UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑
þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2017March 31, 2024
OR
☐
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Commission File No.Number: 001-31720
PIPER JAFFRAYSANDLER COMPANIES
(Exact Name of Registrant as specified in its Charter)
Delaware30-0168701
DELAWARE30-0168701
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
800 Nicollet Mall, Suite 1000
900
Minneapolis, Minnesota55402
(Address of Principal Executive Offices)(Zip Code)
(612)(612) 303-6000
(Registrant’sRegistrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange On Which Registered
Common Stock, par value $0.01 per sharePIPRThe New York Stock Exchange
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ ☑No  ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ ☑No  ¨

☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ☑Accelerated filer¨☐
Non-accelerated filer¨☐(Do not check if a smaller reporting company)Smaller reporting company¨☐
Emerging growth company¨☐

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

☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨☐ No  þ

☑
As of November 1, 2017,April 30, 2024, the registrant had 15,109,13817,699,038 shares of Common Stock outstanding.




Table of Contents
Part I. Financial Information


Piper Jaffray Companies
Index to Quarterly Report on Form 10-Q

PART I. FINANCIAL INFORMATION
ITEMItem 1.
3
Item 2.
Consolidated Statements Management's Discussionand Analysisof Financial Condition as Financial ConditionandResultsof September 30, 2017 (Unaudited) and December 31, 2016Operations
333
Item 3.
454
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and September 30, 2016 (Unaudited)
5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and September 30, 2016 (Unaudited)
6
Notes to the Consolidated Financial Statements (Unaudited)
8
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
43
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
74
ITEMItem 4.
7455
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
74
ITEM 1A.
RISK FACTORS
75
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
77
ITEM 6.
EXHIBITS
78
SIGNATURES
79

Part II. Other Information

Item 1.
Legal Proceedings
55
Item 1A.
Risk Factors
55
Item 2.
56
Item 3.
56
Item 4.
56
Item 5.
Other Information
56
Item 6.
Exhibits
57
Signatures
58

Piper Sandler Companies | 2


Table of Contents

Part I. Financial Information
PART I.    FINANCIAL INFORMATION

ITEMItem 1. Financial Statements.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS.STATEMENTS
4
5
6
7
8
9
Note 1
9
Note 2
9
Note 3
10
Note 4
10
Note 5
11
Note 6
18
Note 7
20
Note 8
20
Note 9
21
Note 10
22
Note 11
22
Note 12
23
Note 13
24
Note 14
25
Note 15
32
Note 16
32

Piper Sandler Companies | 3

Table of Contents
Piper JaffraySandler Companies
Consolidated Statements of Financial Condition

 September 30, December 31,
 2017 2016
(Amounts in thousands, except share data)(Unaudited)  
Assets   
Cash and cash equivalents$40,916
 $41,359
Cash and cash equivalents segregated for regulatory purposes6,016
 29,015
Receivables:   
Customers—
 31,917
Brokers, dealers and clearing organizations80,880
 212,730
Securities purchased under agreements to resell—
 159,697
    
Financial instruments and other inventory positions owned763,946
 464,610
Financial instruments and other inventory positions owned and pledged as collateral335,382
 594,361
Total financial instruments and other inventory positions owned1,099,328
 1,058,971
    
Fixed assets (net of accumulated depreciation and amortization of $61,312 and $58,308, respectively)24,286
 25,343
Goodwill81,855
 196,218
Intangible assets (net of accumulated amortization of $81,483 and $70,017, respectively)25,768
 37,234
Investments179,527
 168,057
Net deferred income tax assets145,817
 97,833
Other assets55,443
 67,129
Total assets$1,739,836
 $2,125,503
    
Liabilities and Shareholders’ Equity   
Short-term financing$76,797
 $418,832
Senior notes125,000
 175,000
Payables:   
Customers—
 29,352
Brokers, dealers and clearing organizations54,265
 40,842
Securities sold under agreements to repurchase—
 15,046
Financial instruments and other inventory positions sold, but not yet purchased357,735
 299,357
Accrued compensation288,299
 288,255
Other liabilities and accrued expenses50,955
 42,553
Total liabilities953,051
 1,309,237
    
Shareholders’ equity:   
Common stock, $0.01 par value:   
Shares authorized: 100,000,000 at September 30, 2017 and December 31, 2016;   
Shares issued: 19,512,328 at September 30, 2017 and 19,535,307 at December 31, 2016;   
Shares outstanding: 12,899,902 at September 30, 2017 and 12,391,970 at December 31, 2016195
 195
Additional paid-in capital786,527
 788,927
Retained earnings227,095
 257,188
Less common stock held in treasury, at cost: 6,612,426 at September 30, 2017 and 7,143,337 shares at December 31, 2016(274,089) (284,461)
Accumulated other comprehensive loss(1,462) (2,599)
Total common shareholders’ equity738,266
 759,250
    
Noncontrolling interests48,519
 57,016
Total shareholders’ equity786,785
 816,266
    
Total liabilities and shareholders’ equity$1,739,836
 $2,125,503
March 31,December 31,
20242023
(Amounts in thousands, except share data)(Unaudited)
Assets
Cash and cash equivalents$69,958 $383,098 
Receivables from brokers, dealers and clearing organizations176,398 212,004 
Financial instruments and other inventory positions owned:
Financial instruments and other inventory positions owned118,753 341,780 
Financial instruments and other inventory positions owned and pledged as collateral323,474 92,777 
Total financial instruments and other inventory positions owned442,227 434,557 
Investments (including noncontrolling interests of $234,167 and $211,096, respectively)325,435 298,048 
Fixed assets (net of accumulated depreciation and amortization of $95,534 and $91,378, respectively)57,744 60,770 
Right-of-use lease assets67,335 69,387 
Goodwill301,760 301,760 
Intangible assets (net of accumulated amortization of $152,848 and $150,487, respectively)113,836 116,197 
Net deferred income tax assets138,519 179,207 
Other assets129,241 85,955 
Total assets$1,822,453 $2,140,983 
Liabilities and Shareholders' Equity
Short-term financing$— $30,000 
Payables to brokers, dealers and clearing organizations3,383 979 
Financial instruments and other inventory positions sold, but not yet purchased158,245 148,980 
Accrued compensation160,741 486,145 
Accrued lease liabilities91,485 93,727 
Other liabilities and accrued expenses83,569 81,679 
Total liabilities497,423 841,510 
Shareholders' equity:
Common stock, $0.01 par value:
Shares authorized: 100,000,000 at March 31, 2024 and December 31, 2023;
Shares issued: 19,553,656 at March 31, 2024 and 19,553,101 at December 31, 2023;
Shares outstanding: 15,642,422 at March 31, 2024 and 15,200,149 at December 31, 2023195 195 
Additional paid-in capital987,195 988,136 
Retained earnings461,191 454,358 
Less: Common stock held in treasury, at cost: 3,911,234 shares at March 31, 2024 and 4,352,952 shares at December 31, 2023(347,156)(356,297)
Accumulated other comprehensive loss(850)(894)
Total common shareholders' equity1,100,575 1,085,498 
Noncontrolling interests224,455 213,975 
Total shareholders' equity1,325,030 1,299,473 
Total liabilities and shareholders' equity$1,822,453 $2,140,983 
See Notes to the Consolidated Financial Statements

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Table of Contents
Piper JaffraySandler Companies
Consolidated Statements of Operations
(Unaudited)

Three Months Ended
March 31,
(Amounts in thousands, except per share data)20242023
Revenues
Investment banking$230,523 $184,404 
Institutional brokerage91,442 96,313 
Interest income8,306 8,712 
Investment income14,168 11,115 
Total revenues344,439 300,544 
Interest expense1,383 2,639 
Net revenues343,056 297,905 
Non-interest expenses
Compensation and benefits222,446 199,394 
Outside services12,422 12,126 
Occupancy and equipment16,036 15,728 
Communications13,229 14,311 
Marketing and business development10,763 10,052 
Deal-related expenses6,387 6,014 
Trade execution and clearance4,866 4,914 
Intangible asset amortization2,361 4,904 
Other operating expenses2,124 4,653 
Total non-interest expenses290,634 272,096 
Income before income tax expense/(benefit)52,422 25,809 
Income tax expense/(benefit)2,844 (7,637)
Net income49,578 33,446 
Net income attributable to noncontrolling interests7,085 7,812 
Net income attributable to Piper Sandler Companies$42,493 $25,634 
Earnings per common share
Basic$2.74 $1.77 
Diluted$2.43 $1.49 
Dividends declared per common share$1.60 $1.85 
Weighted average number of common shares outstanding
Basic15,499 14,507 
Diluted17,504 17,182 

 Three Months Ended Nine Months Ended
 September 30, September 30,
(Amounts in thousands, except per share data)2017 2016 2017 2016
Revenues:       
Investment banking$190,482
 $136,682
 $461,260
 $338,034
Institutional brokerage34,873
 42,189
 111,083
 122,423
Asset management12,818
 15,256
 44,011
 43,699
Interest7,164
 7,343
 22,649
 24,094
Investment income/(loss)(422) 4,806
 15,406
 14,019
        
