sorting occur to a material extent.

Speaker #2: So I think on a relative basis , this general topic is less impactful to Stiefel than to a lot of other players . If you think back ten years ago , we funded our bank balance sheet 100% with sweep accounts .

Speaker #2: Today , that's 12 of a much bigger number . So we've diversified and have already seen the sorting occur to a material extent .

Speaker #1: Yeah, and not— and I answer the question. I tell you, not that big of an issue. And I'm giving a lot of oxygen to it.

Ron Kruszewski: Yeah. I answered the question, I tell you it's not that big of an issue, and I'm giving a lot of oxygen to it. I do think about these things, and I think, for Stifel, really, it's not a big issue. I mean, look at the numbers. You can take it to the broader financial system and zero-based interest in many banks and stuff, and you wonder what will happen there. My viewpoint is that the market will adjust. If rates go up, so are loans down. Banks are earning their spread, and return on capital. Enough said. That's a lot of oxygen to something that I'm not thinking that much about.

Speaker #1: But I do think about these things . And I think , you know , for Steve , it really is not a big issue .

Speaker #1: I look at the numbers , but you , you can take it to the broader financial system . And , you know , a zero based interested in any banks and stuff .

Speaker #1: And , and you wonder , you know , what will happen there . And my , my viewpoint is that , you know , the market will adjust if rates go up .

Speaker #1: So alone , banks earn their spread and return on capital . So enough said . I . That's a lot of oxygen to something that I'm not thinking that much about .

Devin Ryan: Yeah. Appreciate it, to both of you. It's a question that we're, I think, all getting quite a bit, so just addressing it, appreciate it. I will ask you a quick follow-up just on investment banking. Obviously very good start to the year. Sounds like backlogs are at a pretty healthy level as well. When you drill into that, can you just talk about the depository side, just the expectations for more activity there, and how that's kind of feeding into, I think, maybe the announced backlog or even pre-announced backlog? With sponsors, are middle market sponsors reengaged right now or do we need to see them ramp up, and that's the hope as we progress to next?

Speaker #4: A . Appreciate it . Both of you . And you know , it's a question that we're . I think all getting quite a bit .

Speaker #4: So just addressing it , appreciate it . I'll ask a quick follow up just on investment banking , obviously , very good start to the year .

Speaker #4: Sounds like backlogs are at a pretty healthy level as well . When you drill into that , can you just talk about the depository side , like just the expectations for more activity there and how that's kind of feeding into , I think maybe the announced backlog or even preannounced backlog and then with sponsors , our middle market sponsors reengaged right now , or do we need to see them ramp up ?

Speaker #4: And that's the progressive

Speaker #1: Look on the depository side . I was talking with Tom Michaud a little bit about about this and what what I would say is that , in fact , across M&A , not just on the depository side , but specifically on the depository side , you know , there's a lot of uncertainty .

Ron Kruszewski: Yeah, look, on the depository side, I was talking with Tom Michaud a little bit about this, and what I would say is that, in fact, it across M&A, not just on the depository side, but specifically on the depository side. There's a lot of uncertainty, and this uncertainty is impacting buyers. You read the press saying about $150 oil, and interest rates may be rising, and what happens to credit spreads, et cetera. I think that there's a pause. There's some market concerns about have the deals been done with enough of a premium. There's a little bit combining all this, and I think making people think about it. The overriding question as depositories is that this administration, and just compared to the last administration, is fostering and encouraging bank M&A, and that's not going to change.

Speaker #1: And this uncertainty is impacting buyers. You know, you talk, you read the press saying about $150 oil and interest rates may be rising.

Speaker #1: And and you happens to credit spreads , etcetera , etcetera . And I , and I think that there's a pause . There's some market concerns about , you know , have the deals been done with enough of a premium ?

Speaker #1: So there's a little bit of combine all this . And I think making people think about it , but the overriding question as depositories is that this administration and just compared to the last administration , is fostering and encouraging bank M&A , and that's not going to change .

Speaker #1: And as we get closer to an election , not the midterms per se , but but the 2020 elections , the the potential and what's going to happen is going to happen right ?

Ron Kruszewski: As we get closer to an election, not the midterms per se, but the 2028 elections, the potential and what's going to happen is going to happen. All right? People are incented to do that. It's not linear, which is what we're seeing now. You need the same thing as it relates to 2026. Deals got to be announced in the next couple of months. Otherwise, they're 2027 deals. That's what I would say. Overall M&A, look, we're seeing a lot of activity, but my sense is that if we didn't have the economic uncertainty that we have out there, we'd be seeing even more.

Speaker #1: As if people are incentive to do that . It's not linear , which is what we're seeing now . And that's and you know , you need the same thing as it relates to 2026 .

Speaker #1: You know, deals have got to be announced in the next couple of months; otherwise, they're 2027 deals. But that's what I would say.

Speaker #1: And overall M&A look , we're seeing a lot of activity . But my sense is , is that if we didn't have the economic uncertainty that we have out there , we'd even more

Speaker #2: Specific to sponsor . We're seeing a lot of activity in growth , in backlog across a number of verticals . The one area I would call out that has been a little bit weaker is technology , and that's not as big of a vertical for us , but that is certainly an area that has been slower .

Jim Marischen: Specific to sponsor, we're seeing a lot of activity and growth in backlog across a number of our verticals. The one area I would call out that has been a little bit weaker is technology, and that's not as big of a vertical for us, but that is certainly an area that has been slower.

Speaker #1: Well , software .

Ron Kruszewski: Software.

Speaker #2: Software specifically . Yeah .

Jim Marischen: Software specifically.

Ron Kruszewski: Yeah.

Speaker #4: Yeah . Got it . Okay , well I'll leave it there . Thank you both . Appreciate it .

Jim Marischen: Yep.

Devin Ryan: Yep. Got it. Okay. Well, I'll leave it there. Thank you both. Appreciate it.

Speaker #1: Yep . Thank you .

Ron Kruszewski: Yep. Thank you.

Speaker #3: We will take our next question from Mike Brown with UBS.

Operator: We will take our next question from Michael Brown with UBS.

Speaker #1: Hey , Mike .

Ron Kruszewski: Hey, Mike.

Speaker #5: Great , great . Good morning . Good morning . So Ron , you're getting more capital to recruitment in 2026 and some good organic growth in the first quarter .

Michael Brown: Great. Good morning.

Jim Marischen: Morning.

Rachel Smith: Ron, you're allocating more capital to recruitment in 2026 and some good organic growth in Q1. Can you just expand on how the recruitment and productivity efforts are faring relative to your expectations? Maybe what specific profile advisor are you more aggressively targeting and having success recruiting? And then how's the competitive space from the wirehouses or some of your other peers, how is that impacting recruitment and maybe cost of recruitment?

