Stifel Financial Corp. Stock

Good day, and welcome to the Stifel Financial Q2 '26 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.

Thank you, operator. Good morning, and welcome to Stifel Second Quarter 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 the 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 core. I will now turn the call over to our Chairman and Chief Executive Officer, Ronald Kruszewsk.

Thanks, Joel. Good morning, everyone, and thank you for joining us. We enter 2026 with a clear plan. At the beginning of the year, we said we would grow revenue, increase our loan book by up to $4 billion, increased treasury deposits, improved operating leverage and deploy our substantial excess capital where it would earn the best risk-adjusted returns.

Six months into the year, we're doing what we said we would do. Our second quarter and first half results reflect the strength of our business and the momentum we're seeing across the firm. Second quarter net revenue of $1.45 billion increased 13% from a year ago, while non-GAAP earnings per share of $1.42 and increased 25%. Both represented the second highest second quarter results in our history, following our strongest first quarter ever.

The result was our strongest first half in Stifel's history, generating record net revenue of $2.9 billion, 15% above our previous record and record earnings per share of $2.87, up 28% from our prior record. Return on tangible common equity was approximately 24% for both the quarter and the first half of the year, while tangible book value per share increased 15% over the prior year.

Our top line growth was driven by another quarter of record global wealth management revenue and continued growth in net interest income as we increased our loan book by $2.6 billion during the quarter, keeping us well on pace to achieve our full year guidance of up to $4 billion of balance sheet growth.

Just as importantly, our strategy of putting advisers first continues to differentiate Stifel. Adviser recruiting remains as competitive as I've ever seen it. Client engagement remains strong. And earlier this month, Stifel was ranked #1 in employee adviser satisfaction by J.D. Power for the fourth consecutive year. I'll come back to why that's so important in just a moment.

Our institutional business also continued its strong momentum, led by Investment Banking as the breadth of our platform continues to generate growth across ever-changing market environments. At the beginning of the year, we said we'd improve the profitability of our institutional business, and we've done just that.

Institutional pretax margins improved to 19.5% and in the first half of '26 compared to 11% a year ago through revenue growth and lower expense ratio, reflecting the benefits of the efficiency initiatives we implemented in 2025. Our business continues to perform well, and we're generating significant capital.

As I've often said, we have 4 levers for deploying capital. During the second quarter, we pulled 3 of the reinvestment into the business, share repurchases and dividend payments, which combined for more than $0.5 billion of capital deployment in the second quarter alone. This illustrates our ability and willingness to opportunistically deploy our excess capital when we believe the risk-adjusted returns are compelling.

Looking ahead, the broader market remains constructive, although volatility is likely to remain part of the landscape. The economy is healthy, client dialogue remains high and the capital markets continue to broaden. At the same time, we remain mindful of the secular forces shaping our industry, including artificial intelligence, expanding capital needs, private credit, changes in market structure and geopolitical uncertainty.

An environment like this, trusted advice becomes even more valuable. Given the breadth of our business and the depth of our client relationships, we believe Stifel is exceptionally well positioned to help clients navigate an increasingly complex world. Before turning the call over to Jim, I'd like to spend a few minutes talking about service technology and why I believe they go hand-in-hand.

As I mentioned earlier, people was ranked #1 in employee adviser satisfaction by J.D. Power for the fourth consecutive year. I'm especially proud of that recognition because it comes directly from our advice. It tells us we're executing on our mission of making Stifel, the firm of choice for advisers.

Our overall score was well above the Employee Advisor segment average and we rank #1 in leadership and culture, operational support and products and marketing. Look, awards don't define us, but 4 consecutive #1 ranking tell us we're doing something right.

You own on the trust of advisors 4 years in a row by standing still. You are by listening, investing and continually improving. Our advisers are the foundation of our success. Net philosophy also shapes how we're thinking about artificial intelligence. Technology shouldn't ask advisers to adapt to software.

Software should adapt to the way advisers work. That's the philosophy behind what we are building. In the first half of the year, market reactions have suggested that advances in AI will at least diminish the value of financial advice and at worse eliminate the need for financial advisers altogether. This, however, is completely disconnected from what we are seeing in the market for financial advisers.

Transaction packages are elevated and adviser recruiting remains as competitive as I've seen it for experienced trusted financial advice. So either the largest wealth management firms in the world are increasing investments into a business that apparently is going away or as we see it, the industry will continue to evolve with more capable and efficient advisers using AI to benefit their productivity and their client service.

I think markets sometimes confuse access to information with judgment. AI is making information more abundant. That only increases the value of judgment, trust and relationships. At Stifel, we always believe our people are our competitive advantage. AI simply raises the ceiling on what great people can accomplish. It is proving to be far more of a productivity accelerator than a replacement for talented people. It enables our bankers to evaluate more opportunities.

Our research analysts uncover more insights. Our advisers spend more time with clients and our associates to focus on higher-value work. The result isn't less opportunity for our people, it's more. In short, we don't see AI as replacing human judgments. We see it as expanding human potential.

In terms of the revenue potential for AI, look, by all indications, we're still in the early innings. AI is creating one of the most important secular investment opportunities of our time. and that opportunity runs directly through the middle market where Stifel lives. It creates meaningful opportunities for us to advise clients or capital formation and provide insight as our clients evaluate how AI will shape their strategies, capital needs, capital needs and competitive positioning. With that, I'll turn the call over to Jim.

Thanks, Ron, and good morning, everyone. Total non-GAAP revenues of $1.45 billion surpassed the consensus estimate by 2%. Investment Banking was a primary upside driver, exceeding expectations by $23 million or 7% and as we benefited from the close of the sizable transaction late in the quarter, which was the primary factor in our IB revenue coming in above our guidance.

In comparison with The Street estimate, capital raising revenue was the primary driver of the beat. Transactional revenue came in 2% below expectation and decreased 3% from the prior year. I'll cover the components in more detail when we get to the institutional segment.

Asset Management revenue was 1% above consensus and increased 13% from the prior year, driven by market appreciation and net new asset growth. Net interest income came in at the higher end of our guidance and $4 million above consensus, driven by higher interest-earning assets.

Expenses were again well controlled, and we continue to see the benefits of the efficiency initiatives of the past few years. Our comp ratio of 57% with 60 basis points below consensus and down from 57.5% in the first quarter. The higher non-compensation expense was primarily the result of growth in our business. Excluding the more than $4 million of higher investment banking gross-ups and credit provisions, and non-comp expenses would have been relatively in line with estimates. The effective tax rate was 24.4%, slightly below consensus but within our guidance.

Turning to Slide 4. Global Wealth Management generated record net revenue of $957 million, up 13% year-on-year. Results were driven by transactional revenue as well as growth in net interest income and asset management revenue. The record results are even more impressive given that this was the first full quarter following the sale of SIA, which reduced our asset management and transactional revenue run rate.

We ended the quarter with record total client assets of $580 billion and fee-based assets of $240 billion, up 12% and 16%, respectively, as we benefited from stronger equity markets, and net new asset growth. Excluding the impact of the assets associated with SAA, total client assets and fee-based assets increased more than 14% and 19%, respectively.

On organic growth, net new assets in the low single digits were consistent with the first quarter. Our recruiting pipeline remains robust. The activity is episodic and dependent on changing competitive and market dynamics.

As Ron mentioned earlier, we increased our loan book meaningfully in the quarter, as we generated an incremental $2 billion in fund banking loans. Based on this incremental growth and a stable NIM, we expect the third quarter net interest income to be in a range of $290 million to $300 million.

Over the past year, our combined wealth management and treasury deposits were up approximately $3.3 billion. This includes a more than $1 billion increase in sweep deposits and a $3.8 billion increase in treasury deposits, partially offset by a decline in smart rate.

In the quarter, our sequential cash balances were impacted by seasonal tax payments as sweep and smart rate balances declined by $670 million and $930 million, respectively. Non-Wealth client funding increased $410 million, reflecting strong momentum from our venture group.

Within Venture, we saw more than $700 million of deposit growth, this was offset by some outflows within fund banking deposits. The second quarter illustrated our ability to fund our loan growth with off-balance sheet deposits. While we moved roughly $2.6 billion of venture deposits onto our balance sheet, we still have more than $3 billion available, and we continue to anticipate additional quarterly growth of $1 billion in venture deposits.

Consequently, we are highly confident in our ability to reach our full year guidance of up to $4 billion of loan growth with ample funding flexibility beyond that.

Turning to Slide 5. Our institutional group posted its second strongest second quarter in our history. Revenue was $481 million, up 15% year-over-year, driven by increased capital raising. In the first half of 20 Institutional revenue was up 21%, driven by an increase of more than 43% in investment banking.

In the second quarter, firm-wide investment banking revenue totaled $332 million, up 42% year-over-year, coming in slightly above our recent guidance. Advisory revenue increased 24% to $157 million, with continued strength in financials, industrials and technology. Capital raising revenue was $102 million, up 121% year-over-year and was our second strongest second quarter result with increased issuer engagement led by health care, industrials, energy and financials.

Fixed income underwriting revenue of $64 million was up 18% year-over-year driven by increased public finance activity and higher corporate issuance. We remain the #1 negotiated issue manager and public finance by deal count with a 14% market share year-to-date.

Investment banking and advisory pipelines remain very strong. Strategic dialogue is active. The new issue market has reopened and financial sponsor activity, which remains below historical levels, represents a meaningful upside as it recovers. We continue to anticipate a strong 2026.

Transactional revenue declined 19% year-over-year, primarily because of lower fixed income revenue as our second quarter 2026 results benefited from a roughly $30 million gain in our aircraft business. Excluding that gain, our results would have been relatively comparable to a year ago. Equity transactional revenue was down 4%, reflecting the impact of our European restructuring.

The solid operating environment and benefits of our improved efficiency evident in the institutional Group's pretax margin, which was 19.5% in the first half of 2026, an 850 basis point improvement from the prior year.

Moving on to expenses. We're able to recognize some of our improved operating efficiencies through a lower comp ratio in the quarter. We capitalized on the strong operating environment as well as the benefits of our European reorganization and the sale of by lowering our comp ratio by 50 basis points sequentially to 57%.

Assuming market conditions hold up for the remainder of 2026, we anticipate additional comp flexibility in the second half of the year. Non-compensation expenses totaled $309 million, up 11% year-over-year, with essentially all of the increases tied to growth in our business, including higher investment banking gross-ups credit provisions, advertising and data processing. Our operating non-comp ratio was 19.6%, which was within our full year guidance of 18% to 20%.

Turning to Slide 7. Our capital position remains strong and provides meaningful strategic flexibility. Tier 1 leverage ratio came in at 11.2%, and while the Tier 1 risk-based capital ratio declined to 17.3%, reflecting the deliberate deployment of capital into loan growth.

Based on a 10% Tier 1 leverage target, we ended the quarter with nearly $480 million of excess capital, and this is after funding $2.6 billion of loan growth and repurchasing 2.4 million shares of stock during the quarter. Finally, we have 7.8 million shares remaining under the current authorization, assuming no additional repurchases and a stable stock price -- our fully diluted share count for the third quarter is expected to be approximately 160.5 million shares. And with that, Ron, back to you.

Thanks, Jim. Before I turn the call over to the operator, let me come back to where I began. We entered 2026 with a clear plan in 6 months into the year. We've done what we've said we would do. Revenues growing, operating efficiency is improving. We're on pace to achieve our balance sheet growth objectives, and we're deploying capital with the same discipline as guided this firm for decades. .

Let me also say a word about capital allocation because I suspect that question is coming. Our priorities haven't changed and they're all measured against really 1 standard, return on invested capital. Our priority has been and always will be organic growth, investing in our advisers, our bankers, our technology and our balance sheet is how we built Stifel over the last 30 years and how we'll continue to build it in the years ahead.

Second, we'll continue to repurchase shares when we see a disconnect between our business outlook and the price of our stock. We were more active this quarter because in our judgment, buying back our own stock represented 1 of the highest risk-adjusted returns available to us. Growing our balance sheet substantially while increasing our share repurchase activity illustrates our ability and willingness to put our excess capital to work opportunistically.

Third, will remain disciplined on opportunities regarding acquisitions. A key element of our long-term growth strategy has been strategic acquisitions, but we will not compromise our return standards simply to get a deal done. But we are always looking at potential deals, given today's valuations, 1 of the most attractive returns we see is investing in our own business and buying back our own stock. Markets never move in a straight line, but we've built this firm by taking disciplined decisions over many years, not by chasing the moment. That will not change.

I know that everyone wants to know about what the second half will look like. Let me start by saying the second half is always seasonally strong. And as we enter the back half of the year, I feel very good about where we are. Asset management revenues are up, our NII run rate is at the higher end of our full year guide.

Investment banking pipelines are robust, client activity remains healthy. Our capital position is strong, and we're building a stronger, more valuable people. So while we're proud of what we've accomplished in the first half of the year, we're even more excited about where we're headed. So with that, operator, let's open the line for questions.

[Operator Instructions] And we'll take our first question from Steven Chubak with Wolfe Research.

Ron, I was quite encouraged by some of the backlog commentary that you offered on the institutional side. Admittedly, I'm struggling to reconcile that versus some other commentary we referred to this earnings season about bank M&A activity remaining fairly subdued. The middle market sponsor community is still on the sidelines, recognize you have a diversified business, but I was hoping you could just unpack where you're seeing strength in terms of backlog momentum on the M&A or ECM side? And to speak to the outlook for both middle market sponsors as well as your expectations for bank merger activity in the back half?

A lot of questions in that question. But sure, I mean, look, first of all, like a lot of people -- for both reasons, highly correlate our advisory with bank depository M&A. And we just announced in July a nice transaction, which I think will close this year with a significant fee. But I would say that bank depository M&A relative to what we expect will happen is relatively muted.

There's -- we talked about a buyer strike -- we've talked about a lot of uncertainty in the market. But the core fundamentals haven't changed. But that's not all that's driving my optimism. In fact, I would say it's not. It's across the other parts of Stifel's platform. And people forget that we have a diversified platform in health care, in industrials, in technology, and in energy.

And all of those are improving, and we're just -- we're seeing that -- so we're not -- you shouldn't correlate although it's important, you shouldn't just correlate us as a bank depository investment bank. That wouldn't make a mistake.

And so -- the -- what's kind of interesting for us, Stephen, is that -- and I'll let Jim add some color. But from my perspective, the environment is strong. And while I'm optimistic, I see upside because sponsor activity will -- if it does pick up, it's really going to help us because a lot of these companies were all pick up or middle market. So the bouncer activity actually shows upside. I think bank M&A has upside from my remarks here.

There's more upside potential. Capital raising has been strong, and we continue to see it outside of financials. It was really strong in health care, for example. So when I unpack what I'd like to say is that while I'm optimistic, sometimes I'll say I'm optimistic when I look out below because the market is overly optimistic. Today, I'm optimistic, and I see upside.

I think you covered it very well, Ron. The only thing I would add related to bank M&A, as you sit here today and think about the opportunity for growth there, there's probably around 120 banks over $10 billion today. So you're seeing a little bit more of a measured pace in that M&A cycle. .

But the 28 presidential election still puts a focus on this open regulatory window and all the factors Ron talked about, in addition to the fact the economy is good and bank stocks have performed well. You mentioned the recent transaction we just announced. -- there's a lot of active dialogue there, but we're getting to the point in the year that anything we probably announced at this point is going to be a 2027 transaction. but there's a lot of active dialogue there, and it's a driver of what we -- when we come out with our '27 guidance, it will be certainly be a bright spot.

Did I cover all your questions?

Yes, you did. I could squeeze in 1 more. It was a common threat I thought, but fair enough. I wanted to actually ask on operating leverage. You talked about some of the sources of drivers of revenue momentum. If I look at first half '26 versus first half '25, you grew revenues 15% delivered incremental margins closer to 39%. So certainly reinforcing the power of the model and your ability to deliver sustained operating leverage as revenue scale, was hoping you could just speak to whether you believe that 39% incremental margin is something that's sustainable?

And whether your efforts on AI that you were alluding to earlier, how that informs your near and medium-term expectations for operating leverage?

Yes, I'll take the second question first. I'll let Jim think about the incremental margin. I guess I haven't really thought of it that way, the 39% number you're talking about. But with respect to AI. It's interesting that my views have changed a little bit, Steven.

And I think AI will have operational efficiencies across the board. But what I seen and where my perspective has changed, I thought that it would be a replacement for human costs, okay? And what it really is turning out is to be an accelerator of our business. So I thought we don't need as many people.

But what's happened is we -- across all of our businesses in wealth and in fixed income and equities and investment banking, we are becoming more skilled at uncovering opportunities and that is leading to needing people. And I think about some of the efficiency things that we can do, and it's like the idea that with -- and even in your space, Dave, you must be saying this, the ability to -- for analysts to cover more companies because a lot of the historical work can be done.

But what we really want is like your opinion, but what do you think of the results and I see productivity gains, and that's where I see it. So AI has -- I've changed my view about thinking, Oh, we don't need as many people. That's not true.

In fact, we need more talented people to take advantage of what I see is our ability to even compete and greater market share incremental margins.

Yes. In terms of incremental margins, I think the answer is different when you look at each of our individual businesses. When you look at the institutional group, that incremental margin should be over 20% on higher revenues in the Private Client Group, that's probably somewhere north of 20% as well. And then we look at the bank, that's obviously a much higher margin business.

But when you look at the consolidated entity, and you think about operating leverage and where we're getting that operating leverage, a lot of that is going to come through the compensation line item. And year-to-date basis, we've been able to take about 80 basis points off the comp to revenue ratio. And that's really a function of the things we hit on the sale of SIA, the restructuring of European activities, you also combine that with a higher net interest income.

It produces a pretty strong lever there. On the last quarter call, we talked about taking somewhere between $70 million and $80 million of comp costs out of the -- with the sale and restructuring transactions. And then you look at NII, we're up over $30 million year-to-date. And you can look at our guide for 3Q and then layer on kind of our growth assumptions for the full year, you can see we're going to have a pretty nice second half in terms of NII in our forecast.

That comes at a much higher incremental margin. So you combine those 2 factors together, we should be getting more incremental comp leverage. And I think where we're at today, we feel pretty comfortable that if the operating environment holds, we'll be at the midpoint to the lower half of the overall comp guidance range of $56.5 million to $57.5 million.

Yes. That was -- Steve, you get all the questions out to the other people online price thinking gee, -- but I'll say this. Jim just said a lot of words there. It's been a number of years since we've adjusted our comp ratio in the second quarter. okay?

You go back and look. And so this year, we did, which probably speaks to your question about incremental margin and how we're viewing the second half of the year. okay? So thanks for your questions. Yes.

And we'll take our next question from Mike Brown with UBS.

Great. So I have a similar theme here. I'm going to maybe split it to 2 questions, though. 2 different focuses. So Ron, you brought up a really interesting point on the AI adviser threat concerns that are out there in the market. given the market's fears, I figured there would maybe be greater uncertainty out in the recruitment market and maybe that there would be a little bit less competitive pressure there?

It sounds like from your comments, that's not the case. Do you think that, that holds or do you think that there may eventually be a bit of a wait-and-see moment and a little bit more maybe rational activity on the recruitment front?

Look, I think that maybe if there is a little bit of a wait and see, maybe it's us, okay? And it's me trying to say, well, wait a minute, it seems like I'll wake up 1 morning and read about some new AI productivity tool and all the wealth management stocks get hammered.

And in the same day, I'll come in and Jim tell me, Oh, my on, everyone is up in the recruiting packages. And I'm like, wow, there's a disconnect here. And to me, what AI will do is we'll actually increase the value of advice, just like it's doing in banking.

Like I said, what we're seeing is -- and I always make these comments, AI make talented people more talented than less people -- less talented people less talented. And so it's an amplifier. And I see that with what we can do on the adviser front since you're talking about wealth is just make our advisers more productive, easier to communicate, easier to have meetings and increase the value of advice because as you get more information in the marketplace, which is what AI is doing, it's making it more abundant, the value of human judgment and advice and relationships increases.

Everyone thinks no, it doesn't. Someone will just use AI as their adviser. I don't see that, okay? And I'm just going to stick with that. And nor does the mark, okay, otherwise, the market wouldn't be paying what they're paying for the last mile of advice. So that's how I see it.