Total revenues244,915
 206,276
 654,409
 542,269
        
Interest expense4,348
 5,429
 15,568
 17,383
        
Net revenues240,567
 200,847
 638,841
 524,886
        
Non-interest expenses:       
Compensation and benefits169,469
 135,186
 438,161
 356,770
Outside services7,495
 10,288
 27,612
 28,923
Occupancy and equipment8,127
 8,743
 24,846
 25,311
Communications7,136
 7,845
 22,025
 22,469
Marketing and business development6,683
 7,629
 22,512
 23,804
Trade execution and clearance2,125
 2,008
 5,864
 5,686
Restructuring and integration costs—
 —
 —
 10,206
Goodwill impairment114,363
 —
 114,363
 —
Intangible asset amortization3,822
 8,010
 11,466
 15,400
Back office conversion costs1,293
 —
 3,027
 —
Other operating expenses2,290
 2,687
 8,525
 7,915
        
Total non-interest expenses322,803
 182,396
 678,401
 496,484
        
Income/(loss) before income tax expense/(benefit)(82,236) 18,451
 (39,560) 28,402
        
Income tax expense/(benefit)(31,423) 6,515
 (26,912) 8,767
        
Net income/(loss)(50,813) 11,936
 (12,648) 19,635
        
Net income/(loss) applicable to noncontrolling interests(1,100) 1,278
 3,217
 4,602
        
Net income/(loss) applicable to Piper Jaffray Companies$(49,713) $10,658
 $(15,865) $15,033
        
Net income/(loss) applicable to Piper Jaffray Companies’ common shareholders$(50,415)
(1) 
$8,582
 $(18,106)
(1) 
$12,476
        
Earnings/(loss) per common share       
Basic$(3.91) $0.70
 $(1.42) $0.98
Diluted$(3.91)
(2) 
$0.70
 $(1.42)
(2) 
$0.97
        
Dividends declared per common share$0.31
 $—
 $0.94
 $—
        
Weighted average number of common shares outstanding       
Basic12,898
 12,282
 12,774
 12,787
Diluted12,975
(2) 
12,298
 12,945
(2) 
12,801
(1)No allocation of undistributed income was made due to loss position. See Note 17.
(2)Earnings per diluted common share is calculated using the basic weighted average number of common shares outstanding for periods in which a loss is incurred.
See Notes to the Consolidated Financial Statements

Piper Sandler Companies | 5

4
Table of Contents
Piper JaffraySandler Companies
Consolidated Statements of Comprehensive Income
(Unaudited)

Three Months Ended
March 31,
(Amounts in thousands)20242023
Net income$49,578 $33,446 
Other comprehensive income, net of tax — Foreign currency translation adjustment44 955 
Comprehensive income49,622 34,401 
Comprehensive income attributable to noncontrolling interests7,085 7,812 
Comprehensive income attributable to Piper Sandler Companies$42,537 $26,589 
 Three Months Ended Nine Months Ended
 September 30, September 30,
(Amounts in thousands)2017 2016 2017 2016
Net income/(loss)$(50,813) $11,936
 $(12,648) $19,635
        
Other comprehensive income/(loss), net of tax:       
Foreign currency translation adjustment142
 (587) 1,137
 (1,843)
        
Comprehensive income/(loss)(50,671) 11,349
 (11,511) 17,792
        
Comprehensive income/(loss) applicable to noncontrolling interests(1,100) 1,278
 3,217
 4,602
        
Comprehensive income/(loss) applicable to Piper Jaffray Companies$(49,571) $10,071
 $(14,728) $13,190


See Notes to the Consolidated Financial Statements



5
Piper Sandler Companies | 6

Table of Contents
Piper JaffraySandler Companies
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
AccumulatedTotal
CommonAdditionalOtherCommonTotal
(Amounts in thousands,SharesCommonPaid-InRetainedTreasuryComprehensiveShareholders'NoncontrollingShareholders'
 except share amounts)OutstandingStockCapitalEarningsStockLossEquityInterestsEquity
Balance at December 31, 202315,200,149 $195 $988,136 $454,358 $(356,297)$(894)$1,085,498 $213,975 $1,299,473 
Net income— — — 42,493 — — 42,493 7,085 49,578 
Dividends— — — (35,660)— — (35,660)— (35,660)
Amortization/issuance of restricted stock (1)— — 60,185 — — — 60,185 — 60,185 
Issuance of treasury shares for restricted stock vestings730,695 — (61,232)— 61,232 — — — — 
Repurchase of common stock from employees(288,977)— — — (52,091)— (52,091)— (52,091)
Shares reserved/issued for director compensation555 — 106 — — — 106 — 106 
Other comprehensive income— — — — — 44 44 — 44 
Fund capital contributions, net— — — — — — — 3,395 3,395 
Balance at March 31, 202415,642,422 $195 $987,195 $461,191 $(347,156)$(850)$1,100,575 $224,455 $1,325,030 
Balance at December 31, 202213,673,064 $195 $1,044,719 $453,311 $(441,653)$(2,499)$1,054,073 $199,955 $1,254,028 
Net income— — — 25,634 — — 25,634 7,812 33,446 
Dividends— — — (50,861)— — (50,861)— (50,861)
Amortization/issuance of restricted stock (1)— — 67,682 — — — 67,682 — 67,682 
Issuance of treasury shares for restricted stock vestings1,584,696 — (121,284)— 121,284 — — — — 
Repurchase of common stock from employees(426,031)— — — (60,831)— (60,831)— (60,831)
Shares reserved/issued for director compensation1,398 — 192 — — — 192 — 192 
Other comprehensive income— — — — — 955 955 — 955 
Fund capital distributions, net— — — — — — — (5,048)(5,048)
Balance at March 31, 202314,833,127 $195 $991,309 $428,084 $(381,200)$(1,544)$1,036,844 $202,719 $1,239,563 
(1)Includes amortization of restricted stock issued in conjunction with the Company's acquisitions.

See Notes to the Consolidated Financial Statements
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Piper Sandler Companies
Consolidated Statements of Cash Flows
(Unaudited)

 Nine Months Ended
 September 30,
(Dollars in thousands)2017 2016
    
Operating Activities:   
Net income/(loss)$(12,648) $19,635
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:   
Depreciation and amortization of fixed assets5,343
 4,724
Deferred income taxes(47,984) 715
Stock-based and deferred compensation26,459
 43,839
Goodwill impairment114,363
 —
Amortization of intangible assets11,466
 15,400
Amortization of forgivable loans5,207
 6,894
Decrease/(increase) in operating assets:   
Cash and cash equivalents segregated for regulatory purposes22,999
 35,000
Receivables:   
Customers31,917
 (46,398)
Brokers, dealers and clearing organizations131,850
 (21,478)
Securities purchased under agreements to resell159,697
 (10,492)
Net financial instruments and other inventory positions owned18,021
 (72,758)
Investments(11,470) (4,767)
Other assets7,185
 (8,898)
Increase/(decrease) in operating liabilities:   
Payables:   
Customers(29,352) 13,366
Brokers, dealers and clearing organizations13,423
 153,795
Securities sold under agreements to repurchase(15,046) (2,018)
Accrued compensation4,666
 (51,569)
Other liabilities and accrued expenses7,864
 (32,005)
    
Net cash provided by operating activities443,960
 42,985
    
Investing Activities:   
Business acquisitions, net of cash acquired—
 (71,019)
Purchases of fixed assets, net(4,310) (7,360)
    
Net cash used in investing activities(4,310) (78,379)
    
Continued on next page

6
Table of Contents
Piper Jaffray Companies
Consolidated Statements of Cash Flows – Continued
(Unaudited)

 Nine Months Ended
 September 30,
(Dollars in thousands)2017 2016
    
Financing Activities:   
Decrease in short-term financing$(342,035) $(20,405)
Repayment of variable rate senior notes(50,000) —
Decrease in securities sold under agreements to repurchase—
 (21,292)
Payment of cash dividend(14,217) —
Increase/(decrease) in noncontrolling interests(11,714) 10,189
Repurchase of common stock(25,065) (70,428)
Proceeds from stock option exercises1,703
 119
    
Net cash used in financing activities(441,328) (101,817)
    
Currency adjustment:   
Effect of exchange rate changes on cash1,235
 (1,328)
    
Net decrease in cash and cash equivalents(443) (138,539)
    
Cash and cash equivalents at beginning of period41,359
 189,910
    
Cash and cash equivalents at end of period$40,916
 $51,371
    
Supplemental disclosure of cash flow information –   
Cash paid during the period for:   
Interest$15,397
 $17,679
Income taxes$7,781
 $22,148
    
Non-cash investing activities –   
Issuance of common stock related to the acquisition of Simmons & Company International:   
25,525 shares for the nine months ended September 30, 2016$—
 $1,074
    
Non-cash financing activities –   
Issuance of restricted common stock for annual equity award:   
198,981 shares and 843,889 shares for the nine months ended September 30, 2017 and 2016, respectively$16,187
 $35,089