Michael Brown: Ron, you're allocating more capital to recruitment in 2026 and some good organic growth in Q1. Can you just expand on how the recruitment and productivity efforts are faring relative to your expectations? Maybe what specific profile advisor are you more aggressively targeting and having success recruiting? And then how's the competitive space from the wirehouses or some of your other peers, how is that impacting recruitment and maybe cost of recruitment?

Speaker #5: Can you just expand on how the recruitment and productivity efforts are faring relative to your expectations ? Maybe what specific profile advisor are you more aggressively targeting and having success recruiting ?

Speaker #5: And then, how's the competitive space from the wirehouses or some of your other peers? How is that impacting recruitment, and maybe the cost of recruitment?

Speaker #1: Well , I'll take your second part first . You know , the competitive environment , you know , number a couple of the large firms , you may know some of them yourself have have really , really ramped some of these .

Ron Kruszewski: Well, I'll take the second part first. The competitive environment, a couple of the large firms, you may know some of them yourself, have really ramped some of the competitive aspects of transitional pay, the so-called deals. That's been interesting. The quarter across the industry was slower for, I think, the same reasons that we're talking about M&A and everything else. It's just some uncertain times. As it relates to us, our strategy hasn't changed. We continue to be disciplined. As I said earlier in my remarks that we grow and we've grown through acquisition for a number of years and recruitment, and our return on tangible equity is 25%. You don't do that by making investments where with an ROIC, return on invested capital of 5%. It just doesn't work. I'm very confident.

Speaker #1: The competitive aspects of transitional pay , the so-called deals and that has that's been interesting . It . But the quarter across the industry was slower .

Speaker #1: I think the same reasons that we're talking about—M&A and everything else. It's just some uncertain times as it relates to us; our strategy hasn't changed.

Speaker #1: We . We continue to be disciplined . As I said earlier in my remarks , that we grow and we've grown through acquisition for a number of years .

Speaker #1: And recruitment and our return on tangible equity is 25% . You know , you don't do that by making investments with an ROI .

Speaker #1: You know , return on invested capital of 5% . It just doesn't work . So I'm very confident our what I mostly pleased about is our ability to compete , attract and recruit large teams , which is relatively relatively being in the last , say , ten years , you know , new to Stiefel and that we have that and we're talking to a number of of large teams and and that to me is encouraging .

Ron Kruszewski: What I'm mostly pleased about is our ability to compete, attract, and recruit large teams, which is relatively new to Stifel, being in the last, say, 10 years. That we have that, and we're talking to a number of large teams. That to me is encouraging. Recruiting appeals. You get this every quarter, same question. My answer seems to be the same every quarter.

Speaker #1: So you know , recruiting it , recruiting feels like you get this , get this every quarter , same question . My answer seems to be the same every quarter

Speaker #5: Great . I appreciate the color there . Ron .

Michael Brown: Great. Appreciate the color there, Ron.

Speaker #1: Yeah , yeah . I mean , it's no big news . No , no big news there in terms of , you know , we're still , you know , we're number one in J.D.

Ron Kruszewski: Yeah. No big news there. We're number one in J.D. Power. We're number one in advisors. We have a great culture. We have things. If anything, what we're trying to do, and we've talked about this, it takes a little bit longer, is we're just trying to get our name out there. I get discouraged sometimes when I'll talk to people, and they say, "Oh, I didn't know that much about Stifel." We're really trying to fix that. We've done that with a lot of our brand advertising and a lot of things we're trying to get out there. That's still an area that we can improve, we will improve, and then that'll improve our results.

Speaker #1: power . Number one in advisory . Have a great culture . We have things . If anything , what we're trying to do .

Speaker #1: And we've talked about this , it takes a little bit longer . We're just trying to get our name out there . I get discouraged sometimes when I'll talk to people and they say , oh , you know , I didn't really know .

Speaker #1: You know , I didn't know that much about CFO . And we're really trying to fix that . We've done that with a lot of our brand advertising and a lot of things .

Speaker #1: We're trying to get out there, but that's still an area that we can improve. We will improve, and then that will improve our results.

Speaker #5: Great . That makes sense . And just as a up , I appreciate the color on the advisory side . I wanted to ask about the IPO window , which has certainly had some stops and starts in 2025 .

Michael Brown: Great. That makes sense. Just as a follow-up, appreciate the color on the advisory side. I wanted to ask about the IPO window, which has certainly had some stops and starts in 2025 and in 2026, and we've had the Middle East volatility this year that seems to have contributed to some delays. What's your read on maybe the ECM calendar, specifically as we think about H2 2026 for Stifel and the industry here?

Speaker #5: And in 2026 . And we've had the Middle East volatility this year that seems to have contributed to some delays . But what's what's your read on ?

Speaker #5: Maybe the ECM calendar specifically as we think about the back half of 2026 for CFO and in the industry here ?

Speaker #1: Look , I think it's good . I was talking to our desk . This might be dated by a week or so , but you know what , what I said was what's happening .

Ron Kruszewski: Look, I think it's good. I was talking to our desk. This might be dated by a week or so, but what I said was what's happening, and often when deals get delayed, they just get pulled, and they'll get pulled maybe for the next set of numbers. We've seen delays that are a week or two. What that told me at the time was that people, or clients, or issuers, and buyers are just concerned about volatility. The volatility has always impacted ECM, and I think that's the case now. When I layer that with the fact that things are just being delayed maybe for the next news that comes out of the Middle East or something or next comment, it's healthy, I think. Now, the environment changes in a nanosecond, as you know.

Speaker #1: And often when deals get delayed , they just get pulled and they'll get pulled , you know , maybe for the next set of numbers .

Speaker #1: And we've seen delays that are a week or two . So people are , you know , what that told me at the time was that , you know , people or clients or issuers and , and buyers , they're just concerned about volatility and , you know , and the volatility has always impacted ECM .

Speaker #1: And I think that's the case now . But when I layer that with the fact that things are just being delayed , you know , maybe for , you know , the next news that comes out of the Middle East or something or next comment .

Speaker #1: But it's healthy . I think . And now environment changes in a nanosecond , as you know . But if as I sit here today , I would say that that that's a healthy market

Ron Kruszewski: As I sit here today, I would say that that's a healthy market.

Speaker #3: We will take our next question from Steven Chubak with Wolfe Research.

Operator: We will take our next question from Steven Chubak with Wolfe Research.

Speaker #1: Oh .

Ron Kruszewski: Oh, Steven.

Speaker #6: Steve , good morning , Ron and Jim . Hello . How are you ?

Steven Chubak: Good morning, Ron and Jim. Hello, how are you?

Speaker #1: Yeah ,

Speaker #6: Good morning . So wanted to double click run into some of the comments that you made around Agentic . AI . I know you gave it quite a bit of airplay and you might argue too much airplay during at least at the start of Q and A , but this is perceived to be a pretty meaningful potential source of pressure .