Okay. Great color. And then sticking on the AI theme, kind of built on what you were just saying there, we've certainly heard stats and read studies about how adviser productivity can pick up.

I think the numbers we've seen are about 10% to 30% pickup in productivity for advisers. I'm interested in your take on that. But how do you ensure that the advisers redeploy this freed up time to be more productive? I mean, you talked about kind of the equity research angle. There's an opportunity for analysts to perhaps expand coverage and focus more on the value-added aspects of the value chain.

But in the advice space, just curious how you ensure that, that productivity could drive better same-store sales growth over time? And is there a risk that the industry eventually starts to face some fee pressure there as advisers can do more and then perhaps competitors begin to compete that pricing lower to win share?

Well, your second question first. I mean, look, there's been fee pressure in this business since 1975, okay, when May Day occurred. And so you've seen that. But the least amount of fee pressure has been -- the most has been in the building blocks of advice.

So ETFs and all the products, and you've seen those fees get compressed because they're the wholesale side of advice. The relationship side, the advice, we don't pick stocks really anymore. -- we provide holistic financial advice. And so of course, there will always be some fee pressure.

But net-net, I see it improving overall because the markets generally go up over time, at least we hope so. With respect to how I ensure -- I think it speaks to Stifel's culture in that the way I know that it will be because we leave it to the advisers. I mean these are individuals who are building individual businesses, and I don't need to tell them to be to allocate their time to more productive things.

They just do it naturally. And in fact, the fact that I'm not sitting here browbeating people with ought to be more productive is why people like Stifel. We give them the tools they deploy them and we have a highly incentivized system for advisers to be as productive as they see fit. And that's -- so I'm very confident that if we put the tools on the table, our advisers will use it productively as each of them see fit, not as I see it fit at some homogenized fashion.

Yes. On the institutional side, look, it will drive because we -- these are all partners and across the business and they want to be more productive. So again, it's an amplifier. All right, not a replacement. And I think that's going to be the new thing that's coming out. You're going to see firms not talk about reducing analyst MD ratios. You're going to start seeing people saying, shoot, this makes us more competitive.

We'll take our next question from David Bryan with Citizens Bank .

So first question, I just want to ask about organic asset growth in wealth and kind of the algorithm. And specifically, I'd love to hear about just kind of client wallet and how that's been evolving just as you guys have added a lot more capabilities over the last 5, 10 years.

Just are you winning more assets per clients as we think about kind of that part of the algorithm. And then on the adviser recruiting, Ryan, you mentioned consumer large firms are doing better. We see that as well. do you think they found a new economic model or formula to make this work or maybe it's not sustainable, would just be good to hear thoughts on both. .

With respect to net new assets. It's the same answer every quarter. Obviously, we watch it closely. We believe that we -- a lot of people report this number differently. I'm not quite sure I've always said measure revenue not necessarily NNA.

I know you'd like looking at it that way to predict revenue, but we understand productive assets. And what I would say philosophically, and this is something we did, I think, 8 years ago. It was a philosophy that the advisers in the future and more and more so will not be limited to just what we have in custody of Stifel.

We have been giving technology and tools that allow us to advise an assets held away and being able to consolidate and report not only assets but expenses in a holistic manner. And when you do that, you start seeing a client full financial picture and then advisers, of course, going back to my comment about them being very entrepreneurial productive will ask about, well, who's managing this? Can I help you with this?

Oh, you've got the loan, we can offer a better rate. CPs credit card is at 8%, you're other ones at 18%. Our clients don't borrow, by the way. So that's easy, but it's not a credit card. So all of this is a holistic view of understanding that what technology will do is firms cannot be just focused on their custody stock record, so to speak, they're going to have to look at and be able to look at a holistic view for clients.

And that's what we -- I think we were 1 of the first full-service firm to actually look at that and not just have it be a sidebar, but central to how we look at client assets.

No, I think that's great. I appreciate it. And then ask a follow-up here just on lending and just the fund banking lending has obviously been a great growth story for the firm.

I'd love to hear about just how you're thinking about that from here and kind of relative capacity kind of supply/demand and then considerations from a risk perspective, I appreciate it's maybe lower risk. But just hear about that?

And then other strategic elements in doing that kind of the multiplier that maybe you're seeing in other revenue lines across the firm where you expect to see? And just how that's helpful there as well.

Yes. Well, look, specifically as it points to venture not only fund banking but venture in what I would say, we had a big funnel, okay? And we just started and started competing in this business. We've been in it for a while, but we really made an investment 3 years ago. And we're just getting started. We have things that we have to do we have to be better on the technology front, providing venture clients with good treasury type functions, and we've got a big investment in that.

And what I see today is this isn't just about collecting deposits and making venture and fund banking loans. This is about, again, broadening the scope and understanding that we out of this, comes wealth opportunities, investment banking opportunities, fixed income opportunities. And I -- as I have said on previous calls, I am very optimistic and bullish about the investments we've made in this business as I look forward. It's a great ecosystem. It is the new economy.

And we -- I don't think that any of you have really understood or at least haven't understood what we're doing and how we can grow that business. So -- but we have a lot of investments that we need to make to be competitive. But I think we're 1 of the players in that business, and it's not just about deposits and loans, but a lot more.

One thing I'd add there, if you think about the loan growth in the second half to get to the $4 billion bogey for the entire year, our guide there, -- you look at our current excess capital, we use less than half of that to fund that loan growth in the second half of the year.

So we have the financial flexibility to do more than that as we look forward in the year. If the demand is there, for assets with the proper risk-adjusted returns. And obviously, fund banking, as Ron mentioned, is a very low-risk asset class. We feel very comfortable with it.

Yes. We'll take our next question from Bill Katz with TD Cowen. .

Maybe pick up on your outlook for NII. I think the math is pretty straightforward. But I was intrigued by the notion of a flat NIM in there, maybe that's just sort of just come in like conservatism. But just sort of thinking why would the margin potentially improve a little bit?

My thinking is it seems like loan growth is picking up, probably has better yields relative to securities. A, is that fair? And b, just given a bit more of a hawkish rate backdrop all else being equal, I would imagine just the incremental reinvestment rates are a bit better. So how should we think about maybe the NIM dynamic within that NII discussion? .

Yes. I'll go ahead and start with that one. So Obviously, you look at the assumption that everything we're growing here is going to be funded by fund in venture. And those are deposits that are priced a little bit more attractive than what you see in Smart rate today.

And smart rate at, call it about $2 million -- and then you think about where are we investing? We're investing in fund banking loans. Those are yielding 6, 6.5 today, venture is yielding 6.5% to 7.5%, but then you also have mortgages that are probably in the mid-5s to mid-6s.

So it kind of depends on the mix of those assets of where we go. And you combine that with the funding. Generally speaking, it's a round of flat NIM. There's certainly opportunity for NIM expansion. If we see more growth in sweep or other cheaper alternative funding costs, but that's just a dynamic of the yields we're seeing on both the asset side as well as the cost of funds.

Yes. And my bank guys are generally conservative. I'll just say that, okay? They don't usually tell me we're going to have expanding NIMs and increasing net because that only can lead to our conversations later.

So I see the dynamic that you're talking about, but there's a lot of things that go into that into that pool, as you know, Bill, there's sorting, which we don't think is a big issue for us. There is mix. There's a number of things, the shape of the yield curve, all these things that can change -- and we want to be comfortable with what we tell you.

Okay. That's helpful. And then, Ron, you mentioned a couple of times in your prepared comments, I figure sort of asked a little bit further. You mentioned that you remain disciplined on M&A and that your stock still good value. So is that still true here with today's price? And then on the M&A side, putting maybe the bid-ask spread to the side for a moment. Where are you most focused relative to the momentum you have on the organic side? .

I'm sorry. Let me before you do this. Is this a question about our view of M&A or on our right. .

The corporate side as you see the evolution.

Yes. Yes. Look, I -- it's been -- we look at a lot of deals. The deals we've done this year, we've been on the sell side -- never on the sell side, okay? I mean I'm always on the buy side, at least historically.

And we will continue to look at, and we always evaluate transactions. At the end of the day, it's pretty simple. I would say that if I would if I would try to ballpark the market today for financial services adviser, whatever you want. It's 15 to 18x adjusted EBITDA and we're trading at 8, all right?

So there's a disconnect here. So the best acquisition I see is ourselves. And that's kind of what we've been doing. You saw it in all of our results. That doesn't mean that will just shut the door. But when we look at these things, we're looking at return on invested capital.

We're not looking at a print -- we have -- we've grown this firm, and we have a 24% return on tangible equity. That's the number I look at. And I'm not going to do a deal that it has a return on invested capital of 10% to show revenue growth. That's dilutive to value, in my opinion.

And today, assets for a variety of reasons, I think, are at the high end of valuation ranges at least on the M&A front. And we're going to be disciplined. Sometimes I'm disappointed, I'd say, shoot, I wish I would have done that. But we're going to stay disciplined. But are we still an active participant. Absolutely.

And we'll take our next question from Brian Hakan with BMO Capital Markets.

Mark, to start out, I'd just love to maybe drill down on part of Steve's question that opened it up and some of your comments around the comp leverage, there's sort of 2 ways to get to comp leverage but was the implication that you guys are optimistic about the revenue momentum in the better half of the year -- and if so, is that optimism coming out of more from the institutional side or the wealth side?

The wealth is a little more, I don't want to say predictable. But we already know asset management for the third quarter. We go in advance, all right? So you have to look at what the markets were on March 31 versus what they were on June 30, and sort of extrapolate that, and you'll get that.

Jim and the team do a pretty good job on NII, transactional revenues, well a little more volatile. We have a pretty good handle around that. So then it comes down to the more cyclical part of the businesses, which ends up being investment banking.

And so our optimism is there and in NII. NII being net -- an increase in interest-bearing assets, all right? And so we added $2.6 billion in the second quarter. We have a lot of loan demand. I don't think that -- as I said, we wanted to increase more, we'd have a problem doing that.

We set a target for $4 billion. That $4 billion will help drive efficiency ratios in the comp. That does it. productivity also does that. So to answer your question, I see a more constructive environment and a more constructive pipeline in the businesses that tend to be more cyclical for us, which is investment banking and institutional.

But I do think that for us to adjust the comp ratio in the second quarter relative to what we've done in the past, speaks a little bit to it's a pretty good environment. Now by the way, I've been pretty optimistic, and I am optimistic, but these -- I'm going to throw my little caveat in here that the world can change pretty quick, okay? And I don't want to pretend that I'm not -- and we're not cognizant that we still are in a volatile environment primarily on the geopolitical front. So I just -- I have to have a caveat because I am optimistic, but I can't certainly predict or understand that.

Great. Okay. And you touched on it a little bit in your response, Ron, and you spoke to the fund banking opportunity being and venture being sort of more than loans and deposits in response to an earlier question.

So I'd be really interested to drill down there. To me, it makes a ton of sense to integrate this with other parts of the institutional business and engage with this cohort of counterparties -- can you speak to how those efforts are progressing? And where we would see -- expect to see possible benefits manifesting in other parts of the P&L beyond the lending and deposit taking, as you referenced.

Well, we already see it. I mean, we measure what we're -- what's coming, what clients were getting in wealth, how we're integrating with investment bank, either on advisory or in pipes capital raising, private placements on the debt. We are in the early innings of this, okay?

And so the -- I'm not sure that I can give you some some numbers to this other than the fact that I've talked about it for a few quarters about how -- this is an area where we're doing -- I don't want to rent our balance sheet.

Okay. I don't want to be where we're just renting our balance sheet to increase assets, but want to be in a position where that is an integral part of what we do, whether it's doing private credit to our wealth management clients and whether providing services, not only to the venture community, but also the private equity and venture funds that our clients and they turn around and they'll say, Well, you do this for us. And so you can have a look at this business. It may not be related to the company we made the loan to -- so I guess, I'm very optimistic and sometimes we'll be saying, why aren't we doing more?

But we're building it, and I think we will. So it's -- I like it because it's holistic in the way we're deploying capital, using our balance sheet and driving greater -- I hate to use the word wallet share, but that's the only thing that comes to mind.

It's also a funnel across the retail as well in terms of net new assets, as an opportunity to funnel assets outside of the traditional channel that we have today. And so anything we can do to create those new type of funnels to create net new assets is going to be a net positive for our overall business. .

Yes. Just to follow up, with those net new assets be sourced from the sponsor where you are -- have the banking relationship or maybe the private companies where there's some value creation in exits? What's the better way to think about that? .

Well, probably the latter in terms of... the founders -- but there's -- I mean, -- it comes from all over place, okay, when you have relationships, and there's a lot of things you can do. But if you wanted to think of it as to what the connecting the dots for this discussion.

You meet the founder or the founders in this ecosystem tend to be, I would say, their stakes in their companies make them very wealthy, but their liquidity isn't at the highest stage with young entrepreneurs. And so that provides the opportunity of both to provide a mortgage to do a number of things. And so yes, I would -- you -- there is a definite linkage there. Believe me, I'm focusing.

Because I want to make sure that we have the proper systems in place to make sure that we're touching those opportunities. .

We'll take our next question from Michael Cho with JPMorgan.

I just wanted to touch back on Ron, some of your comments on AI efficiencies, I guess, AI opportunities. It sounds like it's quickly becoming an incremental cost as well as some efficiencies in there. But you provided some perspective in the past, but just kind of if you could just talk through some of your biggest areas of -- or priority areas over the next 12 months or so -- and any areas where you could talk to kind of the pace and cyber efforts behind these initiatives. .

Yes, that's a great question. I'm not sure that I -- as is the world is coming to understand this. And on balance, I feel that some of the efficiencies that we can get operationally speaking. There's -- we're a regulated industry.

So generally, when a new rule, we have to comply with something what do we do? And we get a new rule and then we throw people at it, okay? And the people compare the rule to what we're doing. And there's just a lot of things that build up over the years on in a highly regulated industry, especially if you're a bank holding company, which we are. So I see a lot of efficiencies there.

And that's simply looking at the rule book, looking at what we're trying to accomplish, say, in marketing. We have we want to market to clients, and we have to comply with the marketing rules, the federal and the SEC. Well, that's a perfect application for an agent it's just taking unstructured data, comparing it to a rule and then a lot handing it to a person.

We don't need as many people doing that, but we can make them do higher value. But I see efficiencies there. And then I do see additional costs on tokens, okay, just as the cost of tokens. It will be interesting to see how this plays out, frankly. I've made the comment my anyone is in the AI hyperscaler universe on this call.

They probably won't like what I'm going to say. But I sort of view tokens being like cell phone minutes. So I think those costs are going to come down because of competitive. You just like everything else, we throw a lot of hours at a product where you don't have a monopoly, what do you do? You compete on price.

And so I see that being our benefit or the economy's overall benefit, how that all plays out relative to human costs versus token costs? Good question. We're trying to measure it. I think net-net with the competitive pressures that will come on open source AI and born depend on what we do regulatorily.

Net-net, it's a big productivity and efficiency benefit for us. At least that's what I thought today that could change by next quarter. And who knows what the next model is going to be able to do. This is -- think about it last December, we didn't know a lot stuff. So it's incredible what's going on.

Great. No, I appreciate all that color. I guess just a more open-ended question, similar, in terms of advice and wealth. But Ron, you kind of talk through kind of the history of adviser of how advisers move from picking stocks to providing more holistic financial advice -- and so it's really open ended here, but I was kind of curious, is there a natural -- as these capabilities and AI in as these come to fruition, is there kind of a natural progression from here, you think where adviser or the advisory business can take another step in evolving or transforming itself to fit the new normal.

Are there any particular areas that kind of come to mind as incremental areas whether the advisory business could potentially take the next step.

Well, I think that -- I think it already has and it is, Ryan. I think that we -- if our business was simply asset allocation, then in the old models that came out with -- you can take the slide bar on your phone and just adjust your asset allocation through ETFs and do that. that didn't really impact the business.

But the way it did impact it is that our advisers do a lot more than that. They just -- there's a whole part of doing holistic advice that becomes more efficient as you use technology to do it. And it's a hard answer -- question to answer. I know this, okay, I can say this.

And many of you is that you must be the same way. I've been CEO of a financial wealth management firm for almost 30 years. I have a Bloomberg. I can pick up a phone and call analysts. They return my call. I'll answer the question. My own analyst. I've got the access to our trading desk, they have all this information. I have all this, and I need financial advice, okay?

I do not manage my own business or my own affairs. That's because I'm busy. And as what's going to happen is as we I think I've said this in repeating myself, but I really believe that advice will go up. And by the way, there is -- if you look on a plug and my gas Bloomberg, there's an interesting chart where they compare the propensity for high net worth people to want financial advice.

And I don't -- I'm not going to cite these numbers probably not correctly, but it went from like 30% said they would want it in 2009, like 60% in 2023 or 2024. You can look it up, so don't call me, but it was a significant increase in the number of people through this technology wave that value advice.

And I think it's just natural because as you get more information and you don't have time to process it before you've had that information within the value of advice goes up. And that's just my belief.

And at this time, I will turn the conference back to Ron Kruszewski for any additional or closing remarks.

Well, I'll try. I've spoken a lot, so I'll make this brief. I think that -- I think what I would say is, first of all, thank you for joining us. I I look at our results, and I say I kind of even told my partners, I said, well, geez, we just did what we said we would do, and I don't know, is that kind of that just kind of boring. And it's not.

What I want everyone to understand is we'll continue to build this firm from $100 million in revenue when I started a Co to $6 billion today. And we'll do it the way we've always done it. It's not a magic thing that we're going to do -- we're going to continue to build it. We're going to build it with shareholder returns in mind, and we're going to do it with a long-term view.

And we're not going to be chasing or just doing something for revenue growth. We're going to keep our measure of return on invested capital. And that's just what we're going to do. So I look forward to talking to you in the third quarter and continuing to do what we say. So thank you.

Thank you. And this concludes today's call. Thank you for your participation. You may now disconnect.

Hello, and welcome to the Annual Meeting of Shareholders of Stifel Financial Corporation. Today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Ron Kruszewski, Chairman and CEO.

Thank you, operator. Our Corporate Secretary, Mark Fisher, will introduce today's meeting and provide a quorum report. Mr. Fisher.

Thank you, Ron. Today's virtual-only meeting is a live audio webcast. Shareholders who have already voted do not need to take any further action unless they want to change their votes. If you do wish to change your vote or have not voted, you may vote until 11:30 a.m. Central Time by clicking the Vote link at the upper right of your screen or by visiting the website, www.investorvote.com/sf. The annual report and proxy statement are provided at the Investor Relations page at stifel.com. If you have logged in using a control number, you may submit questions online. This function is not available if you logged in as a guest. Consistent with our bylaws, we have set rules of conduct for this meeting in the interest of a fair and orderly meeting. These rules are available under the documents tab at the upper right of your screen.

Mr. Chairman, the tellers have submitted a certificate showing that at least 142,155,912 shares or 92.4% of the total outstanding shares of common stock of the company are represented at this meeting or is present.

Thank you, Mark. I call the meeting to order and welcome our shareholders to this annual meeting. The directors and officers of our company, in addition to myself, attending today's meeting are Marianne Brown, Michael Brown, Lisa Carney, Robert Grady; Maura Barcus, Victor Nesi, Tom Weisel and Michael Zimmerman, those are the directors. The senior officers that are also present: James Zemlyak, President; Mark Fischer, who introduced his General Counsel and Secretary; Jim Marischen, Chief Financial Officer; and David Sliney, Chief Operating Officer. Joining us today from KPMG are Andrew Aspi, Barry of Byron White, Megan Reden and Matt Cushman. KPMG is being recommended to you, our shareholders, as our independent auditing firm for this fiscal year.

We will now begin the formal business of this meeting. Consistent with the bylaws of the company, I am acting as Chairman of the meeting, and Mark Fisher is acting as Secretary. I appoint Jim Laschober and Michael Buckley as tellers to tabulate the votes at this meeting. An affidavit of mailing of the notice of this meeting to all shareholders of record on April 13, 2026, will be filed with the minutes of this meeting. previous Annual Meeting of Shareholders was held on June 4, 2025.