Three Months Ended
March 31,
(Amounts in thousands)20242023
Operating Activities
Net income$49,578 $33,446 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of fixed assets4,258 4,426 
Deferred income taxes40,688 (8,191)
Stock-based compensation26,825 27,502 
Amortization of intangible assets2,361 4,904 
Amortization of forgivable loans4,825 2,614 
Decrease/(increase) in operating assets:
Receivables from brokers, dealers and clearing organizations35,606 173,604 
Net financial instruments and other inventory positions owned1,595 (64,989)
Investments(27,387)(8,019)
Other assets(45,859)(1,979)
Increase/(decrease) in operating liabilities:
Payables to brokers, dealers and clearing organizations2,404 (603)
Accrued compensation(291,830)(362,236)
Other liabilities and accrued expenses(250)(2,385)
Net cash used in operating activities(197,186)(201,906)
Investing Activities
Purchases of fixed assets, net(1,275)(1,855)
Net cash used in investing activities(1,275)(1,855)
Financing Activities
Net change in short-term financing(30,000)— 
Payment of cash dividend(35,660)(50,861)
Increase/(decrease) in noncontrolling interests3,395 (5,048)
Repurchase of common stock(52,091)(60,831)
Net cash used in financing activities(114,356)(116,740)
Currency adjustment:
Effect of exchange rate changes on cash(323)845 
Net decrease in cash and cash equivalents(313,140)(319,656)
Cash and cash equivalents at beginning of period383,098 365,624 
Cash and cash equivalents at end of period$69,958 $45,968 
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest$1,300 $2,549 
Income taxes$127 $737 
See Notes to the Consolidated Financial Statements


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Piper JaffraySandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)



Index
Note 1
Organization and Basis of Presentation
9
Note 2
Accounting Policies and Pronouncements
10
Note 3
Acquisition of Simmons & Company International
12
Note 4
Financial Instruments and Other Inventory Positions Owned and Financial Instruments and Other Inventory Positions Sold, but Not Yet Purchased
14
Note 5
Fair Value of Financial Instruments
16
Note 6
Variable Interest Entities
26
Note 7
Receivables from and Payables to Brokers, Dealers and Clearing Organizations
27
Note 8
Collateralized Securities Transactions
27
Note 9
Investments
28
Note 10
Other Assets
29
Note 11
Goodwill and Intangible Assets
29
Note 12
Short-Term Financing
30
Note 13
Senior Notes
31
Note 14
Legal Contingencies
31
Note 15
Shareholders’ Equity
32
Note 16
Compensation Plans
34
Note 17
Earnings Per Share
39
Note 18
Segment Reporting
40
Note 19
Net Capital Requirements and Other Regulatory Matters
42
Note 20
Income Taxes
42


8
Table of Contents
Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

NoteNOTE 1Organization and Basis of Presentation

| ORGANIZATION AND BASIS OF PRESENTATION
Organization

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


Effective August 7, 2017, Piper Jaffray transitioned from a self clearing securities broker dealer to a fully disclosed clearing model. Pershing LLC ("Pershing") is Piper Jaffray's clearing broker dealer responsible for the clearance and settlement of firm and customer cash and security transactions.

Piper JaffraySandler Companies and its subsidiaries (collectively, the "Company") operate in twoone reporting segments: Capital Markets and Asset Management. A summary of the activities of each of the Company’s business segments is as follows:

Capital Markets

The Capital Markets segment providesproviding investment banking services and institutional sales, trading and research services. Investment banking services include financial advisory services, management of and participation in underwritings, financial advisory services and public financemunicipal financing activities. Revenues are generated through the receipt of advisory and financing fees. Institutional sales, trading and research services focus on the trading of equity and fixed income products with institutions, corporations, government and non-profit entities. Revenues are generated through commissions and sales credits earned on equity and fixed income institutional sales activities, net interest revenues on trading securities held in inventory, and profits and losses from trading these securities.securities, and fees for research services and corporate access offerings. Also, the Company generates revenue through strategic trading and investing activities, which focus on investments in municipal bonds, U.S. government agency securities, and merchant banking activities involving equity or debt investments in late stage private companies. The Company has created alternative asset management funds in merchant banking energy and senior livinghealthcare in order to invest firm capital and to manage capital from outside investors. The Company records gains and losses from investments in these funds and receives management and performance fees for managing these funds.fees.

Asset Management

The Asset Management segment provides traditional asset management services with product offerings in equity securities and master limited partnerships to institutions and individuals. Revenues are generated in the form of management and performance fees. Revenues are also generated through investments in the partnerships and funds that the Company manages.


Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S.United States generally accepted accounting principles ("U.S. GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC"). Pursuant to this guidance, certain information and disclosures have been omitted that are included within the complete annual financial statements. Except as disclosed herein, there have been no material changes in the information reported in the financial statements and related disclosures in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.2023.


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


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



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NoteNOTE 2Accounting Policies and Pronouncements

Summary of Significant Accounting Policies

| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 20162023 for a full description of the Company's significant accounting policies. Changes to the Company's significant accounting policies are described below.

Stock-Based Compensation

Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718, "Compensation – Stock Compensation," ("ASC 718") requires all stock-based compensation to be expensed on the consolidated statements of operations based on the grant date fair value of the award. Compensation expense related to stock-based awards that do not require future service are recognized in the year in which the awards were deemed to be earned. Stock-based awards that require future service are amortized over the relevant service period. Forfeitures of awards with service conditions are accounted for when they occur. See Note 16 for additional information on the Company's accounting for stock-based compensation.

Adoption of New Accounting Standards

Stock-Based Compensation

In March 2016, the FASB issued Accounting Standard Update ("ASU") No. 2016-09, "Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 made targeted amendments to the accounting for share-based payments to employees. It became effective for the Company as of January 1, 2017. There was no impact to the Company’s retained earnings upon adoption of ASU 2016-09.

Under ASU 2016-09, the Company recognizes the income tax effects of stock awards in the income statement when the awards vest or are settled. For the nine months ended September 30, 2017, this accounting change resulted in the recording of a $9.1 million tax benefit for stock awards vesting during the period. Prior to the adoption of this ASU, this amount would have been recorded directly to additional paid-in capital. In addition, the Company has elected to account for forfeitures of awards with service conditions as they occur. This will result in dividends originally charged against retained earnings for forfeited, unvested stock-based payment awards to be reclassified to compensation expense in the period in which the forfeiture occurs. Furthermore, tax impacts from the vesting of stock-based compensation are presented as an operating activity on the consolidated statements of cash flows on a prospective basis.

Goodwill Impairment

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., perform a hypothetical purchase price allocation) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 is effective for the Company’s annual and any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied prospectively. Early adoption is permitted for interim and annual goodwill impairment testing dates after January 1, 2017. The Company adopted ASU 2017-04 effective July 1, 2017.

Future Adoption of New Applicable Accounting Standards

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"), which supersedes current revenue recognition guidance, including most industry-specific guidance. ASU 2014-09, as amended, requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services, and also requires enhanced disclosures.



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NOTE 3 | RECENT ACCOUNTING PRONOUNCEMENTS
Future Adoption of New Applicable Accounting Standards
Improvements to Reportable Segment Disclosures
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). This guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company has identified its revenues and costs that are withinis currently assessing the scopeimpact of the new guidance. The current broker dealer industry treatment of netting deal expenses with investment banking revenues will change under the new guidance. As a result of adopting ASU 2014-09, the Company will generally present deal expenses on a gross basis on the consolidated statements of operations, rather than the current presentation of netting deal expenses for completed investment banking deals within revenues. This change will not impact earnings, however, the Company will report higher revenues and higher non-compensation expenses. In addition, the Company expects to defer the recognition of performance fees2023-07 on its merchant banking, energy and senior living alternative asset management funds until such fees are no longer subjectfinancial statement disclosures.

Improvements to reversal, which will cause a delay in the recognition of these fees as revenue. The Company anticipates that its current methods of recognizing investment banking revenues will not be significantly impacted by the new guidance.

The AICPA industry task forces on broker dealers and asset management, the AICPA’s Revenue Recognition Working Group and the AICPA’s Financial Reporting Executive Committee (FinREC) continue to issue interpretive guidance on ASU 2014-09. The Company will continue to evaluate the potential impact of this guidance.

The Company will adopt this guidance effective as of January 1, 2018 under the modified retrospective method, in which the cumulative effect of applying the standard will be recognized at the date of initial application. As of September 30, 2017, the estimated cumulative effect that the Company would recognize as an adjustment to retained earnings upon adoption will be less than $2 million, net of tax.

Recognition and Measurement of Financial Assets and Financial Liabilities

Income Tax Disclosures
In January 2016,December 2023, the FASB issued ASU No. 2016-01, "Financial Instruments – Overall (Subtopic 825-10): Recognition2023-09, "Improvements to Income Tax Disclosures" ("ASU 2023-09"). This guidance enhances the annual income tax disclosure requirements by requiring disaggregated information related to the effective tax rate reconciliation and Measurement of Financial Assets and Financial Liabilities" ("income taxes paid, as well as other disclosure requirements. ASU 2016-01"). The amendments in ASU 2016-01 address certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-012023-09 is effective for annual and interim periods beginning after December 15, 2017. Except for the early application guidance outlined in ASU 2016-01,2024, with early adoption is not permitted. The adoption of ASU 2016-01 is not expected to have a material impact on the Company's results of operations or financial position, but may impact the Company's disclosures.