Ron Kruszewski: Yeah, good.

Steven Chubak: Morning. Wanted to double-click, Ron, into some of the comments that you made around agentic AI. I know you gave it quite a bit of airplay, and you might argue too much airplay during at least at the start of Q&A. This is perceived to be a pretty meaningful potential source or pressure eventually on idle sweep cash, whether it's agentic AI, tokenization, lots of technology that's in the nascent stages of development. Was hoping you could simply speak to the levers you might consider if headwinds to sweep cash do in fact materialize. How does your pricing model differ from some of your competitors, just in terms of account fees, platform fees that could serve eventually as potential offsets down the road?

Speaker #6: Eventually , on idle cash . Whether it's agentic AI tokenization , lots of technology that's in the nascent stages of development and was hoping you could simply speak to the levers you might consider if headwinds .

Speaker #6: To sweep cash do , in fact , materialize . And how does your pricing model differ from some of your competitors just in terms of account fees , platform fees that could serve eventually as potential offsets down the road

Speaker #1: Yeah . Well , I read your report this morning , and so well thought out , I would I would tell you that and the but but I again , when I put it down , I .

Ron Kruszewski: Yeah. Well, I read your report this morning, and so well thought out. I would tell you that. Again, when I put it down-

Steven Chubak: No worries about it.

Ron Kruszewski: ... I didn't go, "Oh my gosh, we got an issue here at Stifel," because we don't. Steven, I do think that there will be changes, okay? There were changes on zero rate commissions. One of the leading consultants at the time said there wouldn't be another commission trade done by 2004. The robo-advisors were going to do this, and were going to do that. It's business model. The business model will adjust. If in fact, agentic can come in and be more efficient at sweeping cash, I don't really see how it's going to be that much more efficient myself with all of the things that you would have to do.

Speaker #1: Yeah , I didn't go home . I didn't go home . My gosh , you know , we got an issue here because we don't .

Speaker #1: But , but as it relates , Steven , I don't I do think that there will be changes . Okay . And there were changes on zero rate commissions and , and one of the leading consultants at the time said there wouldn't be another , you know , commission trade done by 2004 .

Speaker #1: And , you know , and the robo advisors were going to do this , and we're going to do that . And it's business model and the business model will adjust .

Speaker #1: And so if if in fact , genic can come in and be more efficient at sweeping cash , I don't really see how it's going to be that much more efficient .

Speaker #1: My myself with all of the things that you would have to do , you'd have to actually give something access to everything . Not only your recurring expenses , but your non-recurring and , and you're clearing checks and your , all your credit cards , not just your one single account and , and , and that's not going to be done for free .

Ron Kruszewski: You'd have to actually give something access to everything, not only your recurring expenses, but your non-recurring, and your clearing checks and all your credit cards, not just your one single account. That's not going to be done for free. You're going to sit there and tell me that because of transactional cash has a lower yield that someone's going to do and pay for that and give all that information. Maybe, but it's a ways away, in my opinion. If it does happen, there's a lot of things that you can do. Many banks will raise the yield in general. There's a competitive thing just to make sure that the NIM remains.

Speaker #1: And so , you know , you're going to sit there and tell me that , you know , because of transactional cash is , has a lower yield that someone's going to do and pay for that and give all that information .

Speaker #1: Maybe , but it's a ways away , in my opinion . And if it does happen there , there's a lot of things that that you can do .

Speaker #1: You know , many banks will raise the yield , the in general , there's a competitive thing just to make sure that the Nim remains and as it relates to platform fees , which I know you referred to in your report and you just did in your question , you know , platform fees and account fees and inactive account fees , those are all levers .

Ron Kruszewski: As it relates to platform fees, which I know you referred to in your report and you just did in your question, platform fees, account fees, and inactive account fees, those are all levers. We don't have an account fee at Stifel. We don't have an inactive account fee. Those levers are actually unpulled at Stifel today, while many of our competitors do that. A fair question to me would be, "Well, why don't you do it?" My answer is, it's not that easy, okay? I'm reminded of a commercial we did years ago where the person says, "Hey, what are all these fees? I have an idea. Why don't we charge a fee on a fee?" The guy said, "That's a good idea." It's just as difficult to do. I'll be watching.

Speaker #1: You know , we don't have an account at Stiefel . We don't have an inactive account fee . So those levers are actually on pulled at Stifel today .

Speaker #1: While many of our competitors do do that . And so a fair question to me would be , well , why don't you do it ?

Speaker #1: And my answer is it's not that easy . Okay . Isn't it just I'm reminded of a commercial we did years ago . Where , where the person says , hey , what are all these fees ?

Speaker #1: Why don't I have an idea ? Why don't we charge a fee on a fee ? And the guy said , that's a good idea .

Speaker #1: It it's just as difficult to do . And I'll be I'll be watching . And if the market if the cost of advice across the industry begins to .

Ron Kruszewski: If the cost of advice across the industry begins to be consistently with platform fees and done for firms that have bigger issues with cash sorting than we do, and you know that, Steven. We're probably at the low end of your issue of firms that are going to impact it on this. I think that's what your report said. Look, we have a lot of levers. We have dealt with changing economics in this business for as long as I've been in the business. We will continue to do so.

Speaker #1: You know , be consistently with platform fees and done for firms that are trying that have bigger issues with cash sorting than we do .

Speaker #1: And , you know , that we're probably at the low end of your issue of , of firms that that are going to impact it on this .

Speaker #1: I think that's what your report said . So look , I we have a lot of levers . We have dealt with changing economics in this business .

Speaker #1: For as long as I've been in the business . And , and we will continue to do so .

Speaker #2: The other thing you have to think about here is the impact on the client . And , higher interest income is not just a complete wash based upon the fee .

Jim Marischen: The other thing you have to think about here is the impact on the client. Higher interest income is not just a complete wash based upon the fee when you think about the tax effect of those things, because the higher interest income is taxable while the fee that they're paying is not tax-deductible. You have to consider that overall impact on the client as well when you're doing your overall thesis here.

Speaker #2: When you think about the tax effect of those things , because the higher interest income is taxable , while the fee that they're paying is not tax deductible .

Speaker #2: So you have to consider that overall impact on the client as well, when you're doing your overall thesis here.

Speaker #1: Yeah , I'd be interested to see when you get your feedback as to the number of firms that will say , oh yeah , it would be easy to institute these fees because I would I would take the other side of that .

Ron Kruszewski: Yeah. I'd be interested to see when you get your feedback as to the number of firms that will say, "Oh, yeah, it would be easy to institute these fees." Because I would take the other side of that.