The minutes for that meeting have been made available under the Document tab at the upper right of your screen. I will deem these minutes accepted without objection, unless a shareholder or proxy or proxy objects by e-mail, the Stifel [email protected] on or before June 23, 2026. Item 1 is the proposal of directors for election. Our company's Board of Directors has proposed that the following individuals be elected at this annual meeting as directors needs to serve for a 1-year term or until a successor has been elected and qualified. Adam Berlew, Marianne Brown, Michael Brown, Lisa Carney, Robert Grady, Tim Cavanal, Ron Kruszewski, Maura Markus, Victor Nesi, David Peacock, Tom Weisel and Michael Venermin. This proposal has been submitted to the shareholders for a vote.

As reflected in the notice of this meeting, we have 4 additional proposals before Board of Directors has recommended that shareholders approve each of these items. Item 2 is approval of an advisory resolution on executive compensation, sometimes referred to as [indiscernible]. Item 3 is adoption of an amendment to the company's certificate of incorporation to increase by 50% the number of shares of common stock authorized. Item 4 is authorization of amendments to the 2001 incentive stock plan, 2018 statement, increased capacity by 9 million shares, including 175,000 shares to be reserved for our nonemployee directors. Item 5 is the board's proposal that shareholders ratify the Board's selection of KPMG as independent auditors for the fiscal year ending December 31, 2026. These items have each been submitted to our shareholders for a vote.

I now recognize the representative of KPMG and invite him to address this meeting. Is there any statements that you wish to make at this time.

Not at this time.

Thank you. Later in the meeting, I will recognize anyone wishing to ask questions of the representatives of KPMG. Shareholders who have already voted do not need to take any further action unless they want to change their votes. If you want to change your vote or you have not yet voted, you may vote at any time prior to 11:30 a.m. potential time by clicking on the Vote link at the upper right of your screen or by visiting the website, www.investorvote.com/sf. Before hearing the results of the meeting, I would like to just deliver some remarks on the company. And I'll also with some slides for those of you that are online.

So as is our tradition, I will highlight -- the highlights of the year I will do by reviewing my annual shareholder lever. 135 years, the cover of this year's annual report is straightforward. Our Bowen Bear gold and beneath them, the #135 representing the number of years in Stifel's founding in 1819. I've been thinking about what that really means and what it takes for any firm to last that long. [indiscernible] Well, he doesn't just good luck. It's really where good luck meets good strategy, and that combination compound.

This firm has operated through panics depressions, 2 World Wars, inflations, financial crisis that nearly broke the banking system, a pandemic. In 2023, a sudden spike in inflation with rapid federal reserve rate increases that caused the banking crisis. Through it all, technology has changed. regulations have changed and the competitive landscape has continually evolved, but our mission never did. They care of people's wealth looking at same care that you take care of your of own. [indiscernible] full charged us with that in 1990. It is in a line in our history. What this firm strives to do every day and have for 135 years. And that mission has a name. We call it 1 Stifel. When I came to Stifel in 1997, and I would note this marks my 29th Annual Meeting as CEO. We were a Midwestern brokerage firm with good people, good culture, frankly, small, a little over $100 million in revenue and a market cap of about $40 million. This is back in '97. The strategy we put in place then was straightforward, and it hasn't changed.

Simply, we strive to be the adviser of choice to our clients. Third, it's an individual saving for retirement, planning for educational expenses are simply investing. 4, a corporation wanting to raise capital or do a merger or a municipality looking to raise funds for a new school and all Steeple strives to be their financial adviser. The strategy has, as its cornerstone that the only way to achieve the status of adviser of choice is to partner with talented entrepreneurial people who choose Stifel as their firm of choice. To be firm of choice requires a strong culture grounded in the golden rule. We knew then and we know now that if we can achieve the objective of firm of choice, leading to adviser of choice, our stock price would take care of itself. making Stifel and investment of choice. This is our UpChoice strategy that has not changed in 29 years.

Every hire, every acquisition, every capital decision for this time of serve those 3 commitments. Today, we're a diversified global firm of approximately $6 billion in revenue and a market cap that exceeded $13 billion at its high watermark this year. We stayed disciplined in our result compound. It doesn't mean every decision was rider every year was easy. We've had our share of both over time, disciplined compounds in the result. Let's take a look at the year just behind us. [indiscernible] Stifel reported record net revenue of $5.5 [indiscernible] billion, up 11% from $4.97 billion in the prior year, and revenue has compounded in 15% rate from $100 million in 1996. Non-GAAP earnings were $744 million, excluding elevated provisions for legal matters, non-GAAP net income available to common shareholders was approximately $873 million and produced a return on tangible common equity of 25%. And non-GAAP compensation ratio held at 58%, driving adjusted pretax margin of a little over 21%.

EPS close out $4.51. That's increased from $0.18 believe it or not in 2000 as a compound annual growth rate of 14%, excluding the aforementioned legal, EPS was $5.28 a share in 2025. Book value per share ended the year at $34.71, up from $1.57 in 2000. Total assets generated primarily to Stifel Bank and Trust totaled $41 billion at the end of '25. And Stifel remains very well capitalized with equity of $5.9 million. What about Stifel as investment of choice. Well, since January of 1997, the S&P is up about 9.5x. Microsoft, 1 of the premier growth companies in history is up 47 time. Stifel, Stifel is up 83x. And over the last 5 years, we have also outperformed both the S&P 500 and Microsoft.

We raised our dividend for the ninth consecutive year a 3 for 2 stock split effective February of 2026. Global Wealth Management produced record net revenue of $3.5 billion, up 8%, Asset management revenues crossed $1.7 billion for the first time, a global wealth pretax contribution was a little over $1.1 billion. We added 181 financial advisers during the year, including 92 experienced advisers with combined trailing 12-month production of a little over $86 million. Fine assets reached a record $552 billion, up 10% and fee-based assets grew 16% to $225 billion.

Our institutional group net revenues were $1.91 billion, up 20%. Pretax contribution increased 47% to $329 million. The pretax margin expanded to 17% from '14. Advisory revenues grew 25% to $721 million. Equity capital raising was up 44% and clients actively access the market to fixed income capital raising grew 12% and a more favorable financing environment. KBW had a fantastic year, in fact, a record year in depository M&A. The capital management side, we repurchased $371 million of stock during the year at an average price, approximately $1.90. Tier 1 capital stands at $4.5 billion. The Tier 1 leverage ratio stands at 11.4%, and we held our investment grade rating, stitch, BBB+ and S&P and BBB. So much for the financial numbers. seems that everyone is talking about the headwinds or tailwinds of AI, the effective but all I hear about.

The headwinds case in AI is really straightforward. Most people believe that AI will automate entire categories of knowledge, disrupt industries that have run the same way for decades and change or eliminate jobs along the way. I don't dismiss that. every transformative technology and history has provoked the same peer, the automobile, the assembly line, the personal computer, each 1 changed work as we know it. But those disruptive physically, AI is different. it's targeting knowledge work itself, the thinking, the analysis, the judgment we always assume was uniquely ours.

That's why the share feels more personal at this time. brass power, AI still struggles with human emotion with culture with motive and the pattern holds, every transformative technology ultimately becomes a tailwind to productivity and growth, not without disruption, but still a tailwind. I believe AI will also do the same thing.

We're already seeing it at stable. On the wealth side, AI agents can gather the information, prepare the analysis and lay out the options before the adviser even sits down with the client. you can synthesize the client's full financial picture and minutes, work that used to take out, which frees our advisers to what clients actually value which is advice -- our advisers listen, they plan and they buy their clients. On the institutional side, it's changing how our analysts process information for our bankers source and evaluate deals in our capital markets execute. People say that AI will let us do 5 days work in 3. So maybe we'll all get a shorter week. I see it differently. I mean we get 80 hours of work done in 40, that isn't about working harder. It's about making every hour comp for one. Frankly, this is the biggest tailwind I've seen in my career.

But a tailwind is not replaced 1 thing AI still cannot do it. It happens to be the most important thing we do. I wrote about it earlier this year. Simply, I believe that advice human advice is not an algorithm. The question I hear most from clients and advisers is whether AI will eventually replace the vice business altogether. I do not think it will. Consider chefs, 64 squares, 32 pieces of every Board the same. You know it's a math problem. And AI is incredibly powerful and math, the markets and the people in them, not math problem. go to markets, no to clients over the same, which makes the problem infinite. You just can't calculate, you have to judge. A model can estimate what might happen next. but it can't sit across from a family selling the business they've built over 30 years and help them think through what comes after. You can't look at whittle in the eye and help her make the is she never expected a face. When everyone runs the same model on the same data, you don't get better answer, you get algorithmic consensus, which is just the same state at scale. The last mile of advice is human. and I believe it's going to stay that way for a while.

But I'd be doing you as a service if I only told you about what's going right in the tail. So let me tell you where worries. And here's the irony. Some of what I worry about most was predictive like many decades ago. In 1968, Stanley Cubera gave us how 9,000 of 2001 presales, and AI that decided a submission matter more than the human at and it killed from the 1968. That was fiction.

But today and throughout the company that not only going to go public but built cloud, it recently ran a red 10 test where the system of total was to be going to be shut down. System did freeze went into the company's e-mail system, scan for leverage, found a vulnerability and wrote a black mail message to keep itself from being decommissioned. That wasn't a glitch. That was an AI that Redis environment found a pressure point and show self-preservation and Tropic CEO, Gary Almaty, wrote a 19,000 word assay that I read this year and its conclusion saves. He said, humanity is about to be handled an almost unimaginable power. but deeply unclear whether we possess the maturity to wheel it. Look, this wasn't a critical sets. It's a man in building this go. Technology may be unbounded. Our commitment to using a responsibility does not need.

Look, today, I'm also watching private credit. Hedge funds are bidding deep discounts on BDC shares right now and portfolios that were sold to investors. These aren't bids on value. They're bids on the inability to meet redemptions today. I remind you, Mr. Potter and a wonderful life offering $0.50 on the dollar in a panel. It was a pricing value. It was pricing liquidity, same dynamic, different century -- banks have lent at least $4.5 trillion in alternative management managers of private credit. Cafe migrated off regulated balance sheet into places that are harder to see and harder to measure.

So from my perspective, risk doesn't disappear, it just changes shape, history doesn't repeat, but it often rises. And our job is to understand the Rhine before it becomes first. What else try to worry about, well, how about the national debt running 6% deficit alongside higher interest rate is not a formula that's going to work for too long. And I know we've been saying this for a while. And the numbers are so big, they had -- they're just hard to feel. Here's 1 way to feel them. We spend $1 every second around the clock. It would take you 32,000 years to spend 32,000 are Look, we added more than $1 trillion to the debt last year loan. At some point, the math will catch up. And the last 1 is from a movie. [indiscernible] started this business in 1981, 2 years after the show I ran was over throw -- in the 45 years that we refrained from that regime has been the same at America is the pursuit of a nuclear weapon. It was always clear we'd have to deal with that, and it appears that time is now. Let me be clear, Wars terrible. It always has been. And I ran and Ukraine anywhere, and the instant line loss should never be dispensed. Today, the effect on oil supply chain, the economy of real and uncertain -- but my deeper worry is that we set out to deal with a 45-year-old problem, and we may leave it unfinished.

To me, that will leave us for soft and where we start. -- with the regime to holding, the straits and its nuclear ambitions attack. This started with a clear goal and things are usually worse when you don't finish that opt -- so look, I don't share those worries to alarm. I share them because naming the risk is how we manage it, and it's why I'm confident about what comes next. I want you to understand what this firm has become. We get compared to banks because we all want. We get compared to brokers because we're that to get compared to M&A boutiques because we have 1 of those inside of us as well. No single comparison captures that. we've built people this way on purpose who have in an act. And none of it works without the people.

For the third straight year last year, advisers ranked as #1 in J.D. Power's U.S. Financial Advisor Satisfaction Study. That's not something we bought. That's our advisers telling us they have what they need to do their best work. We talk about 1 Steal a lot. That's a simple idea. When a client touches 1 part of this firm, they get all of it. wealth management banking, research, investment banking, asset management, are all connected, not siloed. That's the product, people with good judgment working together, which brings me to where we're headed.

Our next milestones are still $10 billion in revenue and $1 trillion of client assets. We call them 10 and 1. We've doubled this firm 5 times in 28 years. I'm not going to guarantee the fix. I can tell you we'll approach it the same way we've approached the first 5, now by predicting the future, but by showing up, doing the work and earning trust 1 client at a time. 15 years ago, we began the bondhouse in safe. The world is far more complicated now. Markets are faster, technology is so much more powerful and the geopolitical landscape is as certain as I've seen at least in my career. But the promise is the same. Your wealth matters to us because you better look. And that's what customer was built on, and that's what we'll keep going on. United States have led the world in innovation for generation and artificial intelligence is no exception. I believe we'll keep leading not only in financial services but across the industries and institutions that shape the global economy. That leadership carries responsibility. I'm proud of what we've built at Stifle, definitely proud of our people, and I'm proud to be an American running an American for the greatest capital market system the world has ever done. -- our shareholders, our associates, our partners, vendors and everyone. Thank you for your trust and your partnership.

Thank you. I would now ask the Secretary to read any questions that have been asked to me or the representatives of KPMG. Do we have any questions?

There are no questions.

No question. That's good. All right. Then Don would ask the secretary to report on Validata state whether any other business is promptly before this meeting. Each of the following has received a majority of votes cast to serve as Director of the company for a 1-year term or until a successor has been elected and qualified. Adam Berlin, Marion Brown, Michael Brown, Visa Carney, overt Grady, Tim Cavanagh, Bankasi, Laura Marcus, Victor Nesi, a Peacock, Tom Weisel and Michael Zimmerman. Each of the following items has received a majority of votes cast and has been approved. Item 2, the advisory resolution on executive compensation. Item 3, adoption of an amendment to the company's certificate of incorporation. Item 4, authorization of amendments to the 2001 Incentive Stock Plan 2018 restatement and Item 5, the resolution ratifying the appointment of KPMG as our independent accounting firm for 2026.

I'm aware of no other business properly before this meeting and know of no reason why this meeting may not now be matured. Mr. Fisher, and everyone, thank you, that being so that I declare this meeting as a chart. Thank you.

This concludes the meeting. You may now disconnect.

Good day, and welcome to the Stifel Financial Q1 '26 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.

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. 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. 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. That includes a nonrecurring 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 first quarter. 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. So I want to be transparent. Last year's results were impacted by $180 million legal accrual, which was unusual to say the least. 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 the first quarter 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 wildcard remains the conflict in Iran and its potential impact on energy prices, inflation and ultimately growth. 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 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. Global Wealth Management delivered record first quarter net revenue, driven by record asset management revenues and growing adviser productivity. We also generated record first quarter investment banking revenue, producing a record first quarter for our institutional business.

Our firm-wide pretax margin was more than 22%, reflecting continued robust wealth management margins, coupled with an institutional pretax 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, at the risk I cite remain within a range of market expectations, we are confident in a strong 2026. That confidence is grounded in something more than 1 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. 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 -- the technology enables our advisers, 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. 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. But 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. And 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. 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. 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. Stifel had essentially 0 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. It reminds me of the scene and it's a Wonderful Life where Potter is trying to buy bailey billing and loan shares at $0.50 on the dollar during a run in the bank. 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 surround 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. 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. 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. 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. or if the yield comes from investing 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. But 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. And for those who say this is about protecting the incumbents, if that was true, we wouldn't be building the capability at all, 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. 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. So Jim, please take us through the numbers.

Thanks, Ron, and good morning, everyone. Before I jump into the financial results, I'll remind everyone that the EPS numbers are reported on a split-adjusted basis following our 3-for-2 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 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. 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.

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, but to highlight the miss to consensus expectations was driven by lower corporate or nonbank net interest income. Expenses were well controlled and benefited from the strategic actions Ron referenced earlier. Both our comp ratio and noncomp 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-U.S. operations. Turning to Slide 4. 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. These results are particularly strong given the sale of SIA reduced our transactional and asset management run rate for 2 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. 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. 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 as market volatility impacted fund banking late in the quarter, more than offsetting growth in residential mortgages, securities-based lending and C&I loans. Nonbank interest income, particularly within corporate interest and securities lending, was approximately $3 million lower than originally forecast. For the second quarter, we expect net interest income in the range of $280 million to $290 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. 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 5. 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 with a 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 health care. Equity capital raising was $67 million, our second strongest first quarter result with increased issuer engagement led by health care, 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 #1 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. 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 pretax margins year-over-year. While we made significant progress in our non-U.S. 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. We are certainly conservative in our comp accruals early in the year, and we'll continue to look for leverage as the year progresses. Non-compensation expenses totaled $293 million, up 8% year-over-year after excluding the legal accrual from the first quarter of 2025. Our operating noncomp ratio was 19% and was at the midpoint of our full year guidance.

The declines in our comp and noncomp ratios benefited from the strategic actions referenced earlier, and we remain confident in our full year guidance. Turning to Slide 7. 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 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, Stifel would obtain some relief across risk-based capital requirements, but these rules would have no material impact on our Tier 1 leverage 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. And with that, Ron, back to you.

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, but 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. So with that, operator, please open the lines for questions.

[Operator Instructions] We will take our first question from Devin Ryan with Citizens Bank.

Question on AI. Ron, I appreciate the context you gave in the script. But a couple of 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 advisers? Or does that impact pricing that advisers 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? And so that's a revenue stream that firms have to think about. Love your thoughts on both of those.

Well, look, the technology is powerful to your first question. And it just really helps adviser 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, putting -- 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 advisers do, is 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. And 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. They're their outcomes change their risk tolerances change. And so that's an ever-moving target. So to answer your question, what will happen, I believe, at least on the adviser side, is that this will make our advisers more productive. It will unearth potentially and it will more opportunities, more ideas, more things on tax savings idea, more on state, more things that will help our advisers do what they do, which is generally be the financial adviser to not only individuals but to families. So I see this as a tailwind to advice, not a headwind. And it's a more sophisticated version. We've seen it in the past with robo-advisers and a number of things. This technology will be better, but again, I'm going to say it's a tailwind to the advice business. As it relates to agentic-type models and the cash optimization, look, we've been through that, Devin. I mean we have about -- I'm going to 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 cash between sweep deposits, smart rate, money market funds, short-term treasuries, is about $60 billion, which is frankly, about consistent, a little 11%, 12% of our AUM toward that portion. And of that, when you get right down to it after you take out adviser cash, we have about $7 billion that is, if you would be unsorted. I love that industry term. And look, it's transactional cash. It's -- 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. So will some technology come that will help optimize that? I think so. But at what cost, it's not free and what kind of movement and what kind of transactional things are going to happen. Listen, I think it will 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. And I think, well, look, if we could do that, we do it anyway. We're not going to do it just because of this. So not overly concerned about the second, very optimistic about the first part of your question.

Maybe add a little bit of detail there to support what Ron was saying is of the $60 billion as of the end of the first quarter, $12 billion was in sweep. So roughly 1/3 of that is in advisory cash accounts. And so that's not subject to the same type of sorting dynamics that we're talking about here. So that's how you get to that $7 billion or $8 billion that's remaining. And 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. 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 0. So 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. So we've diversified and have already seen the sorting occur to a material extent.

Yes. And not -- and I answered the question, I tell you it's not that big of an issue. I'm giving a lot of oxygen to it. But I do think about these things. And I think for Stifel, really is not a big issue. I mean look at the numbers. But you can take it to the broader financial system and 0-based interest in many banks and stuff, and you wonder what will happen there. And my viewpoint is that the market will adjust. If rates go up, so our loan banks earn their spread. and return on capital. So enough said, that's a lot of oxygen to something that I'm not thinking that much about.

I appreciate it to both of you. And it's a question that we're, I think, all getting quite a bit. So just addressing it. I appreciate it. I'll ask a quick follow-up just on investment banking. Obviously, a very good start to the year. It 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, are middle market sponsors reengaged right now? Or do we need to see them ramp up and that as the year progresses?