Leases

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability on the consolidated statements of financial position and disclose key information about leasing arrangements. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current U.S. GAAP. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018. As of December 31, 2016, the Company had approximately 65 operating leases for office space with aggregate minimum lease commitments of $78.4 million. The Company is evaluating other service contracts which may include embedded leases. Upon adoptioncurrently assessing the impact of ASU 2016-02,2023-09 on its financial statement disclosures.

NOTE 4 | RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS
March 31,December 31,
(Amounts in thousands)20242023
Receivables from brokers, dealers and clearing organizations
Receivable from clearing organizations$157,997 $199,143 
Receivable from brokers and dealers14,635 9,176 
Other3,766 3,685 
Total receivables from brokers, dealers and clearing organizations$176,398 $212,004 
Payables to brokers, dealers and clearing organizations
Payable to brokers and dealers$3,383 $979 
Total payables to brokers, dealers and clearing organizations$3,383 $979 

Under the Company's fully disclosed clearing agreement, all of its securities inventories with the exception of convertible securities, and all of its customer activities are held by or cleared through Pershing LLC ("Pershing"). The Company does not expect material changeshas established an arrangement to obtain financing from Pershing related to the recognitionmajority of rent expense in its consolidated statementstrading activities. The Company also has a clearing arrangement with bank financing related to its convertible securities inventories. Financing under these arrangements is secured primarily by securities, and collateral limitations could reduce the amount of operations.funding available under these arrangements. The impactfunding is at their discretion and could be denied. The Company's clearing arrangement activities are recorded net of the new guidance ontrading activity. The Company's fully disclosed clearing agreement includes a covenant requiring Piper Jaffray’sSandler to maintain excess net capital is expected to be minimal.of $120 million.

Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). The new guidance requires an entity to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts as opposed to delaying recognition until the loss was probable of occurring. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements.



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Notes to the Consolidated Financial Statements
(Unaudited)


NOTE 5 | FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Cash Flows

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"). ASU 2016-15 clarifies how entities should classify certain cash receipts and cash paymentsBased on the statementnature of cash flows.the Company's business and its role as a "dealer" in the securities industry or as a manager of alternative asset management funds, the fair values of its financial instruments are determined internally. The amendments in ASU 2016-15Company's processes are effectivedesigned to ensure that the fair values used for annualfinancial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, unobservable inputs are developed based on an evaluation of all relevant empirical market data, including prices evidenced by market transactions, interest rates, credit spreads, volatilities and interim periods beginning after December 31, 2017correlations and should be applied retrospectively. Early adoption is permitted. other security-specific information. Valuation adjustments related to illiquidity or counterparty credit risk are also considered. In estimating fair value, the Company may utilize information provided by third-party pricing vendors to corroborate internally-developed fair value estimates.

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


In November 2016,The following is a description of the FASB issued ASU No. 2016-18, "Statementvaluation techniques used to measure fair value.

Cash Equivalents
Cash equivalents include highly liquid investments with original maturities of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). Under ASU 2016-18, restricted cash will be included with cash90 days or less. Actively traded money market funds are measured at their net asset value and cash equivalents when reconciling the beginning-of-periodclassified as Level I.

Financial Instruments and end-of-period amounts shownOther Inventory Positions
The Company records financial instruments and other inventory positions owned and financial instruments and other inventory positions sold, but not yet purchased at fair value on the consolidated statements of cash flows. ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017 and should be applied retrospectively. Early adoption is permitted.

Note 3Acquisition of Simmons & Company International

On February 26, 2016, the Company completed the acquisition of Simmons & Company International ("Simmons"), an employee-owned investment bank and broker dealer focused on the energy industry. The economic value of the acquisition was approximately $140.0 million.

The Company acquired net assets with a fair value of $119.3 million. As part of the purchase price, the Company issued 1,149,340 restricted shares valued at $48.2 million as equity consideration on the acquisition date. Employees must fulfill service requirements in exchange for the rights to the shares. Compensation expense will be amortized on a straight-line basis over the requisite service period of one or three years (a weighted average service period of 2.7 years). The fair value of the restricted stock was determined using the market price of the Company's common stock on the date of the acquisition.

The Company also entered into acquisition-related compensation arrangements with certain employees of $20.6 million which consisted of cash ($9.0 million) and restricted stock ($11.6 million) for retention purposes. Compensation expense related to these arrangements will be amortized on a straight-line basis over the requisite service period of three years. Additional cash compensation may be available to certain investment banking employees subject to exceeding an investment banking revenue threshold during the three year post-acquisition period to the extent they are employed by the Company at the time of payment. Amounts estimated to be payable related to this performance award plan will be recorded as compensation expense on the consolidated statements of operations over the requisite performance period of three years. As of September 30, 2017, the Company had accrued $14.4 million related to this performance award plan.

The acquisition was accounted for pursuant to FASB Accounting Standards Codification Topic 805, "Business Combinations." Accordingly, the purchase price was allocated to the acquired assets and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the net assets acquired was allocated between goodwill and intangible assets within the Capital Markets segment. The Company recorded $60.7 million of goodwill on its consolidated statements of financial condition of which $59.4 million is expected to be deductible for income tax purposes. In management's opinion, the goodwill represents the reputationwith unrealized gains and operating expertise of Simmons.

Identifiable intangible assets purchased by the Company consisted of customer relationships and the Simmons trade name with acquisition-date fair values of $17.5 million and $9.1 million, respectively. Transaction costs of $0.9 million were incurred for the nine months ended September 30, 2016, and are included in restructuring and integration costslosses reflected on the consolidated statements of operations.



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

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

Corporate Fixed Income Securities
Fixed income securities include corporate bonds which are valued based on recently executed market transactions of comparable size, internally-developed fair value estimates based on observable inputs, or broker quotations. Accordingly, these corporate bonds are categorized as Level II.
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Notes to the Consolidated Financial Statements
(Unaudited)


Taxable Municipal Securities
Simmons’ results of operations have been included in the Company's consolidated financial statements prospectively beginning on the date of acquisition. The acquisition has been fully integrated with the Company's existing operations. Accordingly, post-acquisition revenuesTaxable municipal securities are valued using recently executed observable trades or market price quotations and net incometherefore are not discernible. The following unaudited pro forma financialgenerally categorized as Level II.

Tax-Exempt Municipal Securities
Tax-exempt municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II. Certain illiquid tax-exempt municipal securities are valued using market data assumes the acquisition had occurred on January 1, 2015, the beginning of the prior annual period in which the acquisition occurred. Pro forma results have been preparedfor comparable securities (e.g., maturity and sector) and management judgment to infer an appropriate current yield or other model-based valuation techniques deemed appropriate by adjusting the Company's historical results to include Simmons' results of operations adjusted for the following changes: amortization expense was adjusted to account for the acquisition-date fair value of intangible assets; compensation and benefits expenses were adjusted to reflect such expensesmanagement based on the Company’s compensation arrangementsspecific nature of the individual security and therefore are categorized as Level III.

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

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

U.S. Government Agency Securities
U.S. government agency securities include agency debt bonds and the income tax effect of applying the Company's statutory tax rates to Simmons’ results of operations.mortgage bonds. Agency debt bonds are valued by using either direct price quotes or price quotes for comparable bond securities and are categorized as Level II. Mortgage bonds include bonds secured by mortgages, mortgage pass-through securities, agency collateralized mortgage-obligation ("CMO") securities and agency interest-only securities. Mortgage pass-through securities, CMO securities and interest-only securities are valued using recently executed observable trades or other observable inputs, such as prepayment speeds and therefore are generally categorized as Level II. Mortgage bonds are valued using observable market inputs, such as market yields on spreads over U.S. treasury securities, or models based upon prepayment expectations. These securities are categorized as Level II.

U.S. Government Securities
U.S. government securities include highly liquid U.S. treasury securities which are generally valued using quoted market prices and therefore are categorized as Level I. The Company's unaudited pro forma information presentedCompany does not necessarily reflecttransact in securities of countries other than the results of operations that would have resulted had the acquisition been completed at the beginning of the applicable period presented, does not contemplate anticipated operational efficiencies of the combined entities, nor does it indicate the results of operations in future periods.U.S. government.


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  Nine Months Ended
(Dollars in thousands) September 30, 2016
Net revenues $532,683
Net income applicable to Piper Jaffray Companies 15,642



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Notes to the Consolidated Financial Statements
(Unaudited)


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

Investments
The Company's investments valued at fair value include equity investments in private companies and mutual funds held by a grantor trust for the Company's nonqualified deferred compensation plan. Investments in private companies are valued based on an assessment of each underlying security, considering rounds of financing, the financial condition and operating results of the private company, third-party transactions and market-based information, including comparable company transactions, trading multiples (e.g., multiples of revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA")), discounted cash flow analyses and changes in market outlook, among other factors. These securities are categorized based on the lowest level of input that is significant to the fair value measurement and therefore are categorized as Level II or Level III. Certain underlying securities, as well as investments in mutual funds, are valued based on quoted prices from the exchange for identical assets as of the period-end date. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level I. See Note 4Financial Instruments8 and Other Inventory Positions Owned and Financial Instruments and Other Inventory Positions Sold, but Not Yet PurchasedNote 14 to our consolidated financial statements for additional information about the Company's nonqualified deferred compensation plan.