Speaker #6: I will certainly keep you in the loop . And appreciate that perspective for my follow up , just on the restructuring within Europe , I was hoping that you could benefit quantify the benefit to the margins that we're expecting in the coming year , just from shuttering some of the businesses , and was also hoping to get your longer term perspective on how this informs at least your ambitions or appetite to expand outside the US .

Steven Chubak: I will certainly keep you in the loop and appreciate that perspective. For my follow-up, just on the restructuring within Europe, I was hoping that you could quantify the benefit to the margins that we're expecting in the coming year just from shuttering some of the businesses, and was also hoping to get your longer-term perspective on how this informs at least your ambitions or appetite to expand outside the US, and tying that with just your M&A appetite in general, at least in the current environment, amid what remains a heightened level of uncertainty.

Speaker #6: And tying that with just your M&A appetite in general , at least in the current environment . Amid what remains a heightened level of uncertainty .

Speaker #1: That's that's a fair question . I'm going to let Jim , I don't think we can really talk , nor do we disclose margin improvement in that segment .

Ron Kruszewski: That's a fair question. I'm going to let Jim. I don't think we can really talk, nor do we disclose margin improvement in that segment. I'll lateral that to Jim and let him decide whether he can answer in a moment. You can think about that, Jim. As it relates to our strategy and what we have seen margin improvement, what we did, and something that we sort of unwound, was the fact that we invested in sales trading and capital markets within Europe and thinking we'll either be on the London Stock Exchange or the Nordics, and we would do IPOs, and we'd do sales trading and research over there.

Speaker #1: But I'll lateral that to Jim and let him decide whether he can answer in a moment . So you can think about that , Jim .

Speaker #1: But as it relates to our strategy and what we have seen , margin improvement , what what we did and something that we sort of unwound was the fact that we , we invested in sales trading and capital markets within Europe .

Speaker #1: And , you know , thinking we'll either be on , you know , the London Exchange or the Nordics . And we would do IPOs and we'd do sales trading and research over there .

Speaker #1: And what we found was that that market , because of MiFID and what they've done raised to themselves is that that business I even at scale I'm not sure you make any really money but you certainly were not making .

Ron Kruszewski: What we found was that that market, because of MiFID and what they've done, race to the bottom themselves, was that business, even at scale. I'm not sure you make any real money, but you certainly were not making, we weren't making any money at the size that we were. Just as importantly was that when I would visit clients in Europe, and I would ask them what their objectives were, it was interesting. Most of them, and this is a credit to the United States, their dream was to list on NASDAQ or the New York Stock Exchange. I'd say, "Hmm." We've seen this. We just did a large transaction, European-based. We listed it on the U.S. Jim referred to it. What we decided to do strategically, and it frames or you can frame my thoughts about this, is to lead our U.S.

Speaker #1: We weren't making any money at the size that we were . But just as importantly was that when I would visit clients in Europe and I would ask them what they're objectives were , it was interesting .

Speaker #1: Most of them , and this is a credit to the United States . Their dream was to list on Nasdaq or the New York Stock Exchange .

Speaker #1: And I'd say , and we started and we've seen this . We just did . We just did a large transaction , European based .

Speaker #1: We listed it on the US . Jim referred to it . And so what decided to do strategically and it frames . Or you can frame my thoughts about this is to lead our US capabilities into Europe through advice .

Ron Kruszewski: capabilities into Europe through our advisory platform. When we have an equity capital markets transaction, for the most part, they're coming back to the US, especially in healthcare and in areas where we have some expertise. I feel that this was, maybe you can criticize the way we started, but where we're ending up is where we want to be. We're a global firm. We have global capabilities. I just don't think we needed to do market-making sales, trading in local markets to achieve our ultimate goal. Frankly, many of the clients' ultimate goal, which is to access the US capital markets. Jim, I don't know if you

Speaker #1: Our advisory platform and and then we . And then when we have an equity capital markets transaction , for the most part , they're coming back to the US , especially in healthcare and in areas where we have some expertise .

Speaker #1: So I feel that this was maybe you can criticize the way we started , but where we're ending up is , is where we want to be .

Speaker #1: We're a global firm. We have global capabilities. I just don't think we needed to do market making, sales, trading in local markets to achieve our ultimate goal.

Speaker #1: And frankly , many of the clients ultimate goal , which is to access the US capital markets . Jim , I

Speaker #2: So in terms of some numbers to support the , you know , the question you're asking here is , you know , as we've talked about this in prior quarters , we frame this up with a combination of not just the European restructuring , but also the sale of SA .

Jim Marischen: In terms of some numbers to support the question you're asking here is, as we've talked about this in prior quarters, we framed this up with a combination of not just the European restructuring, but also the sale of SIA. We've told you in the past, that's about $100 million of revenue, probably roughly half and half between the two groups, the SIA as well as the European equities business. You think about it, that was probably somewhere between a 70% and 80% comp margin that we're going to save off of. Then we talked about $20 to $25 million of non-comp expenses, gets you roughly to around a break-even number of pulling those revenues out.

Speaker #2: And we've told you in the past that's about $100 million of revenue , probably roughly half and half between the two . You know , the two groups , the SA as well as European equities You think about it , that was probably somewhere between 70 and 80% comp margin that we're going to save off of .

Speaker #2: And then we talked about $20 to $25 million of non-comp expenses, get you roughly to around a break-even number of pulling those revenues out.

Speaker #2: And that's a good way to think about it as we look at the , you know , the non-comp expenses of what actually occurred , we were able to pull out about $6 million here in the first quarter , which is relatively consistent to what our guide was and what we talked about as we kind of frame this up last quarter .

Jim Marischen: That's a good way to think about it. As we look at the non-comp expenses of what actually occurred, we were able to pull out about $6 million here in Q1, which is relatively consistent to what our guide was and what we talked about as we kind of framed this up last quarter. All of those things are fairly consistent. As we look forward, there's still more costs to be taken out of some of our European operations post the restructuring. Think of some of the longer-term contracts, like leases. Think of subscription agreements and things like that. More to come, but as we sit here today, we'll just caveat that this is a pretty good quarter for the international or the non-US business, given some of the larger fees Ron talked about.

Speaker #2: And so all of those things are fairly consistent as we look forward . There's still more cost to be taken out of some of our European operations post the restructuring .

Speaker #2: Think of some longer term contracts like leases . Think of , you know , subscription agreements and things like that . So more to come .

Speaker #2: But as we sit here today , we'll just caveat that this , you know , this is a pretty good quarter for the international or the non US business given some of the larger fees that Ron talked about .

Speaker #2: And it won't necessarily be linear , but it gives you a sense of kind of the overall financial benefit we'll receive over this entire year .

Jim Marischen: It won't necessarily be linear, but it gives you a sense of kind of the overall financial benefit we'll receive over this entire year.