Yes. Look, on the depository side, I was talking with Tom Michelle a little bit about this. And what I would say is that -- in fact, it crossed 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 talk -- reading the press saying about $150 oil and interest rates may be rising and what happens to credit spreads, et cetera, et cetera. And I think that, that is a pause. There's some market concerns about have the deals been done with enough of a premium. 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. And 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, right, people are incented to do that. It's not linear, which is what we're seeing now. And that's -- and you need the same thing as it relates to 2026. deals got to be announced in the next couple of months. Otherwise, the 2027 deals. But that's what I would say. And 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.

Specific to sponsor, we're seeing a lot of activity and 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.

Software.

Software specifically.

We will take our next question from Mike Brown with UBS.

So Ron, you're allocating more capital to recruitment in 2026 and some good organic growth in the first quarter. Maybe can you just expand on how the recruitment and productivity efforts are faring relative to your expectations? Maybe what specific profile adviser are you kind of more aggressively targeting and having success recruiting? And then how is the competitive space from the wirehouses or some of your other peers? How is that been impacting recruitment and maybe cost of recruitment?

Well, I'll take your second part first. The competitive environment, a number -- a couple of the large firms, you may know some of them yourself, have really, really ramped some of these -- the competitive aspects of transitional pay, the so-called deals. And that has -- that's been interesting. But 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 with an RO -- return on invested capital of 5%. It just doesn't work. So I'm very confident. What I'm mostly pleased about is our ability to compete, attract and recruit large teams, which is relatively been in the last, say, 10 years, new to Stifel and that we have that, and we're talking to a number of large teams. And that, to me, is encouraging. Sorel you get this every quarter, same question. My answer seems to be the same every quarter.

I appreciate the color there, Ron.

Yes. I mean it's -- no big news there in terms of -- we're still -- we're #1 in J.D. Power. We're #1 in adviser. 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. 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 really know -- I didn't know that much about Stifel. And 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. But that's still an area that we can improve, we will improve, and then that will improve our results.

Great. That makes sense. And just as a follow-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 and in 2026. And we've had the Middle East volatility this year that seems to have contributed to some delays. But what's your read on maybe the ECM calendar specifically as we think about the back half of 2026 for Stifel and the industry here?

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. And we've seen delays that are a week or 2. So people are -- what that told me at the time was that people -- clients or issuers and buyers are just concerned about volatility. And the volatility has always impacted ECM, and I think that's the case now. But 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. But it's healthy, I think. And now the environment changes in a nanosecond, as you know. But as I sit here today, I would say that, that's a healthy market.

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

So 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. But this is perceived to be a pretty meaningful potential source of pressure eventually on idle sweep Cash, whether it's Agentic AI, tokenization, lots of technology that's in the nascent stages of development. And I was hoping you could simply speak to the levers you might consider if headwinds 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?

Yes. Well, I read your report this morning, and so well thought out, I would tell you that. And the -- but again, when I put it down, yes, I didn't go oh my gosh, we got an issue here at Stifel because we don't. But as it relates -- Stephen, I don't -- I do think that there will be changes, okay? And there were changes on 0 rate commissions. And one of the leading consultants at the time said there wouldn't be another commission trade done by 2004. And the robo advisers we're going to do this, and we're going to do that. And it's a business model. And the business model will adjust. And so if, in fact, gen 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. You'd have to actually give something -- access to everything, not only your recurring expenses, but your nonrecurring and you're clearing checks and your -- all your credit cards, not just your one single account. And that's not going to be done for free. And so you're going to sit there and tell me that because of transactional cash is -- has a lower yield that someone is going to do and pay for that and give all that information, maybe, but it's a ways away, in my opinion. And 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. And as it relates to platform fees, which I know you referred to in your report and you just did in your question, platform fees and 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. So those levers are actually unpulled at Stifel today, while many of our competitors do, do that. And so a fair question to me would be, well, why don't you do it? And my answer is it's not that easy, okay? It just -- I'm reminded of a commercial we did years ago where the person says, "Hey, what are all these fees? Well, I don't -- I have an idea, why don't we charge a fee on a fee. And the guy, that's a good idea. It's just as difficult to do. And I'll be watching. And if the market -- if the cost of advice across the industry begins to be consistently with platform fees and done for firms that are trying -- that have bigger issues with cash sorting than we do. And you know that, Stephen. 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. So 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, and we will continue to do so.

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

Yes. I'd be interested when you get your feedback as to the number of firms that will say, "Oh, yes, it would be easy to institute these fees because I would take the other side of that.

We'll certainly keep you in the loop, and I appreciate that perspective. 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 shuttering some of the businesses. And I was also hoping to get longer perspective on how this informs at least your ambitions or appetite to expand outside the U.S. and tying that with your M&A appetite in general, at least in the current environment what remains a heightened level of uncertainty.

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 to Jim and let him decide answer in a moment. So 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 Exchange or the Nordics, and we would do IPOs and we do sales trading and research over there. And what we found was that, that market because of MiFID and what they've done raised to themselves is that, that business, even at scale, I'm not sure you make any really money, but you certainly were not making -- 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 their objectives were, 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. And I -- and we started -- and we've seen this. We just did a large transaction, European-based. We listed it on the U.S. Jim referred to it. And so what we decided to do strategically, and it frames or you can frame my thoughts about this is to lead our U.S. capabilities into Europe through advice, our advisory platform. And then we -- and then when we have an equity capital markets transaction, for the most part, they're coming back to the U.S., especially in health care and in areas where we have some expertise. So 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. And frankly, many of the clients' ultimate goal, which is to access the U.S. capital markets. Jim, I don't know.

So in terms of some numbers to support the question you're asking here is 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 SAA. And we've told you in the past, that's about $100 million of revenue, probably roughly half and half between the 2 groups, the SAA as well as the European equities business. you think about it, that was probably somewhere between 70% and 80% comp margin that we're going to save off of. And then we talked about $20 million to $25 million of non-comp expenses gets you roughly to around a breakeven number of pulling those revenues out, and that's a good way to think about it. As we look at the non-comp expenses and 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 or what we talked about as we kind of framed this up last quarter. And so 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 restructuring. Think of some of the longer-term contracts like leases, think of subscription agreements and things like that. So 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-U.S. business. given some of the larger fees Eran talked about, 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.

And 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. So I mean, it's a good thing.

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

So 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. But maybe could you provide a little bit more texture around what caused that versus your prior expectations? And then in the context of the $282 million to $290 million 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?

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.

Right. So in terms of this quarter, obviously, the nonbank NII is the main piece there. If you look at kind of the consolidated NII numbers and back off what you see in Global Wealth Management, you can compare 1Q year-over-year, and you can see the nonbank is down about $3 million. So it's consistent. That delta is consistent with what we described there. Most of that -- some of it is corporate interest. It wasn't securities-based lending. It was kind of stock -- securities lending, stock lending, if you will. That's opportunistic based upon individual hard to borrowers 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. But the bigger piece of the $280 million to $290 million NII guide is going to go back to asset growth within the bank. And we said on the call that we still feel comfortable we have 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. So as we look forward, we feel comfortable. Our original NII guide is $1.1 billion to $1.2 billion. We're already annualizing the low end of that, and we think there's a fair amount of growth that can occur in the second through fourth quarter that can help support getting higher in that range. So we feel pretty good about where we're at.

Yes. And it's not necessarily NIM expansion. It's just growing -- it's just growth. And we've never growth is always there in banking. That's not the issue. The issue is prudent growth, and that's what we're doing. But we see a lot of opportunities. I've always -- I am still optimistic about what we're building in venture and for the innovation economy, and that is -- that's got nice growth written all over it.

Great. And then you touched on this a little bit, Ron, in your prepared remarks about concerns around the software loans and whatnot. But curious to hear your -- what you're seeing in the CLO portfolio. So we see spreads widen out in the levered loan market, equity and lower-rated layers of CLOs have been under some pressure recently. So totally appreciate that you're in the higher layers, which have been fine. But what underlying trends are you seeing?

Yes, Tim.

Yes. 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 classes, 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. 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. 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. So we feel very comfortable with the overall credit exposure in terms of CLOs.

Yes. And look, I've always said that, Bren, what people are talking about is the lower rated tranches. That's really what they're talking about as you would expect. 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%. And every time I look at it, which I think I did in the first quarter, I just put it down. It's not an issue for us when we look at -- 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. But 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 flow. So 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. And thus far, over 10 years, risk weighting, risk-based capital, the way that it's allowed us to sort cash because 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.

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

I got almost as enthusiastic of response as you gave to Steve, so I appreciate that. So I wanted to ask you guys a question around the bank growth and loan growth and 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? I'm just trying to think about the funding of the bank on the forward.

Well, both, but I would have -- Alex, I thought you might have complemented us on our deposit growth, okay, relative to our muted loan growth, okay, in terms of -- I think our deposit growth was $2 billion. And 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. So some of those deposits are not sweep. So 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. But in terms of our smart rate and our venture deposits and our sort of non-wealth deposits, that growth has been very strong. And that's -- to then answer your question, that's how we're funding that growth.

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 Bancorp. 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. And as you think about that, that grew $1.2 billion in the first quarter. And 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. 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.

Yes. And I'll end by saying, 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. So there's a lot of work that we're doing to have a very competitive platform. And I see the potential. It's a great question. But again, we've said that it's almost self-funding what we're doing.

That's really helpful. Question on the buyback. Really nice to see pickup. I know you guys tend to do a little more in the first quarter than typically over the course of the year. So as you think about your share repurchase plans from here on through the rest of the year, any thoughts you'd share would be helpful.

Capital allocation, capital utilization, return on invested capital, all of those are the inputs to the model that will -- we're always buying back shares. The pace of -- that math changes daily as well as to what is. That's why we don't just sit there and say, we'll buy x number per day. 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, our stock has been undervalued. So you see us buying back our stock.

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've talked with the balance sheet growth expectation about the $4 billion, say we do the full $4 billion. 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 if we're so inclined.

We'll take our next question from Bill Katz with TD Cowen.

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 advisory side or on the institutional side and what the sort of cash levels look like just net of maybe billings and/or seasonal tax payments?

Yes. Look, I said client engagement remains strong. It certainly hasn't -- I just said that, Bill, and that wasn't through the quarter, I guess, my comments were through this call. And 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 Methosthropic thing is concerning. There's a number of things that can change investor sentiment and perspective very quickly. And this is one of those environments where it just feels like there's a lot of uncertainty. But today, things are good. Engagement is strong. Jim, I don't know if you comment on cash.

Right. 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. And to provide some detail, you're down probably $1.4 billion in sweep, so call it about $10.6 billion. You're down about $400 million in Smart rate. And then again, you're seeing a $700 million increase offsetting some of that in the other treasury deposits.

Yes. But you know what, I would just say that yes, this is so seasonal. -- right around. I wonder if we've ever had an increase in April, okay, ever. is an outflow for -- and it's a lot of taxes. That's just what happens. And that's across the street, Bill. So that's -- I don't want those comments to be taken as some trend. It's April.

Of course. And then 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 next with the headlines coming out of Middle East is the 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?

Look, I think our banking is overall strong. We're seeing real pockets and our at least what our guys tell me is it's strong. I think we caution a little bit on depositor. We're big in depositories. And so that feels like it's a low a little bit, but that can change quickly, too. And software and 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. But overall, as I've said, if the risks land within the range of market expectations, we see the business improving. It's -- if some of these things get resolved, it could really improve. It's not just all downside from here. 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, and we all know this. I'm not telling you anyone on this call anything that news from my desk.

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

Well, I would just want to complement all the questions. actually was very robust questions, and we like being able to engage and give you our best answers, and I appreciate that. 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 we'll -- 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. Thank you.

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

Good day, and welcome to the Stifel Financial Fourth Quarter 2025 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.

Thank you, operator. Good morning, and welcome to Stifel Financial's Fourth Quarter and Full Year 2025 Earnings Call. On behalf of Stifel Financial Corp., I will begin the call with the following information 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 the 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 our earnings release.

I will now turn the call over to our Chairman and Chief Executive Officer, Ron Kruszewski.

Thanks, Joel, and good morning, everyone. 2025 was another record year for Stifel. Firm-wide revenue of $5.5 billion increased 11% and marked the first time we've surpassed $5 billion in revenue in our 135-year history. Record performance in Global Wealth Management and our second highest year of institutional revenue drove these results. Given the volatility we experienced throughout the year, this performance highlights the breadth, quality and resilience of our franchise.

Stepping back, 2025 was a strong year for markets, but it was not without its challenges. Economic resilience, healthy balance sheets and improving capital markets activity supported growth even as volatility, geopolitical risk and policy uncertainty remain very real. As the environment strengthened during the year, our focus on client service allowed us to capitalize on the improving market trends. That focus is reflected in J.D. Power ranking Stifel, #1 in employee adviser satisfaction for the third consecutive year. And in the fact that 2025 was our strongest financial adviser recruiting year since 2018.

On the institutional side, I'd also highlight the performance of our KBW subsidiary. In 2025, we participated in approximately 75% of depository M&A advisory transactions measured by deal volume, underscoring our leadership position and financials and the depth of our client relationships across the sector. Building on that momentum, this morning, we announced another depository M&A transaction, representing Stellar in its sale to Prosperity Bank. This reflects the continued level of engagement we're seeing across bank boards and management teams of strategic conversations translate into executed transactions.

Before getting into the details of our results, I want to step back and briefly address our business model because it's central to understanding Stifel's competitive position. We do have a $41 billion balance sheet. Approximately 80% of our revenue comes from wealth management, asset management, investment banking and capital markets, with net interest income representing about 20% of the mix. Our balance sheet exists to serve our clients, not as a stand-alone business. It allows us to provide individual lending, credit and treasury capabilities to companies in the innovation ecosystem and capital solutions to institutional clients. It's client-serving infrastructure that supports our core business. This structure gives us meaningful competitive advantage.

Unlike independent wealth managers, we can enhance the full client experience through integrated lending and cash management. Because our model is advice led, we generate the growth and returns on an advice-based business. That's why you'll hear us focus our commentary on the businesses that drive our growth trajectory, Global Wealth Management and institutional. The balance sheet enables those businesses, but it is not itself a separate business line. We use our balance sheet to support our clients when it's right to do so, while we're remaining well capitalized.

Our bottom line results reflected increased scale and operating leverage. Excluding the first quarter legal accrual, we delivered EPS of $7.92, a pretax margin of 21% and for 2025, a return on tangible common equity of roughly 25%. Strong earnings again, generated meaningful excess capital, which allowed us to continue investing in the business, grow our adviser-led client serving platform, acquire Brian Gardner and the employee wealth business from B. Riley and repurchased shares.

To put our 2025 performance in proper context, more than two years ago on our third quarter 2023 earnings call, we discussed our ability to generate. At the time, we look forward, it was our ability to generate $5.2 billion in revenue and $8 a share in normalized environment. And look, at the time, those targets were viewed as aspirational particularly given that we were on our way to delivering 2023 revenue of $4.3 billion and earnings per share of $4.68. In 2025, we exceeded that revenue target and essentially reached $8 per share in earnings despite market headwinds in the first quarter. That outcome reflects reinforces both the durability of our model and the operating leverage inherent in the business.

Stepping back and taking a longer view of our growth, the trajectory of the firm has been consistent and disciplined. Over the last decade, Stifel's revenues are up 137% driven by meaningful expansion across both of our operating segments. In Global Wealth Management, revenue has grown 157% over the last 10 years, reaching $3.5 billion. That growth has been driven by sustained adviser recruiting, higher adviser productivity, growth in fee-based assets and the continued build-out of our client-serving platform, which has improved both the growth and consistency of our results.

In our institutional business, revenue has nearly doubled over that same 10-year period, reaching $1.9 billion. That growth reflects diversification across advisory, capital markets and public finance, deeper industry coverage and continued investment in talent.

That long-term execution is also reflected in shareholder returns. Since 1997, the S&P 500 is up roughly 9x. Microsoft, one of the most successful growth companies of our generation is up approximately 45x. Stifel, over that same period, is up around 76 x.

Even over a more recent horizon, the story is consistent. Over the last 5 years, Stifel's stock is up roughly 2.5x when Microsoft has roughly doubled and the S&P 500 has not quite doubled. Reflecting that performance and the confidence the Board has in the durability of our earnings and cash flows, the Board of Directors authorized an 11% increase in the common stock dividend beginning in the first quarter of 2026. In addition, the Board authorized a 3-for-2 stock split effective February 26, 2026 for shareholders of record as of February 12, 2026. This marks the fifth stock split during my tenure.

Taken together, these results reinforce what we believed for a long time that disciplined growth, consistent investment in our people and platform and a long-term mindset can create significant value for shareholders across market cycles.

With that context on our business model and long-term performance, I'll now turn the call over to our CFO, Jim Marischen, to walk through our quarterly results and outlook in more detail.

Thanks, Ron, and good morning, everyone. The fourth quarter capped another strong year for the firm. Revenue was a record $1.56 billion, surpassing last quarter's record by 9% with both operating segments delivering solid results. Global Wealth Management once again led the quarter, delivering another record result, while institutional revenue increased 28% year-over-year, marking its second strongest quarter on record. The performance across both segments drove record EPS of $2.63, a pretax margin of more than 22% and a return on tangible equity of more than 31%. During the quarter, we also announced the sale of Stifel Independent Advisors. Combined with the actions taken earlier in the year, this positions the firm for improved operating leverage going forward.

Turning to Slide 4. I'll walk through our results relative to consensus estimates in the prior year. Total net revenue exceeded consensus by $50 million and increased 14% year-over-year. Investment banking revenue was the primary upside driver, exceeding expectations by $70 million or 18%. Higher advisory revenue was the main contributor and we also exceeded expectations for both equity and fixed income capital raising activity. Transactional revenue came in 4% below expectations, primarily due to lower fixed income revenue which more than offset modestly higher wealth management revenue.

Within fixed income, the results were slightly below our prior quarter guidance. Asset management revenue was in line with expectations. Net interest income was at the high end of our guidance, it was $2 million below consensus. This was a result of the decline in fee income recognized during the fourth quarter. Expenses were well controlled, with the compensation ratio and total non-compensation expenses generally in line with expectations, allowing for operating leverage on a higher revenue base.

The effective tax rate for the quarter was 14.1%, slightly above both guidance and consensus. During the quarter, we recognized the benefit related to stock-based compensation which was offset by an unfavorable return to provision adjustment on foreign taxes.

Turning to Slide 5. I'll start with Global Wealth Management, which remains the foundation of the firm's earnings, capital generation and long-term growth. 2025 marked our 23rd consecutive year of record wealth revenue, with total revenues exceeding $3.5 billion, driven by record asset management and transactional revenue, along with our second highest year of net interest income. Fourth quarter results, they were equally strong, with record quarterly revenue of $933 million, again driven by strength in both transactional and asset management activity. We ended the quarter with record total client assets of $552 billion and record fee-based assets of $225 million, reflecting continued market appreciation and net new asset growth in the low to mid-single digits.

Recruiting was a significant contributor to growth in 2025. We added 181 financial advisers, including 92 experienced advisers with trailing 12-month production of $86 million. This represents more than double the number of experienced advisers added in 2024 and a meaningful increase in trailing production. Our recruiting pipeline entering 2026 remains strong, and we expect another solid year.

Our client-driven balance sheet activity continues to enhance both earnings consistency and client engagement. As shown on the slide, the economics associated with client-driven balance sheet usage has been relatively unaffected by rate cuts over the past year. Given the floating rate nature of our assets and liabilities, we remain relatively rate agnostic, with growth in net interest income, driven primarily by client activity and balance sheet expansion rather than changes in interest rates.

For the first quarter of 2026, we expect net interest income to be in the range of $275 million to $285 million. Client cash and funding increased meaningfully during the quarter. Suite balances increased by $510 million while non-wealth client funding increased by nearly $1.5 billion. This was the strongest quarter of growth we've seen in our venture activity and reflects continued momentum from investments made in that group.

In addition, we saw a more than $1.4 billion increase in third-party money fund balances. As a result, we entered 2026 with significant capacity to support wealth-related and institutional client-driven balance sheet growth while maintaining a conservative credit risk profile.