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Notes to the Consolidated Financial Statements
(Unaudited)

 September 30, December 31,
(Dollars in thousands)2017 2016
Financial instruments and other inventory positions owned:   
Corporate securities:   
Equity securities$66,904
 $6,363
Convertible securities70,900
 103,486
Fixed income securities27,480
 21,018
Municipal securities:   
Taxable securities37,073
 63,090
Tax-exempt securities374,348
 559,329
Short-term securities177,873
 35,175
Mortgage-backed securities4,321
 5,638
U.S. government agency securities300,832
 205,685
U.S. government securities17,205
 29,970
Derivative contracts22,392
 29,217
Total financial instruments and other inventory positions owned1,099,328
 1,058,971
    
Less noncontrolling interests (1)—
 (57,700)
 $1,099,328
 $1,001,271
    
Financial instruments and other inventory positions sold, but not yet purchased:   
Corporate securities:   
Equity securities$100,403
 $89,453
Fixed income securities21,149
 17,324
U.S. government agency securities26,703
 6,723
U.S. government securities203,995
 180,650
Derivative contracts5,485
 5,207
Total financial instruments and other inventory positions sold, but not yet purchased357,735
 299,357
    
Less noncontrolling interests (2)—
 (631)
 $357,735
 $298,726
The following table summarizes the valuation of the Company's financial instruments by pricing observability levels defined in FASB Accounting Standards Codification Topic 820, "Fair Value Measurement" ("ASC 820") as of March 31, 2024:
Counterparty
and Cash
Collateral
(Amounts in thousands)Level ILevel IILevel IIINetting (1)Total
Assets
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities$5,272 $931 $— $— $6,203 
Convertible securities— 139,126 — — 139,126 
Fixed income securities— 4,633 — — 4,633 
Municipal securities:
Taxable securities— 32,274 — — 32,274 
Tax-exempt securities— 127,843 276 — 128,119 
Short-term securities— 23,846 — — 23,846 
Asset-backed securities— 35,276 — — 35,276 
U.S. government agency securities— 59,354 — — 59,354 
U.S. government securities3,725 — — — 3,725 
Derivative contracts— 41,295 2,754 (34,378)9,671 
Total financial instruments and other inventory positions owned8,997 464,578 3,030 (34,378)442,227 
Cash equivalents31,753 — — — 31,753 
Investments at fair value (2)75,566 20,000 217,693 — 313,259 
Total assets$116,316 $484,578 $220,723 $(34,378)$787,239 
Liabilities
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities$78,867 $— $— $— $78,867 
Fixed income securities— 1,638 — — 1,638 
U.S. government agency securities— 26,286 — — 26,286 
U.S. government securities47,824 — — — 47,824 
Derivative contracts— 35,799 4,571 (36,740)3,630 
Total financial instruments and other inventory positions sold, but not yet purchased$126,691 $63,723 $4,571 $(36,740)$158,245 
(1)Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as collateral to its counterparties.
(2)Includes noncontrolling interests of $234.2 million attributable to unrelated third-party ownership in consolidated alternative asset management funds.

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Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following table summarizes the valuation of the Company's financial instruments by pricing observability levels defined in ASC 820 as of December 31, 2023:
Counterparty
and Cash
Collateral
(Amounts in thousands)Level ILevel IILevel IIINetting (1)Total
Assets
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities$388 $— $— $— $388 
Convertible securities— 131,375 — — 131,375 
Fixed income securities— 1,645 — — 1,645 
Municipal securities:
Taxable securities— 25,744 — — 25,744 
Tax-exempt securities— 135,886 2,869 — 138,755 
Short-term securities— 7,122 — — 7,122 
Asset-backed securities— 8,149 — — 8,149 
U.S. government agency securities— 104,418 — — 104,418 
U.S. government securities5,895 — — — 5,895 
Derivative contracts— 52,611 5,834 (47,379)11,066 
Total financial instruments and other inventory positions owned6,283 466,950 8,703 (47,379)434,557 
Cash equivalents343,856 — — — 343,856 
Investments at fair value (2)61,601 — 224,280 — 285,881 
Total assets$411,740 $466,950 $232,983 $(47,379)$1,064,294 
Liabilities
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities$53,857 $— $— $— $53,857 
Fixed income securities— 2,230 — — 2,230 
U.S. government agency securities— 48,268 — — 48,268 
U.S. government securities40,437 — — — 40,437 
Derivative contracts— 47,032 7,962 (50,806)4,188 
Total financial instruments and other inventory positions sold, but not yet purchased$94,294 $97,530 $7,962 $(50,806)$148,980 
(1)Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as collateral to its counterparties.
(2)Includes noncontrolling interests of $211.1 million attributable to unrelated third-party ownership in consolidated alternative asset management funds.

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

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Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The Company's Level III assets were $220.7 million (including noncontrolling interests of $170.9 million) and $233.0 million (including noncontrolling interests of $177.0 million), or 28.0 percent and 21.9 percent of financial instruments measured at fair value at March 31, 2024 and December 31, 2023, respectively. There were $13.2 million and $14.7 million of transfers of financial assets out of Level III for the three months ended March 31, 2024 and 2023, respectively, primarily due to unobservable inputs becoming observable. At March 31, 2024, the Company's Level I investments at fair value included $50.2 million of equity securities subject to contractual sale restrictions, of which $5.2 million will expire in the second quarter of 2024 and $8.6 million will expire in the third quarter of 2024. The sales restrictions on the remaining equity securities are in effect during certain trading windows so long as the securities are owned.

The following table summarizes the changes in fair value associated with Level III financial instruments held at the beginning or end of the periods presented:
Level III
AssetsLiabilities
(Amounts in thousands)
Tax-Exempt
Municipal Securities
Derivative ContractsInvestments at
Fair Value		Derivative Contracts
Balance at December 31, 2023$2,869 $5,834 $224,280 $7,962 
Purchases— — 12,000 — 
Sales(1,901)— — — 
Settlements— (2,842)— (1,434)
Transfers in— — — — 
Transfers out— — (13,219)— 
Total realized and unrealized gains/(losses)(692)(238)(5,368)(1,957)
Balance at March 31, 2024$276 $2,754 $217,693 $4,571 
Balance at December 31, 2022$3,887 $4,756 $191,845 $1,082 
Purchases— — 12,948 — 
Sales— — (6,747)— 
Settlements— (2,353)— 140 
Transfers in— — — — 
Transfers out— — (14,691)— 
Total realized and unrealized gains/(losses)9 (1,961)18,088 2,555 
Balance at March 31, 2023$3,896 $442 $201,443 $3,777 
Unrealized gains/(losses) for assets/liabilities held at:
March 31, 2024$9 $227 $(834)$(288)
March 31, 2023$9 $(239)$9,066 $2,850 

Realized and unrealized gains/(losses) related to financial instruments, with the exception of customer matched-book derivatives, are reported in institutional brokerage on the consolidated statements of operations. Realized and unrealized gains/(losses) related to customer matched-book derivatives are reported in investment banking. Realized and unrealized gains/(losses) related to investments are principally reported in investment income on the consolidated statements of operations.

Piper Sandler Companies | 16

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Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following table summarizes quantitative information about the significant unobservable inputs used in the fair value measurement of the Company's Level III financial instruments as of March 31, 2024:
ValuationWeighted
(1)
Technique
Noncontrolling interests attributable to third party ownership in a consolidated municipal bond fund consist of $1.3 million of taxable
Unobservable InputRangeAverage (1)
Assets
Tax-exempt municipal securities$55.2 millionDiscounted cash flowExpected recovery rate (% of tax-exempt municipal securities, and $1.2 million of derivative contracts as of December 31, 2016. 
par) (3)0 - 25%13.4%
(2)
Derivative contracts
Noncontrolling interests attributable to third party ownershipDiscounted cash flow
Premium over the MMD curve in a consolidated municipal bond fund consist of U.S. government securities as of December 31, 2016.basis points ("bps") (3)12 - 44 bps17.9 bps
Investments at fair value (2)Market approachRevenue multiple (3)0 - 10 times5.4 times
EBITDA multiple (3)11 - 17 times14.4 times
Market comparable valuation multiple (3)0 - 2 times1.3 times
Discounted cash flowDiscount rate (4)19 - 25%21.0%
Liabilities
Derivative contractsDiscounted cash flowPremium over the MMD curve in bps (4)0 - 46 bps13.6 bps

(1)Unobservable inputs were weighted by the relative fair value of the financial instruments.
(2)As of March 31, 2024, the Company had $217.7 million of Level III investments at fair value, of which $43.9 million, or 20.2 percent, was valued based on a recent round of independent financing.
(3)There is uncertainty in the determination of fair value. Significant increase/(decrease) in the unobservable input in isolation would have resulted in a significantly higher/(lower) fair value measurement.
(4)There is uncertainty in the determination of fair value. Significant increase/(decrease) in the unobservable input in isolation would have resulted in a significantly lower/(higher) fair value measurement.