Speaker #1: And look , you see it in our margins , our margins in institutional when , when , when I was getting questioned about that , when it was sub 10% .

Ron Kruszewski: Look, you see it in our margins. Our margins in Institutional, when I was getting questioned about that, when it was sub-10%, and now it's nearly 20%. That's a combination of both productivity and revenue, plus the restructuring that we did. It's a good thing.

Speaker #1: And now it's nearly 20%. That's a combination of both productivity and revenue, plus the restructuring that we did. So, I mean, it's a good thing.

Speaker #6: It's a great color . And thank you both for the fulsome responses . Really appreciate the perspective .

Steven Chubak: It's a great color and thank you both for the fulsome responses. Really appreciate the perspective.

Speaker #1: Sure .

Ron Kruszewski: Sure.

Speaker #7: Take care

Jim Marischen: Take care.

Speaker #3: We will take our next question from Brennan Hawken with BMO Capital Markets.

Operator: We will take our next question from Brennan Hawken with BMO Capital Markets.

Speaker #8: Hi . Good morning . Thanks for taking . Good morning . Hey , Ron , how are you

Brennan Hawken: Good morning. Thanks.

Ron Kruszewski: Morning.

Brennan Hawken: Hey, Ron. How are you?

Speaker #1: Yeah , good .

Ron Kruszewski: Yeah, good.

Speaker #8: Good , good . Excellent . So I wanted to touch on on NII . You touched a little bit on the headwinds in the quarter .

Brennan Hawken: Good. Excellent. I wanted to touch on NII. You touched a little bit on the headwinds in the quarter. You mentioned CORP and securities-based loan headwinds. Maybe could you provide a little bit more texture around what caused that versus your prior expectations? In the context of the $280 to 290 expected for next quarter, good to see your expectations for that to uplift. Maybe could you provide a little bit more texture around what's going to drive that? Thanks.

Speaker #8: You mentioned Corp and loan headwinds. But maybe could you provide a little bit more texture around what caused that versus your prior expectations?

Speaker #8: And then in the context of the 282 to 290 expected for next quarter ? Good to see your expectations for that to uplift , but maybe could you provide a little bit more texture around what's going to drive that ?

Speaker #8: Thanks .

Speaker #1: I love giving NII and margin questions to Jim . And that's I'm not I'm going to do that right now . So . Jim .

Ron Kruszewski: I love giving NII and margin questions to Jim, and I'm going to do that right now. Jim.

Speaker #2: Right . So in terms of this quarter , you know , obviously the non-bank NII is the main piece there . If you look at kind of the consolidated and I .

Jim Marischen: Right. In terms of this quarter, obviously, the non-bank NII is the main piece there. If you look at kind of the consolidated NII numbers and back out what you see in Global Wealth Management, you can compare Q1 year over year, and you can see the non-bank's down about $3 million. It's consistent. That delta is consistent with what we described there. Most of that, some of it's corporate interest. It wasn't securities-based lending. It was kind of securities lending, stock lending, if you will. That's opportunistic based upon individual hard-to-borrows in your box. That number can move around from period to period. It was just somewhat slower in this individual quarter. We do view that kind of getting back to its normalized run rate.

Speaker #2: If I look at the numbers and back off what you see in global wealth management, you can compare Q1 year over year, and you can see the non-banks down about $3 million.

Speaker #2: So it's consistent that delta is consistent with what we described there . Most of that , some of its corporate interests . It wasn't securities based lending .

Speaker #2: It was it was kind of stock , you know , securities lending , stock lending , if you will . That's opportunistic based upon individual , hard to borrowers in your in your box .

Speaker #2: That number can move around from period to period . It was just somewhat slower in this quarter . We do view that kind of getting back to its normalized run rate , but the bigger piece of the 280 to $290 million NII guide is going to go back to , you know , asset growth within the bank .

Jim Marischen: The bigger piece of the $280 to $290 million NII guide is going to go back to asset growth within the bank. We said on the call that we still feel comfortable with up to $4 billion of asset growth. We're seeing things like fund banking pick back up in April. There was a number of pay downs kind of late in the quarter specific to fund banking that kind of caused the period over period, end of period balances to decline. As we look forward, we feel comfortable. Our original NII guide is $1.1 to $1.2 billion. We're already annualizing the low end of that, and we think that there's a fair amount of growth that can occur in Q2 through Q4 that can help support getting higher in that range. We feel pretty good about where we're at.

Speaker #2: And , you know , we said on the call that we still feel comfortable with up to $4 billion of asset growth . We're seeing things like fund banking pick back up in April , there was a number of paydowns kind of late in the quarter specific to fund banking , that kind of caused the period over period , end of period balances to decline .

Speaker #2: So as we look forward , we , you know , we feel comfortable . Our original NII guide is , you know , 1.1 to 1.2 billion .

Speaker #2: We're already annualizing the low end of that . And we think that there's a fair amount of growth that can occur in the second through fourth quarter that can help support getting , you know , higher in that range .

Speaker #2: So we feel pretty good about where we're at .

Speaker #1: Yeah . And it's not it's not necessarily Nim expansion . It's just it's just growing . It's just growth . And , and we , we , we've now we've never growth is always there in banking .

Ron Kruszewski: Yeah, it's not necessarily NIM expansion. It's just growing-

Jim Marischen: Growth

Ron Kruszewski: Growth

Ron Kruszewski: ... it's just growth. Growth's always there in banking. That's not the issue. The issue is prudent growth, and that's what we're doing. We see a lot of opportunities. I am still optimistic about what we're building in venture and for the innovation economy, and that's got nice growth written all over it.

Speaker #1: That's not the issue . The issue is , you know , prudent growth . And , and that's what we're doing . But we see a lot of opportunities .

Speaker #1: I've always I am still , you know , optimistic about what we're building in , in venture . And for the innovation economy .

Speaker #1: And that's got nice, nice growth written all over it.

Speaker #8: Great . Thanks for that color . And then you touched on this a little bit , Ron , in your prepared remarks about concerns around the software loans and whatnot .

Brennan Hawken: Great. Thanks for that color. You touched on this a little bit, Ron, in your prepared remarks about concerns around the software loans and whatnot. Curious to hear what you're seeing in the CLO portfolio. Seeing spreads widen out in the levered loan market. Equity and lower-rated layers of CLOs have been under some pressure recently. Totally appreciate that you're in the higher layers, which have been fine. What underlying trends are you seeing?

Speaker #8: But curious to hear your what you're seeing in the CLO portfolio . So it seem spreads widened out in the loan market , equity and lower rated layers of Clos have been under some pressure recently .

Speaker #8: So, totally appreciate that you're in the higher layers, which have been fine. But, you know, what underlying trends are you seeing?

Speaker #1: Yeah . Jim .