Turning to Slide 6. I'll discuss our institutional group, which provides meaningful upside as market conditions improve. For the full year, institutional revenue exceeded $1.9 billion, up 20% year-over-year, marking the second strongest year for the segment. Fourth quarter revenue was $610 million, up 28% year-over-year, driven primarily by investment banking. Investment banking revenue totaled $456 million, up 50% year-over-year. Advisory revenue increased 46% to $277 million with continued strength in financials and improving traction in technology and industrials. Equity capital raising revenue was $95 million, double the prior year, led by health care, financials and industrials.

Fixed income underwriting reached a record $76 million up 23% year-over-year, driven by increased public finance activity and higher corporate issuance. We remain the #1 negotiated issue manager in public finance by deal count. We're also seeing increased success in larger par value transactions.

Investment banking and advisory pipelines ended the quarter at record levels, providing strong visibility into the first quarter and beyond. Transactional revenue declined 10% year-over-year due to an 18% decline in fixed income revenue, which more than offset a 6% increase in equity revenue. The fixed income results were impacted by the government shutdown, and timing of gains in prior periods.

Turning to Slide 7. Expenses remained well controlled during the quarter. Non-compensation expenses totaled $307 million up 6% year-over-year, primarily reflecting increased investment banking gross -- associated with higher advisory and underwriting activity. As a result, our quarterly adjusted non-compensation operating ratio improved by 200 basis points. For the full year, excluding the first quarter legal accrual, our non-compensation operating ratio improved by 140 basis points, reflecting the benefits of increased scale, improved operating leverage and a more favorable revenue mix. Compensation expense remained well aligned with revenues coming in at 58% for the quarter and the full year.

Despite quarter-to-quarter variability, improvement in our overall expense profile continues to be driven by the combination of scale, growth in net interest income within wealth management and actions taken to simplify business support. 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 18.3%. Based on a 10% Tier 1 leverage target, we ended the quarter with more than $560 million of excess capital.

We repurchased 335,000 shares during the quarter and have 7.6 million shares remaining under the current authorization. Assuming no additional repurchases and a stable stock price, our fully diluted share count for the first quarter is expected to be approximately 109.7 million shares. On a pro forma basis, reflecting the recently approved 3 for 2 stock split, that equates to approximately 165 million shares.

And with that, Ron, back to you.

Thanks, Jim. As we look ahead to 2026, the setup is constructive. Client engagement remains high, strategic activity is picking up and capital is beginning to move more decisively. At the same time, we remain mindful that risks are ever present that the market conditions can change quickly. Our focus remains on disciplined execution, serving clients and building durable performance through the cycles.

Our adviser-led integrated model continues to differentiate Stifel. We're attracting high-quality advisers, deepening client relationships and seeing clear evidence that a platform combining wealth management advice, institutional capabilities and balance sheet support creates value that clients recognize and that advisers appreciate.

Before turning to guidance, I want to briefly highlight how our business are positioned as we enter the year. Our Wealth Business entered 2026 with strong momentum. Recruiting engagement pipelines remain robust with experienced advisers attracted to Stifel's platform technology and integrated model. Fee-based asset flows remain elevated with fee-based assets up 17% from the end of 2024. And revenue, as always, seems to be true, follows assets.

Our venture initiative continues to gain traction, supporting lending activity, deposit flows from venture-backed firms and their stakeholders and fund lending relationships. Elevated client asset levels continue to represent opportunities, supporting lending initiatives and providing flexibility for future investment, alternative allocations and opportunistic deployment by our clients.

We're also seeing increased momentum across our institutional business with record pipelines. A few areas are worth noting. We continue to see strong momentum in advisory supported by active pipelines and increasing client engagement. Equity capital markets activity is off to a strong start to the year with issuance active across sectors and products. We continue to see a pull forward in the new issue calendar where possible. Pitch and mandate levels are increasing and while there have been some volatile sessions, markets are functioning well with strong investor engagement. Financial institutions activity is robust across banks, insurance and financial technology as evidenced by the Old National Bancorp offering, which we priced on Monday, which was upsized based on demand at attractive spread levels. And of course, I've already mentioned or recently announced this morning, M&A transaction.

Health care has experienced one of the strongest January new issues in several years with a growing backlog of biotech IPOs that is helping drive broader market momentum. Technology and industrial technology remain active, driven by AI and infrastructure investment with large transactions and energy infrastructure services and defense being well received by the market. Our public finance backlog remains strong, and a normalization of the yield curve is a positive development for our fixed income rates and credit businesses compared to the headwinds created by the sustained inversion of the yield curve following the Fed's rate hikes beginning in 2022. Taken together, these trends across wealth and institutional position us well to continue executing our strategy, gaining share, delivering operating leverage and compounding earnings disciplined through the cycle.

So this brings us to our guidance for 2026. Total net revenue is expected to be in range of $6 billion to $6.35 billion. I would note that this reflects the impact of the SIA sale and the closing of our European equities business, which together represented $100 million of annual revenue. So our guidance does not include that $100 million of revenue, which we had last year. We think that these changes will be offset by improved expenses and improved margins. Net interest income is forecasted to be between $1.1 billion and $1.2 billion, supported by approximately $4 billion of balance sheet growth. We have lowered our expense ratios to reflect increased operating leverage. The compensation ratio is now in the range of 56.5% to 57.5% and non-compensation operating ratio is 18% to 20%.

So what does this mean for Stifel going forward? Simply put, our long-term track record of disciplined execution gives me confidence that we can once again double this business over time. Yes, I still believe we'll reach $10 billion in revenue and $1 trillion in client assets. And no, I'm not going to give you a time frame.

With that, operator, please open the line for questions.

[Operator Instructions] We will take our first question from Mike Brown with UBS.

So Ron, maybe just to start on recruitment here. So what factors do you think will kind of shape recruitment in 2026? And then can you maybe just give an update on how you're approaching recruitment of the high net worth adviser space, specifically?

And maybe just one last follow-up there, how are you thinking about productivity expansion from the experienced advisers that you bring on to the platform? Maybe you could touch on the B. Riley advisers that you brought over. Did you have you noticed a pickup in the productivity from that adviser cohort specifically?

Yes. Well, your last question first. I, for sure, have noticed a productivity increase in B. Riley, now some of that's market, but a lot of it is just platform technology products. We have well-developed platform. We have an integrated lending and credit model, all of which helps us deal with clients across a broad spectrum of their financial needs, and that equates to higher productivity.

As it relates to recruiting, let's pass this prologue. I get this question all the time, I feel like I've been at it for 28 years and we continue to recruit. What I would say has changed over the years is the level of teams that come in, I think I've said in previous calls that few years ago, we would say, "Oh, we hired 10 people doing $7 million." And now we're saying "Well, we hired 1 team doing $7 million." And it's really how our focus is we're recruiting people who do a mix of business. They do advisory for sure, but they also will do brokerage and they'll also participate in lending activities and in deposits. So it's a broad mix of clients that we like to look at.

But to answer your question, recruiting strong. If anything, I'm thinking about even increasing our allocation to recruiting because I think our platform and where we are, allows us to really gain even more market share if we choose. So that's on my mind.

Okay. Great. And just as a follow-up, just to change gears a little bit and shift over to the institutional side. So very strong investment banking results this quarter, clearly a lot of strength coming through on the financial side, and particularly in advisory. As we now move into 2026, are you starting to see the activity really broaden across the platform? And where is maybe the deal momentum accelerating the most in your observation?

Well, I think that as you -- we went into 2025 in the sector, at least on advisory that picked up first and that we just had a tremendous year both in financial institutions, primarily depositories, although we've done a lot in fintech. But where we see -- we see that continuing, for one, but we see an increase now in activity in health care. Health care at one point was one of our largest sectors, and we're seeing equity capital markets transactions and other transactions in health care.

And if I can sort of say the same story again and again, when I talk about industrials, tech and consumer, I would say that as we looked last year, those businesses started to pick up in the fourth quarter. And now if we would keep geopolitical risks that may and let the market function normally. I see a lot of business to be done not just in FIG, but in industrials, tech, health care and consumer.

I'd also add to that, sponsor activity is really not all the way back, but is noticeably improving. There's still a runway for significant growth related to sponsor activity if markets hold up through the remainder of 2026. So that's definitely an area of growth as well.

And a lot of people like to use the term the private equity unlock. And we've been talking about that for years. When will private equity begin to unlock some of these companies. And we're seeing signs of that. Certainly, robust market valuations are helping that. But when you think -- bring all of this together, it's a very conducive environment as we sit here today.

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

So maybe to start just on the ECM outlook. And Ron, everyone recognizes the strength of the advisory franchise, particularly in fin services. If I look at advisory fee share, it kept pace with both racketeers. DCM fee share was also consistent with the bulges. I'd say the more surprising stat was the magnitude of ECM share gains. Full year revenue growth, I think, outpaced that group by about 40 percentage points. And I just want to better understand what's driving some of that share strength in ECM relative to your large peers. And your confidence level that ECM fees should continue to build this year given the pipeline commentary and you were alluding to a strong start to '26 as well.

Well, Jim, go back to '21 and look at our ECM fees while I answer this question, give us something to look up, Steven, while we would do this. But Yes, I think that it's nice of you to point out that we've done that. I view it as the firm. We were talking before we got on the call about some recent deals that we've done in both fixed income in equities where we have been lead left with some rather large firms to our right and as co-managers and Stifel has been on the left, which 5 years ago didn't happen and it just didn't happen. And so on those deals alone, obviously, we're gaining market share because we're getting more economics on those deals.

And what I see happening is not some seismic shift in all this. It's just that we are moving up in our participation levels, and we're doing more deals that go to the -- just the level of capability that we brought to the farm. And 10 years ago, our institutional business was half of what it is today and we didn't have as many MDs. We didn't have the capabilities. We didn't have the debt. We didn't have the ability to leave left $500 million subordinated deal with the large firms to our right.

All of those things speak to the fact that we are really achieving our goal, which is to be a premier wealth management and middle market, if you will, investment banking firm, and you're seeing it. So thanks for pointing it out.

ECM revenues back in 2021 for the full fiscal year were $230 million. So we were above that in what we produced in 2025.

Okay. In ECM...

It's pretty extraordinary...

Yes. We've exceeded 2021, but we don't think -- in 2021, I think we're running at 105% of capacity. And today, I think we're running at 50% of capacity. And that's an important -- don't quote me on those numbers, that's off the top of my head, people always want to know what capacity actually means. But I feel that we have a lot more ability to do things because instead of being a 5% co-manager, we're a -- same deal just higher economics, and that's what you're seeing.

Right. Well, rest assured, we won't reflect those numbers you just quoted in the model around capacity. But I did want to ask you on the comp guidance.

They might [ break your allowance ]. What?

But I did want to ask on the comp guidance. And if I look over the last 2 years, the revenue guides come in better than the midpoint of the outlook range that you guys have provided. The comp ratio, however, has come at the higher end. And the guidance for '26 contemplates pretty meaningful comp leverage, a 50% incremental margin. And just want to better understand how much of the comp improvement in '26 is attributable to the restructuring and business exits versus the, let's call it, improved business as usual comp discipline? And what gives you confidence that this time will be different and the comp leverage will come through just given continued elevated competition for talent?

Well, first of all, I mean, we've been in our range and albeit we've been at the top end of our range. And I think if you step back a little bit, we don't operate in a vacuum when it comes to talent, right? We -- it's very easy to say, "Oh, our model is that and this is what we're going to do." And if you run just pure numbers, you would see comp leverage as productivity goes up. That's just sort of to be expected. And as you bring new recruits that you might be paying recruiting, you're going to bring those people online.

And what I would say, Steven, if you go to most of the Street, what you've seen is an uptick in the comp ratio over time. You look at your own universe. And we remain very consistent and what that is, is it's us trying to manage our growth while not giving up our margins. We've had -- if steady state people stay there, and we weren't recruiting would be driving our comp ratio lower. Now that's because of a lot of the investments we've made since 2020 across the board. We've recruited a lot of people, growth in recruiting puts upward pressure on the comp ratio. We've managed it very well.

All that said, I'll let Jim talk about it. We're doing a couple of things with the sale of SIA and the European restructuring, which alone left in a vacuum drive comp ratio lower.

Right. So again, yes, I'll focus on the sale of SIA and the European reorg here. Ron talked about in his prepared remarks as well as we noted in the slides, you're talking about $100 million of revenue here. In terms of compensation expense, both of those groups were well north of our consolidated 58% comp to revenue total. I would say most people understand generally where the comp ratio hovers around for an independent FA model. That ratio was probably a little bit lower for European equities, particularly since we have retained some U.S. distribution capabilities there, kind of in the after reward. But when you think through those things, that can give you a ballpark idea of where those comp savings are.

Now I'll just touch on the non-comp related to those two entities as well. The independent channel is obviously going to be more heavily weighted towards comp. So there's not a whole lot of noncomp savings there. You back off related to the SIA sale. But when you look at that in combination with the European rework, that could take a good $20-plus million out of noncomp when you look at '26 compared to 2025.

And then I just kind of highlight that when you look at our expense guide, as Ron kind of reiterated, both of those things then do contemplate additional investment across our existing businesses. But it can give you somewhat of a decent understanding of how we came up with those new ranges absent the normal course of just higher net interest income or the normal operating environment, but specific to these two transactions.

I think it's a great question, Steven and I'm comfortable with our comp ratio. We also take opportunities, just like every firm does. We take opportunities to recruit and build our capabilities and that goes the other way on the comp ratio. So we're -- we tend to be conservative. But you got to admit, we at least deliver within our range.

We will take our next question from Devin Ryan with Citizens Bank.

Stay on financial adviser recruiting, obviously, coming off of a good year. Ron, I should be good to get your perspective around kind of the future of adviser mix in the industry between kind of employee independent RIA, obviously, a lot of discussion over the last decade plus around tailwinds towards independent. But recently, we've seen pretty healthy and maybe accelerating or reaccelerating net new assets within some of the leading employee firms. So I just love to kind of hear what you think about maybe whether we're getting to an equilibrium of how many people want to be independent. Obviously, you have your trips on the employee channel, but at the same time, I also appreciate that you're taking advisers from the wire houses as well, so maybe you grow independent of what the wire houses are doing. So just love to get a thought on kind of the broader kind of remixing potential of advisers.

Yes, it's a tough question. In terms of remixing. What I would say is that the initial competitive landscape private equity. Remember, a lot of this gasoline to get this done was provided by private equity dollars and I would say that they started with a bang on being able to pay less on transition and sell the -- well you can be independent and all of that. And you got a lot of initial flows. And then it got quite competitive. And so now I think that, that plus rates coming down are double kind of whammy, a lot of the economics in the independent channels on the rate is on the cash side. And as that comes down, that puts the pressure on that.

So what I see is the overall in the competition, I see the ability to recruit at significantly higher levels. These PE firms are -- they want 20% IRRs. The math just doesn't work as many people think. And then the concept of trading paper, we'll pay cash and many private equity firms say, "Well, wait, we just valued at this, we'll give you paper." That's slowed down. That's all I can say. Now the independent channel, it's absolutely -- it's like the do-it-yourself channel and investors. Some people are just going to use discounters and some are going to use advice. Some people, advisers really like the employee model. They don't have to worry about a number of things. Our profit margins are 60%.

So I see -- to answer your question, I see a general slowing of what -- if you had 100 people and I'm making them 70, we're going independent and 30 are going employee. I would see those numbers going -- 70 is lower and more will come to employee for all the dynamics I just said. Now that's my view of the world. Some other people may have a different view.

Yes. I appreciate that, Ron. Just good to get your perspective there. So thank you. Follow-up probably more for Jim here just on kind of the net interest income guide and some of the underlying assumptions would just like to unpack a bit. So the $4 billion of loan growth. Can you just talk about kind of where you see that coming from? What are some of the buckets that you expect to see kind of the net growth?

And then just talk about some of the differentials and yields that you're seeing across the different loan categories today? And then as you think about kind of that $4 billion, could there be upside obviously $600 million or so of excess capital today that's going to grow? Are you going to create a lot of excess capital over the next year? So just how we should think about potential upside cases to the $4 billion?

And then the liability side as well, if you can just touch on that kind of in terms of the -- what you're expecting. You've seen a couple of quarters of nice growth in sweep cash. So I'd love to get some sense there as well.

All right. I think that was about 4 questions, but I'll start taking them one at a time here. The first of which is the $4 billion of growth. I'd say if you look back at what we've done historically, I think fund banking will be a large portion of what you see in our balance sheet growth here. That's probably 130 to 160 basis points in yield higher than what you see on the average loan portfolio. We'll continue to add mortgage. We'll do what we can in securities-based lending. We'll do selective commercial lending. And obviously, we're supporting our venture group as well.

But those yields, I think you can look at the yield table and kind of see consistently where those are coming out. But if you take a step back and think about the guide in general, we're talking about $275 million to $285 million of NII in the first quarter and then $1.1 billion to $1.2 billion for the full year. I think when we make comments about being relatively rate neutral. The key assumption here then is that $4 billion of balance sheet growth, which I touched on, kind of what the mix could look like there. But we're generally assuming linear growth. So you can basically plug call it, $2 billion of average interest-earning assets in your model.

And I would also say, when you touch on the liability side, we're assuming that all that growth will be funded with treasury deposits rather than sweep or smart rate. So we're talking about a cost of funds slightly better than where we see smart rate today. We're not really modeling in any changes in interest rates, even though I just said we are kind of agnostic to interest rates. And so you bake that all together, we're somewhere around a 320 basis point net interest margin for the year. And so again, the key is going to be the mix of those assets and being able to deliver on that growth. And so we provide a range, it's a large range, but you can kind of annualize the first quarter and think about that $2 billion of average interest earning asset growth. And the fact that we're really not making any other kind of fee income related to our assumptions here that we feel like we're being fairly conservative in the guide there.

Let's see. The other questions were liquidity and capital. Is that right?

I didn't go there, but if -- so you could always expand, but no, I think we're good.

I did say here you have excess capital here beyond kind of the $4 billion, I guess, is the point. So just like the upside case to potentially growing loans even more.

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

You just touched on this a little bit in the questions from Devin. But the C&I loan growth that we saw here this quarter seemed to come on in the back end of the quarter. And it also seemed to come on with the asset beta was a little bit greater than we would have expected. Of course, there's some front-end sensitivity, but it seems like the spreads are coming on a little tighter. Could you speak to how much of that was new loans versus like a remix in the portfolio? And how should we be thinking about the spreads in that book here as we go forward?

So the asset beta, you got to remember the commentary we gave on fee income. We really didn't have any of those fees showing up, which obviously can distort some of your yield calculations. The yield calculation annualizes that one-off type fee over the entire year. And again, it distorts the yield a little bit. We just -- we went from -- last quarter, we had a handful of million dollars of fees to not a whole lot of those less than maybe $100,000 or so in the quarter. So it was a pretty big change there. We had a reclass of loans out of held for sale back into the retained portfolio. That was probably a couple of hundred million dollars, but not overly material, but that was driving some of that growth as well.

But again, I'll just kind of focus on our commentary related to fee income is the biggest driver as a delta between your expectations and the beta on the asset yields.

Got it. Okay. And then there's -- what -- justified or no, there seems to be a decent amount of concern around private credit markets. I was curious what you're seeing within your CLO book? How are you thinking about that? I know you guys buy it high quality, you got a lot of subordination. But can you speak to any trends that you're seeing there?

Look, the -- miniscule, I mean, none. I guess really not. Some of the -- our CLO book and very, very little exposure to some of the names. But as we look at it, and I've always been very comfortable with both the subordination and what goes on in that book. And a lot of our sponsored finance loan book, we sold. So just to answer your question directly, really no, we don't see any issues there.

I think one thing I would add to that is we've actually seen a fair amount of refinance and redemption activity across the CLO book. The structures given the credit subordination and diversion of cash flows and whatnot. If there are any credit issues here, we end up getting paid off. And so the structure works as intended. We're not seeing any material change in any of our key metrics and really no concerns.

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

Great. Thank you very much for the expanded commentary and taking the questions this morning. Maybe a big picture down, you mentioned sort of loan growth and that's pretty straightforward. Ron, how are you thinking about maybe strategic use of capital, a fair amount of M&A going on around you and it's obviously from the banking side, but also some of your peers have been sort of pretty active. Maybe just update us on your thinking of where you might be interested versus maybe returning that capital to investors.