Piper Sandler Companies | 17

Table of Contents
Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

NOTE 6 | FINANCIAL INSTRUMENTS AND OTHER INVENTORY POSITIONS
March 31,December 31,
(Amounts in thousands)20242023
Financial instruments and other inventory positions owned
Corporate securities:
Equity securities$6,203 $388 
Convertible securities139,126 131,375 
Fixed income securities4,633 1,645 
Municipal securities:
Taxable securities32,274 25,744 
Tax-exempt securities128,119 138,755 
Short-term securities23,846 7,122 
Asset-backed securities35,276 8,149 
U.S. government agency securities59,354 104,418 
U.S. government securities3,725 5,895 
Derivative contracts9,671 11,066 
Total financial instruments and other inventory positions owned$442,227 $434,557 
Financial instruments and other inventory positions sold, but not yet purchased
Corporate securities:
Equity securities$78,867 $53,857 
Fixed income securities1,638 2,230 
U.S. government agency securities26,286 48,268 
U.S. government securities47,824 40,437 
Derivative contracts3,630 4,188 
Total financial instruments and other inventory positions sold, but not yet purchased$158,245 $148,980 

At September 30, 2017March 31, 2024 and December 31, 2016,2023, financial instruments and other inventory positions owned in the amount of $335.4$323.5 million and $594.4$92.8 million,, respectively, had been pledged as collateral for short-term financings and repurchase agreements.financing arrangements.


Financial instruments and other inventory positions sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price, thereby creating a liability to purchase the security in the market at prevailing prices. The Company is obligated to acquire the securities sold short at prevailing market prices, which may exceed the amount reflected on the consolidated statements of financial condition. The Company economically hedges changes in the market value of its financial instruments and other inventory positions owned using inventory positions sold, but not yet purchased, interest rate derivatives, credit default swap index contracts, U.S. treasury bond futures and exchange traded options.options, and equity option contracts.



14
Piper Sandler Companies | 18

Table of Contents
Piper JaffraySandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)


Derivative Contract Financial Instruments

Customer Matched-Book Derivatives
The Company uses interest rate swaps, interest rate locks, credit default swap index contracts, U.S. treasury bond futures and equity option contracts as a means to manage risk in certain inventory positions. The Company also enters into interest rate swaps to facilitate customer transactions. The following describes the Company’s derivatives by the type of transaction or security the instruments are economically hedging.

Customer matched-book derivatives:The Company enters into interest rate derivative contracts in a principal capacity as a dealer to satisfy the financial needs of its customers. The Company simultaneously enters into an interest rate derivative contract with a third party for the same notional amount to hedge the interest rate and credit risk of the initial client interest rate derivative contract. In certain limited instances, the Company has only hedged interest rate risk with a third party, and retains uncollateralized credit risk as described below. TheThese instruments use interest rates based upon either the London Interbank OfferSecured Overnight Financing Rate ("LIBOR"SOFR") index, the MMD index or the Securities Industry and Financial Markets Association ("SIFMA") index. Similarly, the Company enters into a limited number of credit default swap contracts to facilitate customer transactions. These instruments use rates based upon the Commercial Mortgage Backed Securities ("CMBX") index.


Trading securities derivatives:Securities Derivatives
The Company enters into interest rate derivative contracts and uses U.S. treasury bond futures and options to hedge interest rate and market value risks primarily associated with its fixed income securities. These instruments use interest rates based upon either the Municipal Market Data ("MMD") index, LIBORMMD or the SIFMA index.SOFR indices. The Company also enters into credit default swap index contracts to hedge credit risk associated with its taxable fixed income securities andequity option contracts to hedge market value risk associated with its convertible securities.


Derivatives are reported on a net basis by counterparty (i.e., the net payable or receivable for derivative assets and liabilities for a given counterparty) when a legal right of offset exists and on a net basis by cross product when applicable provisions are stated in master netting agreements. Cash collateral received or paid is netted on a counterparty basis, provided a legal right of offset exists. The total absolute notional contract amount, representing the absolute value of the sum of gross long and short derivative contracts, provides an indication of the volume of the Company's derivative activity and does not represent gains and losses. The following table presents the gross fair market value and the total absolute notional contract amount of the Company's outstanding derivative instruments, prior to counterparty netting, by asset or liability position:
March 31, 2024December 31, 2023
(Amounts in thousands)DerivativeDerivativeNotionalDerivativeDerivativeNotional
Derivative CategoryAssets (1)Liabilities (2)AmountAssets (1)Liabilities (2)Amount
Interest rate:
Customer matched-book$41,233 $36,081 $1,363,904 $54,676 $49,293 $1,356,924 
Trading securities2,816 4,289 179,850 3,769 5,701 196,250 
$44,049 $40,370 $1,543,754 $58,445 $54,994 $1,553,174 
  September 30, 2017 December 31, 2016
(Dollars in thousands) Derivative Derivative Notional Derivative Derivative Notional
Derivative Category Assets (1) Liabilities (2) Amount Assets (1) Liabilities (2) Amount
Interest rate            
Customer matched-book $270,149
 $255,102
 $3,178,725
 $288,955
 $272,819
 $3,330,207
Trading securities 686
 4,456
 345,850
 13,952
 1,707
 423,550
Credit default swap index            
Trading securities —
 —
 —
 —
 127
 7,470
  $270,835
 $259,558
 $3,524,575
 $302,907
 $274,653
 $3,761,227
(1)Derivative assets are included within financial instruments and other inventory positions owned on the consolidated statements of financial condition.
(2)Derivative liabilities are included within financial instruments and other inventory positions sold, but not yet purchased on the consolidated statements of financial condition.

(1)Derivative assets are included within financial instruments and other inventory positions owned on the consolidated statements of financial condition.

(2)Derivative liabilities are included within financial instruments and other inventory positions sold, but not yet purchased on the consolidated statements of financial condition.
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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)


The Company’sCompany's derivative contracts do not qualify for hedge accounting,accounting; therefore, unrealized gains and losses are recorded on the consolidated statements of operations. The gains and losses on the related economically hedged inventory positions are not disclosed below as they are not in qualifying hedging relationships. The following table presents the Company’sCompany's unrealized gains/(losses) on derivative instruments:
Three Months Ended
(Amounts in thousands) March 31,
Derivative CategoryOperations Category20242023
Interest rate derivative contractInvestment banking$(84)$172 
Interest rate derivative contractInstitutional brokerage311 (7,009)
Equity option derivative contractInstitutional brokerage— (11)
$227 $(6,848)

Piper Sandler Companies | 19

Table of Contents
Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

    Three Months Ended Nine Months Ended
(Dollars in thousands)   September 30, September 30,
Derivative Category                Operations Category 2017 2016 2017 2016
Interest rate derivative contract Investment banking $(300) $(1,901) $(1,076) $(3,953)
Interest rate derivative contract Institutional brokerage 1,627
 8,438
 (16,028) 819
Credit default swap index contract Institutional brokerage 4,304
 74
 4,482
 3,958
Futures and equity option derivative contracts Institutional brokerage —
 107
 —
 255
    $5,631
 $6,718
 $(12,622) $1,079

Credit risk associated with the Company’sCompany's derivatives is the risk that a derivative counterparty will not perform in accordance with the terms of the applicable derivative contract. Credit exposure associated with the Company’sCompany's derivatives is driven by uncollateralized market movements in the fair value of the contracts with counterparties and is monitored regularly by the Company’sCompany's financial risk committee. The Company considers counterparty credit risk in determining derivative contract fair value. The majority of the Company’sCompany's derivative contracts are substantially collateralized by its counterparties, who are major financial institutions. The Company has a limited number of counterparties who are not required to post collateral. Based on market movements, the uncollateralized amounts representing the fair value of thea derivative contract can become material, exposing the Company to the credit risk of these counterparties. As of September 30, 2017,March 31, 2024, the Company had $20.8$5.0 million of uncollateralized credit exposure with these counterparties (notional contract amount of $181.8 million)$78.3 million), including $15.4$4.6 million of uncollateralized credit exposure with one counterparty.


Note 5Fair Value of Financial InstrumentsNOTE 7 | INVESTMENTS

March 31,December 31,
(Amounts in thousands)20242023
Investments at fair value$313,259 $285,881 
Investments at cost281 281 
Investments accounted for under the equity method11,895 11,886 
Total investments325,435 298,048 
Less: Investments attributable to noncontrolling interests (1)(234,167)(211,096)
Total investments attributable to Piper Sandler Companies$91,268 $86,952 
Based on the nature of the Company’s business and its role as a "dealer"(1)Noncontrolling interests are attributable to unrelated third-party ownership in the securities industry or as a manager ofconsolidated alternative asset management funds, thefunds.

At March 31, 2024, investments carried on a cost basis had an estimated fair valuesmarket value of its financial instruments are determined internally. The Company’s processes are designed to ensure that the fair values used for financial reporting are$0.3 million. Because valuation estimates were based on observable inputs wherever possible. In the event that observable inputs are not available, unobservable inputs are developed based on an evaluation of all relevant empirical market data, including prices evidenced by market transactions, interest rates, credit spreads, volatilities and correlations and other security-specific information. Valuation adjustments related to illiquidity or counterparty credit risk are also considered. In estimating fair value, the Company may utilize information provided by third party pricing vendors to corroborate internally-developed fair value estimates.

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


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following is a description of the valuation techniques used to measurehierarchy, if they were carried at fair value.


Cash Equivalents

Cash equivalentsInvestments accounted for under the equity method include highly liquidgeneral and limited partnership interests. The carrying value of these investments with original maturities of 90 days or less. Actively traded money market funds are measured at theiris based on the investment vehicle's net asset valuevalue. The net assets of investment partnerships consist of investments in both marketable and classified as Level I.