Jim Marischen: Yeah. Jim? Yeah. So our CLO book at the end of the quarter sat right around $6.8 billion. I'd say a little over 60% or 62% of those holdings are AAA rated, with the rest AA rated. What we're seeing in terms of credit enhancement has remained consistent with what we've said in prior periods. On a blended basis, that's around 32%. You can see AAA class is 36% and north of there in terms of credit enhancement. AA class is around 24%. The underlying collateral here is very well diversified. There's no particular concentrations over, call it, 11%, 12%, 13% of the underlying portfolio. Our portfolio is spread out over nearly 100 CLO managers. I think the key here is that what we see in our stress testing has not changed. We're not seeing any new issues.

Speaker #2: Yeah . So our CLO book at the end of the quarter sat right around $6.8 billion , I'd say a little over 60% or 62% of those holdings are Triple-A rated , with the rest double A rated .

Speaker #2: What we're seeing in terms of credit enhancement has remained consistent with what we've said in prior periods on a blended basis . That's around 32% .

Speaker #2: You can see triple classes , 36% in north of there in terms of credit enhancement . Double A classes around 24% . You know , the underlying collateral here is very well diversified .

Speaker #2: There's no particular concentrations over call it 11 , 12 , 13% of the underlying portfolio . Our portfolio is spread out over nearly 100 CLO managers .

Speaker #2: And I think the key here is that what we see in our stress testing has not changed . We're not seeing any new issues .

Speaker #2: We're seeing consistent levels of the ability to withstand stress that are multiples of the Great Financial Crisis and not break the underlying structure.

Jim Marischen: We're seeing consistent levels of the ability to withstand stress that are multiples of the great financial crisis and not break the underlying structure. We feel very comfortable with the overall credit exposure in terms of CLOs.

Speaker #2: So we feel very comfortable with the overall credit exposure in terms of close .

Speaker #1: Yeah . And I look , I've always said that what you're what people are talking about is the lower rated tranches , you know , that's really what they're talking about as , as you would expect .

Ron Kruszewski: Yeah. Look, I've always said that, Brennan, what people are talking about is the lower-rated tranches. That's really what they're talking about, as you would expect. As it relates to diversification, I don't think there's any class that's more than 10%. I think they can't go more than 15%.

Speaker #1: But as it relates to diversification , I don't think there's any class that's more than 10% . I think they can't go more than 15 .

Jim Marischen: Right.

Speaker #1: And every time I look at it, which I think I did in the first quarter, I just—I just put it down.

Ron Kruszewski: Every time I look at it, which I think I did in Q1, I just put it down. It's not an issue for us when we look at it individual loan by individual loan across CLOs and look at it consolidated and individually. Our team does a really good job. At the AAA, where we are at the top and what happens when it gets stressed, actually the subordination gets higher as stress occurs because you divert cash flows. What I sometimes ask myself is that, is the yield give up worth the subordination sometimes? We got a lot of subordination. Remember, we don't get the full yield. We get the AAA yield.

Speaker #1: It's not an issue for us . When we when we look at we look at it , you know , individual loan by individual loan across Clos and look at it consolidated and individually , I think our team does a really good job .

Speaker #1: But at the triple A where we are at the top and what happens when when it gets stressed , actually , the subordination gets higher as the as stress occurs because you divert cash flows .

Speaker #1: So you know what ? I sometimes ask myself is that is the yield give up worth the subordination ? Sometimes we got a lot of subordination .

Speaker #1: Remember , we don't get the full yield . We get the we get the triple A yield . And and thus far over ten years risk based risk weighting , risk based capital .

Ron Kruszewski: Thus far, over 10 years, risk-weighting, risk-based capital, the way that it's allowed us to source cash because it's a variable rate asset, it's been a great asset class for us, and I don't really see any stress in what we own.

Speaker #1: The way that it's allowed us to sort cash, because the variable rate asset, it's been a great asset class for us. And I don't really see any stress in what we own.

Speaker #8: Great . Thanks for taking my questions

Brennan Hawken: Great. Thanks for taking my questions.

Speaker #1: Yep

Ron Kruszewski: Yep.

Speaker #3: We will take the next question from Alex Blaustein with Goldman Sachs

Operator: We will take the next question from Alex Blostein with Goldman Sachs.

Speaker #9: Hey , guys . Good morning . Hello . Question . Good to hear you as well . I got almost as enthusiastic a response as you gave to Steve .

Alex Blostein: Hey, guys. Good morning.

Ron Kruszewski: Hello.

Alex Blostein: Hello.

Ron Kruszewski: I hear your voice.

Alex Blostein: It's good to hear you as well. I got almost as enthusiastic a response as you gave to Steve, so I appreciate that. I wanted to ask you guys a question around the bank growth and loan growth, kind of how that comes together. Obviously, that's a priority for the firm for some time. I'm curious how you're thinking about funding that, because if we look at the sweep deposit balances, they've been basically in a range of, I don't know, $10 billion, $11 billion for quite some time, a couple of years. Even holding the whole AI sweep cash issue aside, as you think about the forward loan growth and without a whole lot of balance sheet sweep options, how do you sort of think about the funding mix here over time? Is that more institutional? Is it more sort of high yield savings?

Speaker #9: So I appreciate .

Speaker #10: That .

Speaker #9: So I wanted to ask you guys a question around the bank growth and loan growth , kind of how that comes together . Obviously , that's a priority for the firm for some time .

Speaker #9: I'm curious how you're thinking about funding that , because if we look at the deposit balances , they've been basically in a range of , I don't know , ten , $11 billion for for quite some time , a couple of years , even holding the whole AI sweep cash issue aside , as you think about the forward loan growth and without a whole lot of balance sheet sweet sweep options , how do you sort of think about the funding mix here over time ?

Speaker #9: Is that more institutional ? Is it more sort of high yield savings ? I'm just trying to think about the funding of the bank on the forward .

Alex Blostein: I'm just trying to think about the funding of the bank going forward.

Speaker #1: Well , first of all , it's both , but I would have . Geez , Alex , I thought you might have complimented us on our deposit growth .

Ron Kruszewski: Well, look, first of all, it's both. Geez, Alex, I thought you might have complimented us on our deposit growth, okay, relative to our muted loan growth, okay, in terms of, I think our deposit growth was $2 billion. What we're seeing is much of our loan growth and the potential we see is not only self-funded, if you will, by deposit generation, but self-funded in a multiple of the loans outstanding. Some of those deposits are not sweep. If you're focusing on sweep, then we got to go all the way back around the barn and come back and say, transactional cash and clients isn't going to get that much higher for all the reasons that we've been talking about. In terms of our Smart Rate, our venture deposits, and our sort of non-wealth deposits-

Speaker #1: Okay . Relative to our muted loan growth . Okay . In terms of I think our deposit growth was 2 billion , $2 billion .