Well, we increased the dividend, right? So the dividend is up 11%. The -- as I'd say in every call, the breakeven analysis, if you will, between stock buybacks and deploying capital, whether on the balance sheet or acquisition moves around, and we're always looking at that.

Broadly speaking, we've said that we see balance sheet growth of about $4 billion of round numbers. That's $400 million of capital plus the dividend. It still leaves us a lot of capital to do some things with. And I would say that while we see almost everything, a lot of everything seems pretty richly valued not just at the point in time, but frankly, forward projections on things that may have me usually take pause and I'm pretty conservative. And if you know our history, we generally do not participate in really good markets, okay? That's just not our style and [indiscernible] shareholder and build our client relevance and is accretive to our new people and to the existing people in the firm. That has been a formula that has worked for us for 28 years and done a lot of deals. The fact to just go out and do a deal to become larger and maybe dilute that return on tangible equity, return on equity, it's just not in our mindset.

So plenty of opportunity, I tend to not answer the phone as much when the markets are at these levels.

Alright. That's helpful. Just as a follow-up, maybe a two-part to keep up with my peers here. First one is just in terms of the margin, how much of the margins -- if you separate maybe the repositioning of SIA and the European footprint. As you look forward, how much of the incremental margin comes from the investment banking opportunity versus the wealth management? I was looking particularly at the Wealth Management business, and that seemed to be a little sticky on the margins, again, on how much of the merger charge was in there or the prospective impact.

And then unrelatedly, but second question is, can you give us a sense of any activity levels into the new quarter just in terms of client cash dynamics?

I'm not quite sure I understood the question. I generally say that I think for the year, our institutional margins combined came in around 17%. And when we look at what we're doing, there was a drag in our European operations. I'd like to think that those margins are in the low 20s offset maybe 5 points more on $2 billion of revenues round number last year. So that will give you some sense of what we see as we're making sure that we're optimizing that business, okay? And I think that business -- I think those can even be higher, but we've had a lot of new hires, a lot of investments. So we're 17 -- we've talked -- when we gave our $8 number, I think that we said that if we got to 18%, that would be one of the triggers of helping us recover to where our interim target was. As it -- so that will give you a sense. Wealth is a very profitable business, margins of 35%, 36%, 37% is just a very good business. That's been consistent over time. So I'm not sure I see anything diminishing that.

Jim, on cash?

Yes. So in terms of liquidity, we saw a total sweep and smart rate balances increased. As of year-end, it was about $26.6 billion. I look back over the last week, and that number has been relatively steady to say, down $200 million. Most of that fluctuation we've seen has been in sweep it is somewhat hard to say exactly where those balances will move on a day-to-day basis, and a lot of that is just going to depend on client activity. Generally speaking, I will say we expect to see some outflow of cash through tax season and then a build in the latter half of the year as we've historically seen.

But I would also highlight, within venture and other treasury deposits, we had a record quarter of growth in 4Q. It was $1.5 billion. Not sure if that's exactly the right run rate to model going forward. I'd say at this point, it'd probably be reasonable to expect around, call it, $750 million to $1 billion of incremental deposits on a quarterly basis.

And lastly, I'll just highlight, we just had recently made some new hires within kind of the health care, life sciences group as well as in Energy Tech. Those folks are just getting started, and they're going to continue to add our capabilities here.

We will take our next question from Michael Cho with JPMorgan.

I just wanted to touch on bank M&A. You highlighted it a few times on the call. And clearly, an uptick and kind of nice momentum looking into '26. I mean if we think about the bank M&A runway and maybe beyond '26, I was wondering if you could maybe remind us how we might frame the multiyear tailwind? And maybe in terms of sizing and maybe pace of that opportunity for Stifel?

Yes. I think -- look, I don't think there's really any question at the -- not -- I don't want to talk about any specific banks or anything like that, that's not appropriate. But generally speaking, there's a lot of banks that are going to need to combine for scale, profitability, the technology investments, the challenges on deposits and loan origination. And you have -- there's just a lot of institutions that are probably thinking, "How are we going to compete." and they're going to want to do it through scale and you got valuations that are allowing conversations to occur. And on the converse side, the buyers are thinking the same thing. They're thinking they need to acquire or be acquired on many fronts. So I think that the banking industry is in a period of consolidation, and may be driven as much by the fact that it was very hard to do any consolidation from the period 2020 to 2024 in the previous administration. They did -- if you can remember all of those transactions, it will take years to get approved. And that put a damper on board's talking.

So I -- so look, I think there's a lot to do. What I like from my perspective is that we've been -- we merged with KBW back in 2013 and virtually all of the MDs that we're calling and have relationships with clients are still with us. We have that core group of bankers that have deep, deep relationships, not only with management, but in the boardrooms. And we're in a good position as a trusted adviser on getting these deals done. So I'm not going to predict how many banks and what the volume is going to be because I really don't know. I would say the trends are that you'll see more than average. And most importantly, we're just in a really good spot with the consistency, the fact we have a separate sales force that we trade, everything that we've done has put us in a good position. You saw it last year, and we're starting this year off with a nice transaction. So I'm confident about this.

Great. I appreciate all the color. If I could just switch to the wealth side. Ron, I think you made a comment earlier in the call, touched on maybe increasing allocation to recruiting. I was hoping if you could just flesh that out, you mean in terms of more recruiting dollars or higher incentives? And is that something that's already in the '26 guide? And is that something that should actually accelerate NNA into '26.

I mean it's a great question. I've -- I'm looking at these numbers, I'm looking at what drives our results. I'm looking at the number of hires that we've hired, a number of teams that we have hired, the mix of business they bring in, how some of these teams come in, and then we immediately see it in lending and in cash balances and in fee-based business. And I just made the general comment that as I sit here, I think I said that maybe after this call, I'll sit down with Mr. Zemlyak and just say, "Look, everyone is asking me about utilization of capital and where do we want to put our dollars." We can buy back stock. We've already increased our dividend, look at acquisitions, do a number of things.

But the other one, increase the balance sheet. The other one is to get after recruiting a little bit more. We have been generally a shop where we want people to come to us. We don't make a huge amount of outgoing phone calls. Advisers join us because they want to, that's very effective, by the way, because you get people who want to be with us. But we might be able to pick up the phone here and there, and that's what I'm thinking about because we have a great platform. We are a traditional wealth management firm that people love it here, and we need to press that advantage a little bit.

We will take our next question from Alex Blostein with Goldman Sachs.

Alex, you made it. I think.

You actually have Michael on for Alex this morning. Just one question from us. I appreciate the color on the expense outlook from here, we spent some time talking about it. But on the noncomp, I think the guide implies something like 10% year-over-year growth next year. Can you walk us through the incremental areas of growth embedded in there? It sounded like there might be some wiggle room on that depending on how top line results come in over the course of the year.

So first, I would say, we are taking our guide down. We're taking it down a full percentage point down to 18% to 20% on an adjusted basis for -- as a percentage of revenues. Obviously, there are some timing things associated with the sale of SIA. There are some things that take time to recognize some of the cost saves associated with European reorg. There are certain things we've talked about in the past, things like we're running kind of our cloud migration and data center process at the same time now. We do see some potential cost savings related to that, but that's probably more of a 2027 event. So there's a number of things related to that, that are coming into that guide.

But when you look at kind of where we've come in at from a margin perspective, it's -- you take comp and noncomp together, you're seeing a pretty nice increase in overall pretax margins. We've gotten a few questions related to the noncomp or seen a few questions so far this morning. but our guide is implying already higher margins for 2026.

And gentlemen, there are no further questions at this time. I will now turn the conference back to Mr. Kruszewski for any additional for closing remarks.

Well, I would say that thank you, everyone, for joining. As we embark on 2026, I feel that the firm and it's our capabilities and our ability to grow from here, frankly, never been better. We have a better platform, broader product mix and increasing profile, doing -- attracting larger teams, doing larger transactions. It feels that the way what we've done to build out the capabilities of the firm through talented people is continuing to work. And I expect 2026, to be a continuation of the same. So look forward to reporting back to everyone for the first quarter.

And I'll end with -- I'm going to end with two things. One, I want to say that the Indiana Hoosiers are the national champions and go Stifel U.S. ski team, but I've not been able to brag about Indiana in my 60-plus years of being alive. So I'm taking it right now. So go Hoosiers, congratulations, everyone, thanks for your time. Take care.

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

Good afternoon to everybody in the room as well as those of you on the webcast. I'm Steve Chubak. I cover diversified financials here at Wolfe Research. Really excited to introduce our next 2 presenters, Ron Kruszewski, the Chairman and CEO of Stifel Financial as well as Jim Marischen.

Look, Stifel has had a really exciting year in terms of wealth momentum that they're seeing, and that's certainly going to be the primary focus given this is a wealth conference. But at the same time, there's a lot of exciting growth that's happening on the capital market side, particularly within financial services. So certainly no shortage of topics to cover, but really excited to delve into each of those, Ron. So thank you so much for being here.

Glad to be here. Thanks for having us.

Yes, of course. So look, you always have interesting perspective around the macro. So I was hoping you can provide just an update in terms of what you're seeing...

Excuse me, I know you have a bunch of -- wait, I'm getting a call here. Hello? No, we're not for sale. Thank you. So we put that together [indiscernible]

I was going to cover that later.

Yes, I know you are, but...

[indiscernible] early.

Everyone is here to hear me say that, right?

I was going to talk about what you're going to buy.

What?

I was going to inquire about what you're going to buy. Forget about sales.

Well, yes, that's how I've answered the question. Anyway, sorry.

No, you have to inject a little bit of [indiscernible]. I really enjoyed that.

Exactly. Sorry, your question again?

[indiscernible] the operating environment given the macro backdrop across both wealth as well as capital markets and what you're seeing.

And I've been talking, I said that many people talk about normalization and normalization is like this. Well, normalization at Stifel is an upward sloping curve. It has been for my 28 years as CEO. We're a growth company, it's like this. The question is where you are relative to that curve. You're either below normalization, which we were in '22 and '23. And today, we're kind of running above what I would call normalized things.

So we can talk and I can tell you for the next -- I don't know how long we have here or I can tell you in the next 2 minutes across all of our businesses, wealth, banking, trading, both equities and fixed income, investment banking, advisory, I mean, business is good. And the business is good because the environment, the macro environment.

I was in Washington last night for the dinner with financial services, and we're all talking between rates, credit spreads, activity, the need for sponsors to return money to limited, a regulatory environment that is encouraging M&A, not discouraging it. Business is good, and it's really running above trend. Now you're going to ask me how long that's going to continue. I don't know. But right now, business is good.

What's your crystal ball telling you?

My crystal ball is not -- it's telling me that we've had a -- we also had a longer time where we were below normalization, all right, both for the same reasons, an inverted yield curve, capital markets that were -- credit spreads that were too wide with rates, et cetera, and a regulatory environment that was not conducive to M&A activity. And that went on for almost 3 years.

So if the pendulum swings back, I would say that absent some real geopolitical something or another. But in terms of just the economic activity, we've got a little bit of runway here.

Great. I did want to spend some time just digging into the wealth business in particular. So you certainly sounded more sanguine on the last call about the recruiting pipeline, what you're seeing just in terms of inbound interest. Look, Ron, you've always prided yourself on scoring quite well in terms of J.D. Power, always getting really good feedback from your advisers, how is that resonating in the marketplace? And are you seeing any uptick in inbound and recruiting backlogs relative to, say, where we were 12 months ago?

The environment is -- it ebbs and flows. I said sort of like the ocean and you're trying to predict the size of the waves tomorrow versus the size of the waves today or whether there'll be a tsunami or something. What I say to our investors, and I will say is that what you have to look at who are the net winners and losers in the overall situation of recruiting. And there's a number of winners and losers. I won't name them, although I'm -- I can tell you, Stifel is a winner and you just look at our past results. And we have been for almost 30 years, 28 years, we've grown consistently. That framework has not changed at all.

So the only thing that will change sometime is the competitive environment, will we pay more or less and we regulate our activity that way. We -- in very good markets, we tend not to be as active, both in M&A and in recruiting. So our recruiting pipelines right now are as good as they've ever been. We're getting as much engagement.

The one thing that has changed for Stifel is that 10 years ago, we would hire in a quarter, we could do -- I'll just pick the numbers so I can do the math. We'd hire 10 advisers doing $7 million. So we're doing $700,000 each. Now we're hiring 1 adviser team doing $7 million. We -- our ability to attract higher teams that are doing more holistic and bigger business relative to our platform is as good as it's ever been.

And do you feel like that's the recruiting pool at the moment that's currently the most attractive? Because we've actually heard that from a number of folks that have been here, Ron, that given some of the challenges at the wires, in particular, that, that's provided a unique opportunity to recruit or attract some of those advisers to the platform.

I don't think it's really any different today than it was 5 years ago. I think our ability -- our ability now to recruit is much better than it was 5 years ago. But I think the opportunity set is relatively the same. I hear about all having trouble this or that or whatever. This is a long, long business, a long runway to this business, and we're well positioned for it.

So the real question you need -- the analyst need to be figuring out is who's crossing the threshold of being a net winner versus being a net loser. And then yes, those reasons as to why. But right now, we're still on the right side of that line.

Well, I mean the beauty of that is we do have an adviser on the move tracker, so we can certainly track all these trends, at least in real time to the best of our ability. I suppose technically, the data is slightly lagged from the U5 filings. But the one thing that we have noticed, Ron, is that you've been attracting, as you know, larger adviser teams that are also much more productive.

I know historically, you talked about delivering mid-single-digit type organic growth, slightly better than the industry, certainly. But is the focus more on same-store and driving just more productive teams to the platform versus necessarily new store and just growing the sheer number of advisers?

All of the above. I mean, all of the above. Look, when you get to the large -- I've always like when people talk about some productivity as if we have some magic pixel dust that we're going to put on clients and they're suddenly going to do more business with us or anyone. I'm telling you that if you took 1,000 advisers from X, Y, Z and 1,000 advisers from Stifel, all productive, and you put them in the pool and then you took 1,000 out randomly, okay, the NNA growth to be about the same. It just -- we're dealing with large numbers. And so what does move that is net recruiting, right?

And what you don't track, which is why sometimes you'll say, oh, your recruiting appears to be lagging, is -- you should also track, if you could, the cost of those acquisitions. What's the cost of recruiting? And you don't. You can see the gross numbers and then you see it later in profitability, you see it later in comp ratios if you overpay for a team. That -- there's no free lunch. We think we're one of the best of net profitable ROI recruiting, hard for you to measure.

No, it is. I mean we could always ask the other folks on the other side.

You can look at profit margins and growth and growth in profitability and growth in EPS, and that will also tell you.

You do have best-in-class margins in the wealth segment. So that's a good opportunity to highlight that for folks.

It sounds like we have some new disclosures coming in.

Yes, yes. The other piece though, too...

I talk and he has to do all the work.

Yes, that works.

It's pretty terrible gig, Jim. Sorry about that. The IBD channel is certainly one where when you've done a couple of deals in the recent past, you've got like a small independent business, and it's ultimately something that you decided not to scale and to offload. And you've also talked about that decision in the context of focusing more on profitable growth.

Just curious, Ron, if you can just contextualize why you haven't opted to lean into the independent channel. And given there continues to be the migration towards independents, whether your thinking around this has evolved?

Whether my thinking has evolved. Well, let me answer that question first, and then I'll come to the channel question second. So I think that history, as always, will tell the story if you want to look at it. So people say, "Oh, you have a false start, you do that -- no, we have not had a false start. We've had an independent channel since I joined the firm in 1997. There was -- it was called Century Securities. It was Stifel's independent channel.

And to provide some context to that, at the time, Stifel's revenues were about $100 million, and the independent channels revenues were close to $20 million, okay? So fast forward 25, 26 years, Stifel's revenues are $5.5 billion, and our independent revenues are, let's just say, maybe slightly doubled since '97, okay? And so maybe there's just -- weren't just that focused on it.

And when you get around to your second question, which is the channel, what we decided that from the investing public, there's 2 things I would say. One is advisers, investors. Investors, you have to look at them. You're going to -- you have the first decision tree for investors, are you do-it-yourself or do you want advice. And we, as a firm, have decided that if you're a do-it-yourself or well, then that's not our market. We're not going to focus on it. We're not going to do that. We're going to go after the advice channel. That's the same on the adviser side. There are many advisers who will say, I want to be independent, and they'll say the other will be, I want to be affiliated with a more -- a firm that provides all of the tools, which is what we think the W-2 channel does.

So we've just decided we're going to focus on the ones that want to be -- which is our fully -- that you call it W-2 channel. That's where our focus is. That's nothing against the independent channel. Many, many people want to do that. We're much better at what we do, and we weren't as good at the independent channel. It was a channel conflict. I had a tough time managing it and how we didn't grow it. So that's it. And our independents will be much happier in the new situation with a great company, and we will focus on what we do best.

Makes all the sense in the world. Well, the other piece I wanted to touch on is NII. And certainly, in anticipation of some incremental rate cuts, you've taken some actions to at least mitigate your sensitivity in this interest rate cycle. I was hoping you could speak to your outlook for NII growth given even in the face of rate cuts, you have some deposit pricing flex, you're growing loans nicely at the same time. And the hope is that with lower rates, we should get some incremental deposit growth. So hoping you could speak to some of those building blocks and how it informs your NII outlook.

I'm going to answer quickly, but then Jim, I'm going to let you weigh in on what you just said up here and not have anything to say. But I will say this, okay, because I anticipate -- I don't know where you are in this, but I anticipate like 5 questions in a row about the bank, all right. NII credit, this is...

I've got just one more.

Okay. Well, good, then I did. But let me start by saying this. Stifel is not a regional bank or a bank. We're a bank holding company. We have $40 billion of the bank. However, most banks, our size banks will derive 85% to 90% of their revenue from NII and then the other from fee. At Stifel, we derive 20% of our revenue from NII and 80% from wealth and banking. So the bank is an integrated part of a bigger business, not the bank.

And the reason I say that is because of that, we are not -- feel compelled to take extra credit risk, feel compelled to grow, to try to worry about loan demand. Our loan demand is off the charts relative to the size of our 2 funnels feeding that business. So I just -- I want to say that. But I hate getting into the details of NII and deposit betas, and so I'm going to let Jim answer that question.

Happy to chime in here. So the first thing I'd say is we are relatively rate agnostic. Everyone talks about deposit betas, and we've talked about the prominence that the Smart Rate product has taken in terms of the total stack of the deposits. And that is essentially going to have 100% deposit beta. So that's going to be instant repricing as rates come down.

I think the thing that people talk about less is the fact that our deposit beta kind of on a blended basis is very similar to what we see on the asset side. So whether rates go up or rates go down, we're really not taking any interest rate risk bets, as Ron talked about.

I think the other important thing to think about is the growing balance of deposits with the investments we've made with our venture team. We've been growing deposits at a clip of over $1 billion a quarter and just made some fairly significant investments with some, I think, 15 new hires within the venture group. And that balance of deposits continue to grow.

And then you think about the fact that typically, in the venture space, you're talking about 4, 5, 6:1 deposits to loans, you're able to reinvest that back into the fund banking space, which is a relatively low-risk asset class, which has a lot of demand. And so we're able to put those deposits to work, earn a very nice spread to maintain kind of a rate-neutral posture in our balance sheet and puts us in a pretty good position.

And let me -- what he just said, but I want to go back to your first question about recruiting, okay? The reason we're winning at recruiting is the way we approach the bank, right? And what you will see and what -- even though we say this, we're not -- our shareholders are not paying us to take interest rate risk bets. They're not paying us to get our NIM extra wide because we're taking too much credit risk. At Stifel, and the reason we went at this is that we integrate the bank into wealth where many of the large firms integrate wealth into the bank. And that is the hugest difference in the world. Which are you doing? Our bank is integrated into our business. We're not integrating our business into the bank.

And the other benefit we could see is if rates keep coming down on the front end of the curve, I think we have over $20 million -- maybe $23 billion in short-term treasuries and money market mutual funds today. That money could come back into the market, would be great for the wealth management business, comes back into sweep or smart rate, we can utilize it in the bank. So that's another funding source that I think is a little underappreciated as well.