Financial Instruments and Other Inventory Positions Owned

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

Equity securities – Exchange traded equity securitiesunderlying investments held by such partnerships are valued based on quoted prices from the exchange for identical assets or liabilities as of the period-end date. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level I. Non-exchange traded equity securities (principally hybrid preferred securities) are measured primarily using broker quotations, prices observed for recently executed market transactions and internally-developedestimated fair value estimatesdetermined by management in the Company's capacity as general partner or investor and, in the case of investments in unaffiliated investment partnerships, are based on observable inputs and are categorized within Level II offinancial statements prepared by the fair value hierarchy.unaffiliated general partners.


Convertible securities – Convertible securities are valued based on observable trades, when available. Accordingly, these convertible securities are categorized as Level II.

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

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

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

Short-term municipal securities – Short-term municipal securities include auction rate securities, variable rate demand notes, and other short-term municipal securities. Variable rate demand notes and other short-term municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II. Auction rate securities with limited liquidity are categorized as Level III and are valued using discounted cash flow models with unobservable inputs such as the Company’s expected recovery rate on the securities.

Mortgage-backed securities – Mortgage-backed securities are valued using observable trades, when available. Certain mortgage-backed securities are valued using models where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data. These mortgage-backed securities are categorized as Level II. Other mortgage-backed securities, which are principally collateralized by residential mortgages, have experienced low volumes of executed transactions resulting in less observable transaction data. Certain mortgage-backed securities collateralized by residential mortgages are valued using cash flow models that utilize unobservable inputs including credit default rates, prepayment rates, loss severity and valuation yields. As judgment is used to determine the range of these inputs, these mortgage-backed securities are categorized as Level III.


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

U.S. government agency securities – U.S. government agency securities include agency debt bonds and mortgage bonds. Agency debt bonds are valued by using either direct price quotes or price quotes for comparable bond securities and are categorized as Level II. Mortgage bonds include bonds secured by mortgages, mortgage pass-through securities, agency collateralized mortgage-obligation ("CMO") securities and agency interest-only securities. Mortgage pass-through securities, CMO securities and interest-only securities are valued using recently executed observable trades or other observable inputs, such as prepayment speeds and therefore are generally categorized as Level II. Mortgage bonds are valued using observable market inputs, such as market yields ranging from 205-853 basis points ("bps") on spreads over U.S. treasury securities, or models based upon prepayment expectations ranging from 0%-18% conditional prepayment rate ("CPR"). These securities are categorized as Level II.

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

Derivatives – Derivative contracts include interest rate swaps, interest rate locks, credit default swap index contracts, U.S. treasury bond futures and equity option contracts. These instruments derive their value from underlying assets, reference rates, indices or a combination of these factors. The Company's equity option derivative contracts are valued based on quoted prices from the exchange for identical assets or liabilities as of the period-end date. To the extent these contracts are actively traded and valuation adjustments are not applied, they are categorized as Level I. The Company’s credit default swap index contracts are valued using market price quotations and are classified as Level II. The majority of the Company’s interest rate derivative contracts, including both interest rate swaps and interest rate locks, are valued using market standard pricing models based on the net present value of estimated future cash flows. The valuation models used do not involve material subjectivity as the methodologies do not entail significant judgment and the pricing inputs are market observable, including contractual terms, yield curves and measures of volatility. These instruments are classified as Level II within the fair value hierarchy. Certain interest rate locks transact in less active markets and were valued using valuation models that included the previously mentioned observable inputs and certain unobservable inputs that required significant judgment, such as the premium over the MMD curve. These instruments are classified as Level III.

Investments

The Company’s investments valued at fair value include equity investments in private companies and partnerships, investments in registered mutual funds, warrants of public and private companies and private company debt. Investments in registered mutual funds are valued based on quoted prices on active markets and classified as Level I. Company-owned warrants, which have a cashless exercise option, are valued based upon the Black-Scholes option-pricing model and certain unobservable inputs. The Company applies a liquidity discount to the value of its warrants in public and private companies. For warrants in private companies, valuation adjustments, based upon management’s judgment, are made to account for differences between the measured security and the stock volatility factors of comparable companies. Company-owned warrants are reported as Level III assets. Investments in private companies are valued based on an assessment of each underlying security, considering rounds of financing, third party transactions and market-based information, including comparable company transactions, trading multiples (e.g., multiples of revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA")) and changes in market outlook, among other factors. These securities are generally categorized as Level III.

Fair Value Option – The fair value option permits the irrevocable fair value option election on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The fair value option was elected for certain merchant banking and other investments at inception to reflect economic events in earnings on a timely basis. Merchant banking and other equity investments of $13.9 million and $19.7 million, included within investments on the consolidated statements of financial condition, are accounted for at fair value and are classified as Level III assets at September 30, 2017 and December 31, 2016, respectively. The realized and unrealized net gains from fair value changes included in earnings as a result of electing to apply the fair value option to certain financial assets were $1.4 million and $1.0 million for the nine months ended September 30, 2017 and 2016, respectively.


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following table summarizes quantitative information about the significant unobservable inputs used in the fair value measurement of the Company’s Level III financial instruments as of September 30, 2017:
ValuationWeighted
TechniqueUnobservable InputRange      Average
Assets:
Financial instruments and other inventory positions owned:
Municipal securities:
Tax-exempt securitiesDiscounted cash flowExpected recovery rate (% of par) (2)5 - 60%19.4%
Short-term securitiesDiscounted cash flowExpected recovery rate (% of par) (2)66 - 94%91.0%
Mortgage-backed securities:
Collateralized by residential mortgagesDiscounted cash flowCredit default rates (3)1 - 10%2.7%
Prepayment rates (4)2 - 18%10.0%
Loss severity (3)5 - 50%32.6%
Valuation yields (3)5 - 6%5.3%
Derivative contracts:
Interest rate locksDiscounted cash flowPremium over the MMD curve (1)4 - 20 bps11.3 bps
Investments at fair value:
Equity securities in private companiesMarket approachRevenue multiple (2)2 - 6 times4.8 times
EBITDA multiple (2)10 - 15 times12.2 times
Liabilities:
Financial instruments and other inventory positions sold, but not yet purchased:
Derivative contracts:
Interest rate locksDiscounted cash flowPremium over the MMD curve (1)1 - 21 bps10.9 bps
Sensitivity of the fair value to changes in unobservable inputs:
(1)
Significant increase/(decrease) in the unobservable input in isolation would result in a significantly lower/(higher) fair value measurement.
(2)
Significant increase/(decrease) in the unobservable input in isolation would result in a significantly higher/(lower) fair value measurement.
(3)
Significant changes in any of these inputs in isolation could result in a significantly different fair value. Generally, a change in the assumption used for credit default rates is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally inverse change in the assumption for valuation yields.
(4)
The potential impact of changes in prepayment rates on fair value is dependent on other security-specific factors, such as the par value and structure. Changes in the prepayment rates may result in directionally similar or directionally inverse changes in fair value depending on whether the security trades at a premium or discount to the par value.

19
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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following table summarizes the valuation of the Company’s financial instruments by pricing observability levels defined in FASB Accounting Standards Codification Topic 820, "Fair Value Measurement" ("ASC 820") as of September 30, 2017:
       Counterparty  
       and Cash  
       Collateral  
(Dollars in thousands)Level I Level II Level III Netting (1) Total
Assets:         
Financial instruments and other inventory positions owned:         
Corporate securities:         
Equity securities$2,466
 $64,438
 $—
 $—
 $66,904
Convertible securities—
 70,900
 —
 —
 70,900
Fixed income securities—
 27,480
 —
 —
 27,480
Municipal securities:         
Taxable securities—
 37,073
 —
 —
 37,073
Tax-exempt securities—
 373,598
 750
 —
 374,348
Short-term securities—
 177,168
 705
 —
 177,873
Mortgage-backed securities—
 —
 4,321
 —
 4,321
U.S. government agency securities—
 300,832
 —
 —
 300,832
U.S. government securities17,205
 —
 —
 —
 17,205
Derivative contracts—
 270,149
 686
 (248,443) 22,392
Total financial instruments and other inventory positions owned19,671
 1,321,638
 6,462
 (248,443) 1,099,328
          
Cash equivalents4,112
 —
 —
 —
 4,112
          
Investments at fair value37,778
 —
 130,160
(2)—
 167,938
Total assets$61,561
 $1,321,638
 $136,622
 $(248,443) $1,271,378
          
Liabilities:         
Financial instruments and other inventory positions sold, but not yet purchased:         
Corporate securities:         
Equity securities$100,181
 $222
 $—
 $—
 $100,403
Fixed income securities—
 21,149
 —
 —
 21,149
U.S. government agency securities—
 26,703
 —
 —
 26,703
U.S. government securities164,084
 39,911
 —
 —
 203,995
Derivative contracts—
 255,308
 4,250
 (254,073) 5,485
Total financial instruments and other inventory positions sold, but not yet purchased$264,265
 $343,293
 $4,250
 $(254,073) $357,735
(1)
Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as collateral to its counterparties.
(2)Noncontrolling interests of $44.9 million are attributable to third party ownership in consolidated merchant banking and senior living funds.