Speaker #1: And what what we're what we're seeing is many , much of our loan growth in the potential we see is not only self-funded , if you will , by bye deposit generation , but , you know , self-funded and multiple of the loans outstanding .

Speaker #1: So , you know , some of those deposits are not sweeps . So if you're focusing on sweep , then we got to go all the way back around the barn and come back and say , you know , transactional cash and clients isn't going to get that much higher for all the reasons that we've been talking about .

Speaker #1: But in terms of our smart rate and our venture deposits and our sort of non wealth deposits , that that growth has been very strong .

Alex Blostein: Right

Ron Kruszewski: That growth has been very strong. To then answer your question, that's how we're funding that growth.

Speaker #1: And that's the answer to your question. That's how we're funding that.

Speaker #2: Growth , right . If you look at the supplement and you look at page ten , the bottom of page ten has the disclosure of third party deposits available to CFO Bancorp .

Jim Marischen: Right. If you look at the supplement and you look at page 10, the bottom of page 10 has a disclosure of third-party deposits available to Stifel Bank. There's $6.2 billion of excess deposits that are off balance sheet today that we can use to fund that growth. Obviously, a good portion of that is going to be in that third-party commercial treasury deposit line. So that's $5.7 billion of it. The vast majority of that's going to be obviously venture and fund banking. As you think about that grew $1.2 billion in Q1. If you look at that as kind of a mark to market of where we're at through, I don't know, as of yesterday, that's up another $700 million.

Speaker #2: There's $6.2 billion of excess deposits that are off balance sheet today that we can use to fund that growth . Obviously , a good portion of that is going to be in that third party commercial treasury deposit line .

Speaker #2: So that's 5.7 billion of it . The vast majority of that is going to be obviously venture and fund banking . And as you think about that , that that grew $1.2 billion in the first quarter .

Speaker #2: And you know , if you look at that as kind of a mark to market of where we're at through , I don't know , as of yesterday , that's up another $700 million .

Speaker #2: So that's a significant source of funding capacity growth that continues to occur . That's been fairly consistent and gives us a lot of flexibility if we're talking about up to $4 billion of asset growth .

Jim Marischen: That's a significant source of funding capacity growth that continues to occur, that's been fairly consistent and gives us a lot of flexibility if we're talking about up to $4 billion of asset growth.

Ron Kruszewski: Yeah. I'll end by saying, and as I've said before, in this segment of what we're doing, we're really in the early innings of some of the things that we can do as we've been adding, frankly, technology capabilities to our treasury platform, international settlements. There is a lot of work that we're doing to have a very competitive platform. I see the potential. It's a great question. Again, we've said that it's almost self-funding what we're doing.

Speaker #1: And I'll end by saying , as I've said to before , in this segment of what we're doing , we're really in the early innings of some of the things that that we can do as we've been adding , frankly , technology capabilities to our Treasury platform , International Settlements .

Speaker #1: So there's a lot of work that we're doing to have a very competitive platform . And I see the potential . It's great question , but again , we've said that almost self-funding what we're doing .

Speaker #9: That's really helpful . Thanks . Question on the buyback , really nice to see you pick up . I know you guys tend to do a little more in the first quarter than than typically over the course of the year .

Alex Blostein: That's really helpful. Thanks.

Ron Kruszewski: Yeah.

Alex Blostein: Question on the buyback. Really nice to see it pick up. I know you guys tend to do a little more in Q1 than typically over the course of the year or so. As you think about your share repurchase plans from here on through the rest of the year, any thoughts you'd share will be helpful. Thank you.

Speaker #9: So as you think about your share repurchase plans from from here on through the rest of the year , any thoughts you'd share would be helpful .

Speaker #9: Thank you .

Speaker #1: Capital allocation , capital utilization , return on invested capital , all of those are the inputs to the model that , you know , will , we're always buying back shares .

Ron Kruszewski: Capital allocation, capital utilization, return on invested capital, all of those are the inputs to the model that we're always buying back shares.

Speaker #1: The pace of that math changes daily as well as to what is . That's why we don't just sit there and say , oh , you know , we'll buy X number per day .

Alex Blostein: Right.

Ron Kruszewski: The pace of that math changes daily as well as to what is. That's why we don't just sit there and say, "Oh, we'll buy X number per day." We look at it. We balance that against M&A, other opportunities. We've been more consistent because we've felt that relative to our growth, our stock's been undervalued.

Speaker #1: We , we look at it , we balance that against M&A . Other opportunities . But we've been more consistent because we felt that relative to our growth stocks been undervalued .

Speaker #1: So you see us buying back our stock.

Alex Blostein: Right.

Ron Kruszewski: You see us buying back our stock.

Speaker #2: Right . So Ron touched on this . The strategy and how we think about it in terms of capacity . You know , we had $560 million of excess capital at the end of the quarter .

Jim Marischen: Right. Ron touched on the strategy and how we think about it in terms of capacity. We had $560 million of excess capital at the end of the quarter. If you think about what we talked with the balance sheet growth expectation of up to $4 billion, say we do the full $4 billion. That's only about 70% of the current excess before retained earnings. We certainly have fairly material amount of capacity, if the strategic rationale that Ron talked about, if that math works, we can buy back a lot of stock if we're so inclined.

Speaker #2: If you think about what we talked with , the balance sheet growth expectation of up to 4 billion , say we do the full 4 billion .

Speaker #2: That's only about 70% of the current excess before retained earnings. So we certainly have a fairly material amount of capacity. If the strategic rationale that Ron talked about, if that math works, we can buy back a lot of stock.

Speaker #2: If we're so inclined

Alex Blostein: Very well. Thank you, guys.

Speaker #9: Thank you guys

Speaker #1: Hey , thanks , Howard

Ron Kruszewski: Hey, thanks, Alex.

Speaker #3: We'll take our next question from Bill Katz with TD Cohen .

Operator: We'll take our next question from William Katz with TD Cowen.

Speaker #11: Great . Thank you very much . Most of my big picture questions have been asked already . So maybe just thinking tactically , update us on sort of what's been happening in April , just in terms of maybe client engagement , whether it be on the on the advisory side or on the institutional side , excuse me .

Bill Katz: Great. Thank you very much. Most of my big picture questions have been asked already. Maybe just thinking tactically, update us on sort of what's been happening in April, just in terms of maybe client engagement, whether it be on the advisory side or on the institutional side. Excuse me. Excuse me, what the sort of cash levels look like, just net of maybe billings and/or seasonal tax payments. Thank you.

Speaker #11: And how excuse me , what the so the cash levels look like just net of maybe billings and or seasonal tax payments . Thank you .

Speaker #1: Yeah . Look , I said client engagement remains strong . I certainly hasn't . I just just said that Bill and that that wasn't through the quarter .