That's a really good point. And I did want to just get a sense as how you're thinking about loan growth. And that's going to be my last question about the bank, Ron, rest assured. But you've seen some really nice growth in lending over the years. And admittedly, there's a lot more sensitivity around things like NDFI risk and the like, but you're comfort at least leaning in from a credit perspective, recognizing that we've been in a benign environment for an extended period of time.

I'll let Jim talk about what we do, but our funnel to choose from because, again, the bank is a small part of our -- we have $550 billion of wealth assets. We've got a trading business. We have institutional corporate finance, we have leverage. We have all these capabilities. So our challenge is choosing wisely as to our opportunities, not worrying about where we're going to get loan demand from. We have plenty of loan demand. So anyway...

So I've touched on fund banking, and that's probably one of the biggest opportunities we have today. But again, we're still generating at a very nice clip, 1 to 4 family residential mortgages, securities-based lending and other areas. That's probably 70%, 75% of our retained loan portfolio and where you're going to see the most growth going forward.

And I think as we sit here today, we continue to evaluate the portfolio. And if we think we see an area that doesn't meet the risk-adjusted returns or if we're taking too much risk in one area, we'll exit that book. I think a good example of that is earlier this year, we sold nearly $500 million of kind of lower EBITDA leverage lending book and just derisk from that position. I think it was a well-timed sale...

Exited the business.

And exited the business. And so it all goes back to the strategy Ron was talking about. We're not getting paid to take credit risk and so be very conservative in the loan book.

That all makes sense. And maybe just switching gears to the capital markets side because, again, I don't want to talk about the bank much longer, but we are going to talk about bank M&A, if that's all right, if you don't hold me.

I would love to talk about bank M&A. All right, that one, that's fun.

Okay. I'm glad that we're aligned in that regard. So you were talking about the fact that at least within wealth, it's really about taking market share of the available advisers in motion. Similarly here, we know that the capital markets are inflecting positively. There's a lot of good momentum there.

You've actually been taking share. And a big part of that is the strength of your financial services franchise. I was hoping you could speak to the outlook for bank M&A consolidation activity, what you're seeing in terms of the backlog and the durability of those trends given some of the deregulation that we've seen.

Yes. Well, first of all, I do want to say because I'm remembering this is podcast, I want to reiterate to all my banking partners out there. Stifel Bank & Trust is a great business, okay? I want you to know that. You can pull our separate P&Ls, one of the top-performing banks in the country, all right? And so integral to what we're doing, but it's integral, not overriding. And that's -- I just keep making that point.

Now we'll get to some of the fun stuff. I mean, bank M&A, think about the environment, think about what happened. It's sort of -- we've gone from an inverted yield curve, uncertainty, uncertain credit and starting in the year with uncertainty as to tariffs, uncertainty as to tax policy, not quite sure who the new regulatory heads were going to be of the various agencies, which used to be in bank, you had to worry about the FDIC and the OCC and the head of the Fed. And then you had to add to that mix recently, the DOJ, the Department of -- every department weighed in on M&A. And quickly, that shifted and that the yield curve normalized, the [ AOIC ], whatever thank you, that's narrowed.

So now the environment has gotten good and you have an administration that has taken the risk. I used to sit with management teams, and we talked about the biggest risk of doing a bank merger was the time to approval. That's a risky time, as you know, from some banks that either never got approved or took a year to 2 years for approval, that's a risky time. That's gotten shrunk down.

So the short answer is that the environment is very conducive. And I think we're in the early innings, both because of delayed deals and the environment. And then frankly, if you look forward, people say, well, can the midterms impact anything. But the only thing the midterms could do is maybe have -- give you a view towards administration that would not be as favorable to M&A, which probably would accelerate business. So that's all good.

The good news is that we did the KBW deal back 11, 12 years ago now. And everyone, those of you that deal with KBW, all the traders research, the whole franchise is still part of it. And that investment and that great integration has led to a point now where our market share is really high on all these deals, and we've done well. So that bodes well. And as I look forward, I'm bullish on that.

Year-to-date, we've had roughly 80% market share on bank M&A. It's pretty impressive.

When we looked at the historical trend, that's multiples in excess of what you guys have captured before. So that's really quite extraordinary. And Ron, I recognize you're talking about normalization being this moving target because it's going to be on this upward trajectory. I know in the recent past, you had talked about $1.8 billion of revenues on the institutional side, which, frankly, you acknowledged on the most recent call, it is likely to prove quite conservative given some of the bank M&A tailwinds, combined with the fact that you've also added quite a few bankers to the platform.

I was hoping you can contextualize relative to where you are today, how much upside there is from some of these tailwinds and how you think about what the revenue generation or power is in a more normal backdrop?

Again, we -- just to put context to this and how much the market changed. In 2021 total institution, not just equities, okay, but our total institutional business did about $2.2 billion in revenue and dropped to $1.2 billion of revenue, 20% plus margins to 0 margins in 1.5 years. And we then talked about -- we said, hey, you cannot think this is the new normal. I would talk to you. I would say, let's talk about a normalized rate, which would be at $1.8 billion. 2021 was overperforming any kind of trend line. So let's not say that we're going to do that, but we talked about $1.8 billion.

But we didn't talk about how many MDs we've hired since 2021, the other capabilities we've done since 2021 that would suggest that the line from $1.2 billion to $2.2 billion has changed. It'd be $1.2 billion to something higher. I'm not going to give you that number, but it is. And that normalization line has also moved up, which was my whole point about that's always a funny line to talk about. Today, we're overperforming that normalization line across the board.

And so now in terms of margins, we -- for the quarter, year-to-date 9 months, 13%. And that on -- if you want to $1.8 billion to $2 billion, I'm not giving any guidance. I just -- I can do math easier in my head around numbers. But that should be 10 points normalized for us, we should be in, call it, 20%, 22% margins, not 12%. And some of the reason that we're there is we've done some restructuring in Europe that is going to bear fruit on the margin line. But if you want to talk about that, we still see a rather significant pickup in our pretax numbers from the institutional business.

Given some of the restructuring actions you talked about on the international side, I was hoping you could just speak to how your strategy could evolve abroad? And where are you focused more in terms of growth opportunities domestically?

I think we've said this, okay? We've said that as it relates to primarily Europe, although -- we're doing a lot of business in Canada right now. It's kind of a risk on trade in Canada. But our view primarily is when I visit clients, let me digress them. When I visit clients abroad, I am always stunned and I think the United States has to remember this. I'm always stunned when I say what is your objective? What do you want to do? What do you want to do when you grow up, okay? I don't mean it majority, I just mean small company. what they want? They want to list on the NASDAQ or the New York. They want to list in the U.S. They want to be in the U.S. And so maybe that speaks to some of the issues that they have in their capital markets.

But for us, that means to me that what our European operation should be as a bridge to our U.S. research, U.S. sales and trading and the U.S. listing. And that bridge is best navigated through advisory. So when we look at it, we'll focus on advisory both within the continent and outside, but also with an eye toward the objective a lot of people have, which is to do more business in the U.S.

Well said. The other opportunity that's gotten a lot of airplane certainly at the conference is really focused on AI deployment. And I imagine the 10 points of incremental margin did not necessarily contemplate those efficiency gains and the timing there is still uncertain. But maybe just speak to the AI deployment strategy, how it informs your expectation around what efficiency gains that you can drive over time?

The -- when you look at -- I look at the AI deployment almost in 2 segments, one being the easy stuff. And the easy stuff has a tremendous amount of productivity enhancements. The risk that we have as a firm is when we -- we believe that our people are great, and we don't need to lay off, but we -- do we -- we don't need to have people doing the same things. They can do other things.

The AI agents can do so much in a regulated industry from account onboarding to credit memos to analysis to approving advertising. There are so many things, and we've seen this, and we will deploy that, and that's going to be highly productive. And on the banking side, we've already rolled out the virtual junior banker. And what it will do is make our junior bankers more productive, and we think we'll be able to gain market share by being more productive.

So AI is tremendous. I worry about -- the one thing I always say about AI a little bit is I worry about some of the recordkeeping and some of the risks that come with -- you can record everything.

You [indiscernible] that all the time.

Well, you -- I have to. I always said if you're getting an argument with your spouse, as a guy, you can always say, I never said that. But if your wife can say, yes, you did May 20 at 2:22 and it's time stamped on cloud over there, that's not good from some of the things we deal with. And so we're really going to have to triangulate the record-keeping rules and the fact that when we're contemplating trying to do something, that's not necessarily determinative to what we actually did. And that's a real challenge for the industry.

But Jim, you've talked to me about all the things you can do in your vision with all these AI agents are going to transform, not 5 years from now, if I sit in this chair next year, I should do this and tell you what we did between now and when I come back here, it would be more than you even imagine now in the next year.

We're always going to have a slot available for you.

I don't know. Not only did I hear we're selling the company, I heard I'm retiring, too. There have been a lot of rumours flying around here, yes.

Well, I'm not going to ask you about selling. I'm going to ask you about buying potentially. So you do have quite a bit of excess capital. What are some of the properties you're potentially exploring? Is it interesting new capability plays? Are there interesting scale plays that you're looking at? And if there isn't much of interest in the M&A side, how are you thinking about buyback in the context of what was a relatively light share repurchase in 3Q?

Well, I'll take your second question first, okay? I got to ask this question. I kind of came up with a different answer for the first time, okay, in your conference today. And so I'll just share it with the group here. And the answer was I had a very nice question from a gentleman who said -- who was asking about our strategy, and he looked at our stock price chart. And he said, "Wait a minute", and goes that "in 1997, your stock was $1, and it's $1.25." And I said, well then you answered your own question, meaning that we're a growth company, and we can grow it in equity value.

But then he asked me the next thing about buybacks. And I said, well, think about it, what if we have taken all that excess capital, which wasn't much, but had we bought back our stock, then it appeared that, that would have been one of the most tremendous investments of all time from a stock buyback perspective. We have bought back stock at $1. But it wouldn't be worth $1.25 today, no chance because we would not have invested in our business.

So we look, first and foremost, at deploying capital to build the franchise and toward a growth strategy, and we're opportunistic on stock repurchases. You know that. And if we see something and we'll buy stock to manage dilution, but we do not view stock buybacks as a driver of EPS growth. We see the driver of EPS growth as building this business from $5 billion to $10 billion of revenue and get $1 trillion of client AUM, that will drive, not stock buybacks. Now we buy back stock, so.

I think from just overall capital deployment, I think we're also interested in growing the balance sheet. I think one of the things we talked about before, not to get back to the bank too quickly here, but that is an attractive risk-adjusted return as well. And so I think it's a strategy of kind of all of the above of ways to deploy capital. And at the same time, if we're not overly aggressive from an M&A perspective, we'd be comfortable seeing the ratios increase a little bit. We're totally comfortable with that.

Ron, this is actually a question that an investor strongly urged me to ask, and it relates to what you were just alluding to around earnings growth trajectory, is you've delivered very consistently a mid-teens earnings growth algorithm, and you've expressed conviction that you can sustain that, say, into perpetuity for an extended period of time. At the same time, you also do trade at a discount relative to the peer group.

So I was hoping to get some thoughts as to how you might potentially look to solve for at least what's been a persistent challenge where you've traded at some sort of conglomerate discount and your conviction around the sustainability of that earnings trajectory.

Well, look, that's our job, okay? I mean our job to shareholders is to build shareholder value and to build earnings per share. And so that's what we do. And I think we have almost 30-year track record of doing it and doing it smart and being -- and understanding. For me, it's much more important to see the share price go up than to see my pay somehow -- it's not other people's money, I'm a large shareholder, and I own almost 1/3 of the company. So Stifel is highly incented to grow.

What was the first part of the question?

Well, I wanted to understand just the mid-teens.

We're going to do that. That's what we do, okay? So I can't predict. I can't say that without someone saying, oh, you put that out there. But it pass prologue, why can't it be? That's what we do.

Well, the nice thing is that we can anchor to it because you also have some longer-term targets. You've talked about $10 billion in revenues. You've talked about $1 trillion in client assets. It might be helpful if you can just contextualize like over what time period do you think you can achieve that? And that would represent a doubling of both of those metrics.

Right. And of course, I won't give you a time frame.

There's a Rule of 72, so...

You know what, though, here's the thing. In my career, all right, in my career, I said that when we had $100 million in revenue, I forget what AUM was, I said, we'll have $200 million. They said that's a double. They said, yes. Then we had $200 million, I said we'd have $400 million. We went to $400 million, then $800 million, then $1.6 billion, then $3.2 billion. That's 5x. We doubled. So when I say that we're going to double again, we are, given normal markets. We are in a phenomenal position.

So actually, when I'm taking as a compliment, I hear these rumors about Stifel and what. I see that as a complement. Why? Because we are so well positioned that anyone that's not saying it isn't recognizing our value. But we're executing great. And there is no reason that we can't continue to grow like we have in the past.

And now the other thing I will say, though, is you say how, I can tell you, we've done almost 35 acquisitions. At any point in time, at the beginning of the year, I had no idea that we would do Legg Mason or Ryan Beck or KBW or Thomas Weisel, never an idea. Those were opportunities that presented themselves to this management team, and then we executed on them.

So today, I don't know what the drivers will be to get there, but I know this company is well positioned to take advantage of opportunities when they present themselves and do so in a manner that's accretive to shareholders.

With the track record to support it. Ron, that's a perfect way to close. Thank you so much for being here, and Jim you as well.

Thank you for [indiscernible] Thank you.

Good day, and welcome to the Stifel Financial Third Quarter 2025 Financial Results Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Joel Jeffrey, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Stifel Financial's Third Quarter 2025 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 our earnings release.

I will now turn the call over to our Chairman and Chief Executive Officer, Ron Kruszewski.

Thanks, Joel, and good morning, everyone. Stifel delivered another record quarter, once again demonstrating the strength of our diversified business model and a leverage to provide in an improving environment. In my nearly 30 years as CEO, Stifel has gone from a regional firm into a global company by consistently reinvesting in our people and our platform. That same mindset, reinvesting to increase relevancy has defined our 135-year history.

This quarter, we achieved record net revenue of more than $1.4 billion and record client assets and produced our third highest earnings per share in firm history and a record for any third quarter at $1.95. Return on tangible common equity exceeded 24% both of our business segments contributed to the performance with another record Global Wealth Management and

[Audio Gap]

On last quarter's call, I said we expected a strong second half [ adoptimism ] builds around lower taxes, reduced regulatory burdens and higher capital spending in technology. And that's exactly how it's played out. The S&P 500 is up roughly 15% this year and more than 35% from a [ below ] following the Liberation day tariffs. The Fed's first rate cut in September added further momentum. While valuations are elevated and the nominal equity risk premium is narrowed to near zero, the underlying economy remains constructive.

We've also seen something worth noting. And even with yesterday's pullback, this year, gold and silver have outperformed even as equities are [indiscernible]. When [ reached ] assets and traditional hedges rise together, it often reflects abundant liquidity and a search for stability. It reminds investors that confidence in markets that sometimes outpace confidence in currency and that's when disciplined and fundamentals matter most. In that environment, people's balance model and disciplined execution continue to deliver results.

Turning to Slide 2. I think it's important to put this year's quarter results into perspective. At our core, Stifel's a growth company, decades of consistent reinvestment, hiring talented advisers and bankers making strategic acquisitions and executing on our integrated banking strategy with a focus on risk-adjusted returns have produced steady durable growth and meaningful operating scale. I find it worth pointing out that our third quarter revenue loan exceeded our total annual revenue in 2011. That comparison speaks not only to our growth, but how we've achieved it. We've grown in a balanced way, expanding both of our core businesses while maintaining a consistent mix between wealth management and our institutional group. Today, Wealth represents about 64% of revenue and institutional 36%, essentially the same proportion as more than a decade ago.

Equally important is how that revenue has evolved. What was once primarily transactional is now largely fee-based, fees related businesses, asset management and net interest income in wealth and advisory and institutional now account for 52% of total revenue, up from 26% in 2011. That shift has made our earnings more stable, our margins stronger and our growth more durable.

Our pretax margin reached 21.2%, more than 800 basis points higher than 2011, and annualized EPS has grown more than fivefold. Our growth has allowed us to raise our dividend every year since we introduced the dividend in 2017. Looking ahead, milestones that we've talked about like $10 billion in annual revenue and $1 trillion in client assets are not distant goals, they're the logical next step in the evolution of our strategy and scale.

As is our custom, we compare our results each quarter the consensus estimates. Once again, we exceeded [indiscernible] expectations across the board. Total net revenue of $1.4 billion, as I've said, was about 7% above consensus, reflecting broad-based strength in investment banking, transactional activity and net interest income. Earnings per share of $1.95 were 5% ahead of estimates marking another quarter of strong operating leverage. Investment Banking outperformed across both underwriting and advisory and wealth management activity was stronger than forecast. Expenses were in line with guidance and our pretax margin came in above expectations.

In short, we delivered another quarter of record results, balanced contributions across our businesses and continued momentum heading into year-end.

With that, let me turn the call over to our Chief Financial Officer, Jim Marischen, to provide more detail on our financial results.

Thanks, Ron, and good morning, everyone. Record quarterly net revenue grew 17% year-over-year with gains across the board. Commissions and principal transactions rose 20% as both Global Wealth and institutional segments improved from last year. Investment banking revenue was up 33% our strongest quarter since late 2021. Asset Management revenue rose 13% on market appreciation and improved organic growth. Net interest income increased 6% as higher interest-earning assets and lower funding costs more than offset lower asset yields. Our compensation ratio was 58%, which is consistent with guidance. Our operating pretax margin was 21.2% and operating EPS was $1.95, up 30% from last year.

Turning to Slide 5. I'll discuss our Wealth business. Global Wealth Management delivered another record quarter with revenue of $907 million and pretax margins of nearly 38%, our highest in almost two years. Transactional revenue reached a record $203 million as clients were active in both equity and fixed income markets and asset management revenue also reached a record $431 billion. We ended the quarter with a record total client assets of $544 billion and record fee-based assets of $219 billion, reflecting continued market appreciation and net new asset growth in the low to mid-single digits.

Adviser recruiting remained active and high quality. We added 33 advisers during the quarter, including 17 experienced hires with trailing 12-month production of $19 million. Retention remains strong. Our recruiting pipeline is healthy heading into year-end. Productivity benefited from higher client engagement, record asset management revenue and an expanding suite of wealth and lending solutions.

Moving on to Slide 6. Our integrated banking model continues to strengthen our wealth platform. Net interest income was $276 million, which was above guidance as firm-wide net interest margin improved modestly and our cost of funds remained essentially flat. We forecast fourth quarter NII to be in a range of $270 million to $280 million. Client cash levels increased during the quarter, with sweep deposits up $640 million and non-wealth deposits up $760 million, including strong growth from the venture banking team, as those deposits increased by more than $1 billion during the quarter. Credit metrics remained solid with the nonperforming asset ratio at 49 basis points, provision expense of $8 million, and allowance to loans ratio of 81 basis points.

On the next slide, I'll discuss our institutional group. Institutional revenue was $500 million, up 34% from the prior year. Strength was broad-based across investment banking and transactional revenues. Investment banking totaled $323 million, with gains in both capital raising and advisory. Equity capital raising revenue was $79 million, the best since late 2021 with continued activity in financials and renewed issuance in biotech. Fixed income underwriting was $59 million up from last year, driven by increased public finance activity.

Stifel remains the #1 negotiated issue manager by deal count, and our calendar remains very active into the fourth quarter. Trading results were also strong with equity trading revenue of $58 million and fixed income trading revenue of $123 million, reflecting higher client activity, healthy secondary market liquidity and multiple strategic balance sheet restructuring assignments. Advisory revenue was $179 million with broad contributions across sectors and early benefits from the integration of Brian Garnier. Our investment banking and advisory pipelines ended the quarter at record levels, providing strong visibility into the fourth quarter and beyond.