Ron Kruszewski: Yeah, look, I said client engagement remains strong. I just said that, Bill Katz, and that wasn't through the quarter, I guess. My comments were through this call. It is. I have to caution, though, because from where I sit, the level of uncertainty, which we're not seeing right now, but the things that can change pretty quick, whether it would be on the technology, this Mythos Anthropic thing is concerning. There's a number of things that can change investor sentiment and perspective very quickly. This is one of those environments where it just feels like there's a lot of uncertainty. Today, things are good. Engagement is strong. Jim Marischen, I don't know if you want to comment on cash.

Speaker #1: I guess my comments were through through this call . And it is I , I have to caution though , because in from where I sit , the , the level of uncertainty , which we're not seeing right now , but the things that can change pretty quick Whether it would be , you know , on the technology , this , this mythos anthropic thing is concerning .

Speaker #1: There's , there's a number of things that can , can change investor sentiment in perspective very quickly . And this is one of those environments where there just feels like there's a lot of uncertainty , but today , things , things are good , engagement is strong .

Speaker #1: Jim, I don't know if you can comment on cash, right?

Jim Marischen: Right. If you kind of go bucket by bucket, sweep is down since quarter end. Smart Rate is down since quarter end, while Treasury deposits are up. To provide some detail, you're down probably $1.4 billion in sweep. Call it about 10.6. You're down about $400 million in Smart Rate. Again, you're seeing a $700 million increase offsetting some of that in the other Treasury deposits.

Speaker #2: So, if you kind of go bucket by bucket, sweep is down since quarter end, smart rate is down since quarter end, while treasury deposits are up.

Speaker #2: And to provide some detail , you're down probably 1,000,000,004 in sweep . So call it about 10.6 . You're down about 400 million in smart rate .

Speaker #2: And you're seeing a $700 million increase offsetting some of that in the other treasury deposits .

Speaker #1: Yeah . But you know what ? I will just say that . Yeah , this is so seasonal , right around . I wonder if we've ever had an increase in April .

Ron Kruszewski: Yeah, you know what? I will just say that.

Jim Marischen: Seasonally adjusted.

Ron Kruszewski: Yeah, this is so seasonal.

Jim Marischen: It's right around there.

Ron Kruszewski: I wonder if we've ever had an increase in April. Okay, ever in cash. It is an outflow for and it's a lot of taxes. That's just what happens. That's across the street, Bill. I don't want those comments to be taken as some trend. It's April.

Speaker #1: Okay . Ever in it is an outflow for and it's a lot of taxes . That's just what happens . And that's across the street .

Speaker #1: So , you know , that's I don't want those comments to be taken as some , you know , trend . It's , it's , it's April .

Speaker #11: Of course . And then there's a follow up . I'm just sort of . You mentioned on the banking side . Very good pipeline , but also seems like a lot of this conversation is about just so the , the ebbs and flows around uncertainty .

Bill Katz: Of course. As a follow-up, I'm just sort of curious. You mentioned on the banking side a very good pipeline, but it also seems like a lot of this conversation is about just sort of the ebbs and flows around uncertainty, and certainly appreciate one day to the next with the headlines coming out of Middle East is confounding for everything. Should we be assuming that a little bit of a deceleration here in terms of activity from a revenue perspective, given your comments that if some things don't get sort of booked in the next couple of months, it's more about 2027, just as we think about the pacing for this year versus next for the advisory side of investment banking? Thank you.

Speaker #11: And certainly appreciate one day to the next with the headlines coming out of Middle East is confounding for everything . Should we be assuming that there's a little bit of a deceleration here in terms of activity from a revenue perspective , given your comments , that if some things don't get sort of booked in the next couple of months , it's more about 2027 .

Speaker #11: Just as we think about the pacing for this year versus next for the advisory side of investment banking . Thank you .

Speaker #1: Look , I think our banking is is , is overall strong . We're seeing real pockets and our and our at least what our guys tell me is , you know , it's strong .

Ron Kruszewski: Look, I think our banking is overall strong. We're seeing real pockets in our, at least what our guys tell me is it's strong. I think we cautioned a little bit on deposits. We're big in deposits, and so that feels like it's a lull a little bit. That can change quickly, too. Software in the technology side, which we haven't been as big at, but we can see when we look at numbers, that appears to be more muted relative to what else is going on. Overall, as I've said, if the risks land within the range of market expectations, we see the business improving. If some of these things get resolved, it could really improve. It's not just all downside from here.

Speaker #1: I think we , we caution a little bit on depository . We're big in depositories . And so that that has feels like it's a , you know , a lull a little bit , but that can change quickly too .

Speaker #1: And , you know , software in the technology side , which we haven't been as big at , but we can see when we look at numbers that that appears to be , you know , more muted relative to what else is going on .

Speaker #1: But overall , as I've said , if , if the risks land within the range of market expectations , we see the business improving .

Speaker #1: It's if some of these things get resolved , it could really improve . It's it's not just all downside from here . The business , especially in ECM , can can really pick up here .

Ron Kruszewski: The business, especially in ECM, can really pick up here if we take some of the volatility out of this and uncertainty out of this market. There's always volatility. There's always uncertainty. It's just heightened. We all know this. I'm not telling you, anyone on this call, anything new from my desk.

Speaker #1: If we take some of the volatility out of this and uncertainty out of this market , there's always there's always uncertainty . It's just heightened .

Speaker #1: And we all know this . I'm not telling you any anyone on this call . Anything that news from from my desk

Speaker #11: Thank you .

Bill Katz: Thank you.

Speaker #1: Yep .

Ron Kruszewski: Yep.

Speaker #3: There are no further questions at this time. I will turn the conference back to Mr. Kruszewski for any additional or closing remarks.

Operator: There are no further questions at this time. I will turn the conference back to Mr. Kruszewski for any additional or closing remarks.

Speaker #1: Well , I would want to compliment all the questions . Actually , it was very , very robust questions and and we we like we like being able to engage and give you our best answers .

Ron Kruszewski: Well, I want to compliment all the questions. Actually, it was very robust questions, and we like being able to engage and give you our best answers, and I appreciate that, and I appreciate everyone's time, and I look forward to talking to you in July. I would just say, who knows what's going to happen between now and July, but many of you will be talking before then. To our investors that are on the call, thank you for calling in, and have a great day. Thank you.

Speaker #1: And I appreciate that . And I appreciate everyone's time . And I look forward to talking to you in July . I would just say , who knows what's going to happen between now and July ?

Speaker #1: But we'll—well, many of you will be talking before then, but to our investors that are on the call, thank you for calling in and have a great day.

Speaker #1: Thank you .

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

Q1 2026 Stifel Financial Corp Earnings Call

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