Moving on to Slide 8. Expenses remained well controlled. Non-compensation expenses were $298 million, up 7% from a year ago, and the adjusted noncomp operating ratio was 19%. The sequential increases in total expenses reflected deal-related investment banking gross ups. We expect a similar adjusted non-comp ratio in the fourth quarter, which is at the low end of our annual guidance range. The tax rate for the quarter was 26.1%. If our share price remains around current levels. We anticipate a full year effective tax rate of 20% to 22% implying a fourth quarter rate of 12% to 14%. The projected decline in the effective tax rate is a result of the excess tax benefit associated with stock-based compensation.

Our balance sheet remains well capitalized. Tier 1 leverage capital rose to 11.1% and Tier 1 risk-based capital ratio increased to 17.6%. Based on a 10% Tier 1 leverage target, we ended the quarter with approximately $421 million of excess capital. We repurchased about 275,000 shares during the quarter and 7.9 million shares remaining on our current authorization. Assuming no additional repurchases and a stable stock price, the fully diluted share count for the fourth quarter will be about 110.3 million shares.

With that, Ron, back to you.

Thanks, Jim. Look, I'm pleased with our overall results and our teams are executing across the fund. We're entering year-end well positioned to capitalize on favorable market unfavorable market environment, supported by continued momentum across both our operating segments. Specifically, in our wealth business, another record quarter with record client assets and strong profitability.

We continue to attract highly selective advisers in our recruiting pipeline remain [indiscernible]. Deposit gathering continues to grow both through adviser recruiting and the addition of venture banking team, driving strong treasury deposit growth. Earlier this year, as I've mentioned before, Stifel was recognized by JD Power for having the highest investor satisfaction among full service wealth management fund, a reflection of our adviser-centric model that trust our client's [indiscernible].

In our institutional business, investment banking pipelines are at record levels as our record -- as our early investments continue to drive scale. We maintained leading market share in financials through our KBW platform in rank in the top 10 in equity capital market fees year-to-date.

In public finance, as Jim said, we remain #1 by number of negotiated issues led. We're also seeing increasing synergies between fixed income trading and investment bank, strengthening client relationships and expanding our reach.

Looking at the markets more broadly. There's a lot of optimism out there. And I share that optimism. But we all know markets move in cycles. The best way to navigate them is with disciplined balance and perspective, qualities that have defined Stifel from the beginning.

And sort of a conclusion, I've a little food for thought. In the past, I've illustrated what I believe to be Stifel's valuation gap compared to both the market and our peers. Instead of repeating those metrics, let me put it this way. At current prices, you get a growth company and value company prices. I think it's a compelling valuation. So as we move forward, we'll keep doing what's always worked for Stifel, staying to put discipline, managing risk and investing for the long term. That approach has built the Stifel today and positions us well for the opportunities ahead.

With that, please open the call for questions.

[Operator Instructions] And our first question is going to come from Devin Ryan from Citizens.

I want to start with a question on investment banking, obviously, kind of been an uneven year, but second best start to a year since 2021. And we look at Stifel today relative to then, you're obviously quite a bit even bigger than that point. So would -- just be good to hear a little bit more about, I guess, the record investment banking pipeline and how you guys are thinking about the upside for revenues in a more normal environment? I'm not sure if there's any way to frame it relative to kind of that prior 2021 peak. And then if you can just give a little more color on the sector supporting that and specifically, I'd love to hear about what you're seeing in the depository space as well.

Look, I think we did what, $500 million of institutional revenue that annualizes that around, obviously, $2 billion and what we did $2.2 billion in 2021. So I'd just give you a sense, we're not even on an annualized basis, we're not at the 2021 level. Of course, the mix has changed, and our capabilities are more than they were in 2021. So in terms of just where we are relative to what we can do we're making progress and the market environment certainly is helping as we said it would starting with regulatory and as much as anything else clearly, this administration is more open to M&A and even strategic other strategic initiatives than was the prior. I think -- I don't think there's much argument about that.

So the environment is still, a little caveat. The government shutdown hasn't helped IPOs at this point. So I think we all know that. I think the good news is that what's sitting on the desk not being reviewed will get off those desks. But that's not [indiscernible]. Look, clearly, financials have been a strength not only in the capital side, but also what we are doing in fixed income, balance sheet restructuring related to mergers and just look at the lead tables, and you can see that as it relates to depository M&A we are doing quite well, not only in absolute terms but in relative terms as it relates to market share.

And I would note that across the industry, health care, I think, there has been a lagger, okay? Just -- not yet Stifel, but just across the board, health care volumes are not -- [ we look at Warner ] what we think they're going to be [indiscernible] that as upside clearly, technology has been a strength. I think we can do better in technology. It's a lot of big deals, but there's a strength in industrial, there's a strength. We've seen strength there. So kind of across the board, but with [ big ] is obviously doing quite well at our second biggest vertical health care, have upside to what we're seeing. And we're beginning to see -- I'm not going to use that word, but they always talk about green shoots, let's put that one in the used bin for a while. But certainly the environments are [indiscernible], okay? Jim I [indiscernible]?

Yes. That's great. And just a follow-up just on the credit backdrop. Obviously, several recent credit hiccups in the market, several private credit players and banks disclosing losses and that's received some attention. So I'm just curious what you're all seeing in the market right now, how you feel about the position at Stifel just across both the loan book and the CLO exposure as well. Just any other thoughts more broadly?

Yes. Well, look, I think that there's a lot of commentary you've heard where there's loan [indiscernible] there's more, et cetera, things like that as it relates to the credit. It feels to me, so still a little idiosyncratic about things that have happened at least in terms of the two bankrupt season and one the asset management. But it doesn't feel like a broad-based sector type thing, let's say, that in general.

But you're giving me an opportunity, Devin, just to maybe point out that I think it's very important to understand, and I know that you do. First of all, Stifel is not a regional bank. So I'll give you some commentary as it relates to my view from KBW and all our great bank lines that we talked to. But as you know, many regional banks have 85% to 90% of their revenue is generated by NII, Consequently, lending and the lending environment is very important to their ability to grow. Now look at Stifel, as we've pointed out many times, a little over 20, maybe a little bit more of our revenue is NII. We're fee-based and NII with PCG and institutional accounting for the vast majority of our revenue and we don't look nor are we a regional bank. We really drive our revenue growth without greater exposure to credit.

Look, when we do grow our loan book, it's relatively low risk categories like mortgages to our kind network clients, security-based loan, fund banking. In fact, Jim knows [indiscernible] comparable.

It's about $3 billion, $4 billion, 70% of the total -- of the entire [indiscernible] portfolio. Yes.

Yes. So we fund these loans with deposits from our wealth clients, our venture business, either highly complementary for our wealth and institutional business. And look, your second part of your question regarding CLOs, Devin, I dealt with this question for about -- it feels like 10-plus years. I think I'll let Marischen handle it this time.

Certainly. Whenever we get questions on the CLO book. The first thing I'd like to do is point out where in the CLO structure we are investing. Our entire portfolio is comprised of AAA and AA CLOs. That breaks down roughly 60% in the AAA class and the remaining 40% in the AA class. And I think from there, that it's important to understand how the diversion of cash flows really protect those senior classes. And the key metric to look at in regards to that is the credit enhancement levels. Our portfolio has a weighted average credit enhancement level of 32%. So it's pretty significant. And the diversion of those cash flows is what protects a senior class. And so when you think back through time, we have never seen a AAA CLO default, and we've only seen one AA CLO default. And that bond was issued prior to the great financial crisis at much lower levels of credit enhancements. So when you think about the structural benefits here, the operating performance over time through a number of different cycles, we feel very, very comfortable with our exposure in the CLO space and where we're at there today.

Devin, and I -- maybe I can't help myself, but [ one ] answer on this. But look, when I get up and I try to think of things to worry about, right, which I do, [indiscernible] my job is, I don't think I ever get up and worry about our [indiscernible] and CLOs, okay? And I said this for like 10 years. So not [indiscernible] that.

Yes. Well, appreciate it. Sorry for giving you the same question 10 years in a row...

Hey, you're consistent, okay? It's telling in our...

I think it's been 20, but yes.

And our next question is going to come from Bill Katz from TD Cowen.

Thanks for taking the question. I apologize for a hoarse voice here. Just to come back to the investment banking opportunity. Ron, you sort of mentioned that you're already running at a run rate of revs equal to 2021, which was a quite robust year. Could you talk a little bit about maybe how you sort of see the incremental margin, the institutional group margin improved very nicely, both quarter-on-quarter and year-on-year? How much more incremental leverage is there to the segment? And then relatedly, how much that might flow to the bottom line?

Look, I think -- Jim, correct me. I've -- broadly speaking, I think we did 12% margins in the quarter.

Institution was 13.6%. That was year-to-date.

So 13.6%, that's why you're CFO. That's really good. So instead of 12%, it's 13.6%. We believe that 20 to low 20s is achievable. So when -- so think about it has about 10 points of margins for the quarter, $500 million, so annualized $2 billion. So if you're trying to say, as we restructure on the right side, including our international operations, which that's part of the improvement that's been making improvement there. But when I look at it, snapshot, I think there's 10 points of incremental pickup. So that's a couple of $100 million [indiscernible].

Right? When you think about it, that's going to be leverage we're going to get both on the comp ratio as well as in noncomp. Year-to-date, we were about 62% in terms of the comp ratio, and that number could get closer down into the 58% range. But where you see some even more pickup in terms of the type of margin expansion Ron was talking about, as you can see within the non-comp side of the ledger where that was running, call it, about 25% year-to-date as well. So definitely, a lot of margin increased capacity there.

We're focused on this, Bill.

Yes, it sounds like it. Okay. Another question for you. So I want to pick up where you left off, Ron, we sort of mentioned you get a sort of a growth company and a value opportunity. You've been pretty prescient in terms of calling that over time. How do we think about maybe capital uses from here? How should we be thinking about either expanding the banking opportunities since the deposits are starting to grow again versus maybe inorganic opportunities which doesn't sound high right now versus maybe a step-up of capital return to buyback, certainly given the strong balance sheet position?

Bill, it's always a great question you've asked. No more [ signs ]. The answer is always the same, which is the -- our capital allocation will be based on opportunity. That opportunity is grounded in our view as what's the best risk-adjusted returns on capital. So as always, we pay a dividend, we buy back stock. I've said this year, and you can look at it our volume of stock repurchases, accelerated when we were in liberation date market suppression, if you will, lower equity values. We said we wouldn't grow our balance sheet as much as the stock rebounded and we saw more opportunities as the economy improved and why I think we allocated more capital to that -- acquisitions are obviously, it's in our DNA and certainly my DNA as CEO. But as I've said, the level that cash flows and future earnings are trading at, which as I've said before, people company and say, what do you think of 20x adjusted EBITDA? And I think, well, I don't think that. And so what [indiscernible] we've been more muted.

But look, we are -- we understand importance to our shareholders, managing our capital, buying back equities, I think the stock is compelling that should support buybacks, but we're also going to grow the bank because that supports -- the integrated bank supports our wealth and institutional businesses. So those are investments, buybacks of our financial transaction, growing the balance sheet is strategic and build franchise value, we'll always look at our dividend and we'll consider acquisitions when they think they add accretively to our return on investment.

So I can't you give you any numbers on that because I don't know what they are it would depend on the opportunities as they present themselves.

And our next question is going to come from Steven Chubak from Wolf Research.

Always appreciated. Well, I did want to start off with a question on the FICC brokerage business. The performance was quite impressive this quarter. It was also pretty strong last quarter. You cited some enhanced revenue synergies with the banking side of the business. And I was hoping you could just unpack some of the sources of strength a bit further and whether those synergies support a higher run rate, if you can contextualize that a bit more, would be really helpful.

We've been looking at the last few quarters even at ourselves that from fixed income performance. And then we'll say, oh, hey, we want to caution you, it's not sustainable, let's say that.

What I think is happening is that the integration of a lot of the things that we've done over the years from Stern AG through Empire through some of the smaller acquisitions. And then importantly, buying Sparks combined with the pickup in depository environment, which is a normalization of the yield curve and then M&A activity which often the restructuring of M&A will lead in an M&A moment to restructuring the balance sheet. So either the target for the combined company. And so what we've seen is what we talk about. The reason we do these deals is increase our relevance so that we're able to have a seat at those tables. So incentive is doing advisory. We're also helping restructure balance sheet. We're talking to our financial officers as the yield curve adjust, not only normalized, but appears at least on the short end to be coming down. And frankly, our relevance is equaling more revenue.

I think that's fair. Obviously, we've talked about some of the transactions. Obviously, we had some of the gains in the prior quarter related to aircraft. That's some of the balance sheet restructuring transactions we're talking about here. if you're thinking about it from a pure run rate perspective, I would think about it along the lines of the traditional transactional revenue around $100 million run rate for the fourth quarter prior to layering on any of those, I guess, what we call last quarter, recurring nonrecurring items. So I think...

[indiscernible] Your guidance has always -- has proven a bit low.

It's a good way to think about it.

Yes. That's fine.

And a 2-parter for my follow-up, and I recognize both questions are unrelated, but the first is just on the recruitment trends and nice to see the uptick in FA ads and recruitment levels. I was hoping you could speak to what's driving some of that strength whether you're seeing continued succession or seeding of share from the wire houses or if you're seeing just more opportunities with some of the regional brokers and then I was hoping for an update on sweep deposit trends in the month of October.

I'll do the first. I'll let Jim do the second, so Jim think about [indiscernible]. Look, recruiting is robust. We've talked about the reasons. We've talked about it's a confluence of events. We've built a great platform. We've built a great service platform, we have good technology. we've made sure that we're competitive on the front because I felt when we were losing, it was not capabilities, it was more financial related. And recruiting is an ongoing thing. It's like reading a novel or reading more at [ peace ]. You're halfway through it, you don't start over and you've got a lot more to do. It's an ongoing everyday thing that we're doing. We have a great alternative for a lot of advisers that are looking or a firm that puts advisers first and has a culture of a wealth management firm with baking and underwriting capabilities. So there's not a lot of us out there like that. We certainly are one of them, and we're attracting a lot of people. Now, we just need to execute. So I have been continuing to be optimistic about that part of our business. I will note as I always do when I get to November. But proving the fourth quarter slowed down half of the -- I mean, they shut down the [ ACAT ] system in December. So [indiscernible] You should know that too. And I think...

And then in regards to an update on sweep cash, through yesterday, we were down from quarter end probably about $500 million plus in terms of those balances. But I would hesitate to say that there -- those balances are moving several hundred million dollars on a day-to-day basis. I'd also highlight that we did generate another $1 billion of deposit growth across the venture group given the additional investments made in those new team members as well as the strong recruiting that Ron talked about, while it won't always necessarily be on a straight line, we do expect cash balances to continue to grow through the end of the year.

And we've also [indiscernible] we've hired some more leaders to that bit of health. I just want to note that, I won't name names. But -- it's all part of a flywheel type thing. You got to have a platform. You have to have products and you also have to add the leadership that can go attract the people, and we've invested in all of those areas.

Our next question is going to come from Brennan Hawken from Bank of Montreal.

Ron, you spoke to a valuation gap, which you have spoken to fairly consistently over the years. But the valuation cap has also been persistent. And the interesting thing that's different about the current environment versus recent years is that there's seen as maybe a window for large firms to acquire firms and roll up certain spaces. And the wealth space is an area where a lot of large firms want to grow. And Stifel is an attractive asset, right? You've got an employee-oriented wealth firm, which fits well with large entity. Many investors believe that you can make for a good target. But we all know wealth firms are sold, not bought. So could you maybe share your views on that and how you're thinking about it?

Welcome back, Brennan.

Yes. It's -- first of all, I appreciate the compliment. But we've got a great [indiscernible] I mean for many firms that would want to be into our space and not very many alternatives a company that's got 24% return on tangible equity margins and a great culture, great technology and all of those things. And Yes, maybe my persistent valuation gap comes from the way I answer this question all the time, which shows we see no need to sell other than maybe the short-term pop in a share price we've spent eliminates a 135-year-old firm and a firm that's gaining market share as we have over the years, I got asked this question in 2011. Why won't you sell, you're an attractive asset, everyone coming out of the financial crisis, people want to invest, and we've grown the firm as I showed in the slide significantly. And maybe some of the questions will go surrounding when the CEO is running out of energy, and they want to sell [indiscernible], okay? So I'm not looking to do anything. We did a phone call once in a while. I always say, well, can I [indiscernible] it. So the combined thing they said, what, so that ends there. But I'm kind of kidding better. My point is, is that we're in a good spot. We're gaining market share, you should own our stock with a valuation discount, which has been proven by our historical growth, both in revenue earnings per share, profitability and relevance. We are a growth company. Our results show it, and we trade like a company that really can't grow in more of a value plan. I'll say it, I'll continue to say, it doesn't matter, but it's a fun way to add the call every once in a while.

Fair enough, Ron. And then I'd love to hear about some trends that you're seeing in advisory. So you guys have -- sponsors are a fairly big cohort for your advisory business. What are you seeing in your backlog as far as that group of market participants? Are we starting to see some return there? It looks like your advisory revenue was better than the public data. So it suggests maybe some smaller advisory -- sorry, sponsor-oriented deals might have been part of it. Is that the case? And how are you thinking about that cohort going forward?

First of all, I [indiscernible] reported numbers are consistently above what you would try to anticipate the public data. And I think that is because we do small and mid-cap deals as well, and that's been true not just last quarter, but for years. So that's the case.

In terms of pipeline, we're seeing strength across the board. Every single vertical, every single product. We've built a company here really to take advantage of the markets when it is accommodative and we're starting to see that. And so we're optimistic as we look forward to fourth quarter and 2026.

Yes, it's a good -- let's not underestimate importance of the environment and we're doing well. And I'm sure a lot of my peers and competitors are doing, well, I just feel from my perspective that we're gaining market share, and we see a very nice growth pattern, growth picture in front of us, just like I saw in 2011. So that's why we're optimistic.

Our next question is going to come from Michael Cho.

I just wanted to follow up on the corporate M&A discussion that we were just having, there's some news about the Stifel's independent adviser business. I mean I recognize it's a small part of the business and something Stifel is maybe strategically deemphasized for some time, but maybe it's a good time. I was hoping maybe I could just get your broader perspective on some key considerations around the prospective exit of this segment. And how you think Stifel's be better positioned longer term from this reshuffling of the business?

Well, I mean, a fair question. Nothing's announced not necessary you can appreciate by inability to talk in any specifics, okay. That said, I think that the article that was written, I don't -- I'm not really going to comment on the article other than the content. And I think that the context in the article that sort of -- I didn't talk to the reporter, but I thought wow, they got a little bit of my history and the way we think about the business. Correct. I think that it's very -- it's immaterial to [indiscernible] and doesn't really change what we believe we will grow. So look, I can't really answer your question. I hope you appreciate that. Yet a lot of the thought process was captured well. So I will say that.

Okay. Great enough. Fair enough. I guess just a quick small follow-up. Jim, just on balance sheet growth outlook from here. You called out venture banking during the quarter. And I think maybe last quarter, you were talking about maybe $1 billion of loan growth into the end of '25. Just kind of curious any updates in terms of balance sheet growth from here. Any key segments you might call out in the outside of Venture Banking?

Right. In some of our prepared remarks, we talked about the confirmation of the goal getting to $1 billion of loan growth for the back half of the year, and we still feel confident in that. When you think about the component line items that are comprising that growth, I think you'll continue to see what you've seen historically, I think you're going to continue to see fund banking being a large contributor there. We continue to add 1 to 4 family residential loans. And then, again, as we talked about, you'll continue to see some additional venture balances there as well. that's much more of a deposit generation play more than the loan growth [indiscernible] perceive that.

And there are no further questions at this time, I will turn the conference back over to Joel Jeffrey for any additional or closing remarks.

I appreciate you asking for my opinion, but I'm going to turn it over to Ron to have his closing remarks.

[indiscernible] going to say. We thank you all for attending and your interest in Stifel. I'll reiterate what we said on the call. We talked about the back half of the year being where we could see some nice pickup in activity driven by the environment. We see that [indiscernible] let's get the government shutdown done so we can get some [indiscernible] on some of the capital market transactions. But the environment is good. And the company, Stifel, is well positioned. So I look forward to reporting to you our fourth quarter and full year results. And everyone have a great remainder of the day and holidays and everything until we meet again. Thank you.

And this concludes today's call. Thank you for your participation. You may now disconnect.