20
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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following table summarizes the valuation of the Company’s financial instruments by pricing observability levels defined in ASC 820 as of December 31, 2016:
       Counterparty  
       and Cash  
       Collateral  
(Dollars in thousands)Level I Level II Level III Netting (1) Total
Assets:         
Financial instruments and other inventory positions owned:         
Corporate securities:         
Equity securities$82
 $6,281
 $—
 $—
 $6,363
Convertible securities—
 103,486
 —
 —
 103,486
Fixed income securities—
 21,018
 —
 —
 21,018
Municipal securities:         
Taxable securities—
 60,404
 2,686
 —
 63,090
Tax-exempt securities—
 558,252
 1,077
 —
 559,329
Short-term securities—
 34,431
 744
 —
 35,175
Mortgage-backed securities—
 273
 5,365
 —
 5,638
U.S. government agency securities—
 205,685
 —
 —
 205,685
U.S. government securities29,970
 —
 —
 —
 29,970
Derivative contracts—
 288,955
 13,952
 (273,690) 29,217
Total financial instruments and other inventory positions owned30,052
 1,278,785
 23,824
 (273,690) 1,058,971
          
Cash equivalents768
 —
 —
 —
 768
          
Investments at fair value32,783
 —
 123,319
(2)—
 156,102
Total assets$63,603
 $1,278,785
 $147,143
 $(273,690) $1,215,841
          
Liabilities:         
Financial instruments and other inventory positions sold, but not yet purchased:         
Corporate securities:         
Equity securities$89,453
 $—
 $—
 $—
 $89,453
Fixed income securities—
 17,324
 —
 —
 17,324
U.S. government agency securities—
 6,723
 —
 —
 6,723
U.S. government securities180,650
 —
 —
 —
 180,650
Derivative contracts—
 273,166
 1,487
 (269,446) 5,207
Total financial instruments and other inventory positions sold, but not yet purchased$270,103
 $297,213
 $1,487
 $(269,446) $299,357
(1)
Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as collateral to its counterparties.
(2)Noncontrolling interests of $45.1 million are attributable to third party ownership in consolidated merchant banking and senior living funds.

The Company’s Level III assets were $136.6 million and $147.1 million, or 10.7 percent and 12.1 percent of financial instruments measured at fair value at September 30, 2017 and December 31, 2016, respectively. The value of transfers between levels are recognized at the beginning of the reporting period. There were no significant transfers between Level I, Level II or Level III for the nine months ended September 30, 2017.

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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following tables summarize the changes in fair value associated with Level III financial instruments held at the beginning or end of the periods presented:
                 Unrealized gains/
                 (losses) for assets/
 Balance at         Realized Unrealized Balance at liabilities held at
 June 30,     Transfers Transfers gains/ gains/ September 30, September 30,
(Dollars in thousands)2017 Purchases Sales in out (losses) (1) (losses) (1) 2017 2017 (1)
Assets:                 
Financial instruments and other inventory positions owned:                 
Municipal securities:                 
Tax-exempt securities$1,117
 $—
 $(267) $—
 $—
 $—
 $(100) $750
 $(100)
Short-term securities721
 —
 —
 —
 —
 —
 (16) 705
 (16)
Mortgage-backed securities4,251
 —
 —
 —
 —
 —
 70
 4,321
 70
Derivative contracts383
 105
 —
 —
 —
 (105) 303
 686
 686
Total financial instruments and other inventory positions owned6,472
 105
 (267) —
 —
 (105) 257
 6,462
 640
                  
Investments at fair value113,885
 18,250
 —
 —
 —
 —
 (1,975) 130,160
 (1,975)
Total assets$120,357
 $18,355
 $(267) $—
 $—
 $(105) $(1,718) $136,622
 $(1,335)
                  
Liabilities:                 
Financial instruments and other inventory positions sold, but not yet purchased:                 
Derivative contracts$5,573
 $—
 $3,461
 $—
 $—
 $(3,461) $(1,323) $4,250
 $1,430
Total financial instruments and other inventory positions sold, but not yet purchased$5,573
 $—
 $3,461
 $—
 $—
 $(3,461) $(1,323) $4,250
 $1,430
(1)Realized and unrealized gains/(losses) related to financial instruments, with the exception of customer matched-book derivatives, are reported in institutional brokerage on the consolidated statements of operations. Realized and unrealized gains/(losses) related to customer matched-book derivatives are reported in investment banking. Realized and unrealized gains/(losses) related to investments are reported in investment banking revenues or investment income/(loss) on the consolidated statements of operations.

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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

                 Unrealized gains/
                 (losses) for assets/
 Balance at         Realized Unrealized Balance at liabilities held at
 June 30,     Transfers Transfers gains/ gains/ September 30, September 30,
(Dollars in thousands)2016 Purchases Sales in out (losses) (1) (losses) (1) 2016 2016 (1)
Assets:                 
Financial instruments and other inventory positions owned:                 
Municipal securities:                 
Tax-exempt securities$1,177
 $—
 $—
 $—
 $—
 $—
 $—
 $1,177
 $—
Short-term securities748
 —
 —
 —
 —
 —
 —
 748
 —
Mortgage-backed securities56,053
 —
 (44,006) —
 —
 1,440
 190
 13,677
 111
Derivative contracts18
 —
 —
 —
 —
 —
 942
 960
 960
Total financial instruments and other inventory positions owned57,996
 —
 (44,006) —
 —
 1,440
 1,132
 16,562
 1,071
                  
Investments at fair value122,786
 12,011
 (21,309) —
 —
 10,336
 (7,709) 116,115
 2,570
Total assets$180,782
 $12,011
 $(65,315) $—
 $—
 $11,776
 $(6,577) $132,677
 $3,641
                  
Liabilities:                 
Financial instruments and other inventory positions sold, but not yet purchased:                 
Derivative contracts$14,785
 $(5,922) $171
 $—
 $—
 $5,751
 $(7,497) $7,288
 $(1,263)
Total financial instruments and other inventory positions sold, but not yet purchased$14,785
 $(5,922) $171
 $—
 $—
 $5,751
 $(7,497) $7,288
 $(1,263)
(1)Realized and unrealized gains/(losses) related to financial instruments, with the exception of customer matched-book derivatives, are reported in institutional brokerage on the consolidated statements of operations. Realized and unrealized gains/(losses) related to customer matched-book derivatives are reported in investment banking. Realized and unrealized gains/(losses) related to investments are reported in investment banking revenues or investment income/(loss) on the consolidated statements of operations.



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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

                 Unrealized gains/
                 (losses) for assets/
 Balance at         Realized Unrealized Balance at liabilities held at
 December 31,     Transfers Transfers gains/ gains/ September 30, September 30,
(Dollars in thousands)2016 Purchases Sales in out (losses) (1) (losses) (1) 2017 2017 (1)
Assets:                 
Financial instruments and other inventory positions owned:                 
Municipal securities:                 
Taxable securities$2,686
 $—
 $(2,703) $—
 $—
 $716
 $(699) $—
 $—
Tax-exempt securities1,077
 —
 (267) —
 —
 —
 (60) 750
 (60)
Short-term securities744
 —
 (25) —
 —
 2
 (16) 705
 (16)
Mortgage-backed securities5,365
 997
 (1,854) —
 —
 296
 (483) 4,321
 (90)
Derivative contracts13,952
 350
 (11,978) —
 —
 11,628
 (13,266) 686
 686
Total financial instruments and other inventory positions owned23,824
 1,347
 (16,827) —
 —
 12,642
 (14,524) 6,462
 520
                  
Investments at fair value123,319
 25,444
 (25,211) —
 (601) 9,399
 (2,190) 130,160
 7,704
Total assets$147,143
 $26,791
 $(42,038) $—
 $(601) $22,041
 $(16,714) $136,622
 $8,224
                  
Liabilities:                 
Financial instruments and other inventory positions sold, but not yet purchased:                 
Derivative contracts$1,487
 $(719) $11,219
 $—
 $—
 $(10,500) $2,763
 $4,250
 $4,125
Total financial instruments and other inventory positions sold, but not yet purchased$1,487
 $(719) $11,219
 $—
 $—
 $(10,500) $2,763
 $4,250
 $4,125
(1)Realized and unrealized gains/(losses) related to financial instruments, with the exception of customer matched-book derivatives, are reported in institutional brokerage on the consolidated statements of operations. Realized and unrealized gains/(losses) related to customer matched-book derivatives are reported in investment banking. Realized and unrealized gains/(losses) related to investments are reported in investment banking revenues or investment income/(loss) on the consolidated statements of operations.

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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

                 Unrealized gains/
                 (losses) for assets/
 Balance at         Realized Unrealized Balance at liabilities held at
 December 31,     Transfers Transfers gains/ gains/ September 30, September 30,
(Dollars in thousands)2015 Purchases Sales in out (losses) (1) (losses) (1) 2016 2016 (1)
Assets:                 
Financial instruments and other inventory positions owned:                 
Municipal securities:                 
Taxable securities$5,816
 $—
 $(611) $—
 $(5,216) $11
 $—
 $—
 $—
Tax-exempt securities1,177
 —
 —
 —
 —
 —
 —
 1,177
 —
Short-term securities720
 —
 —
 —
 —
 —
 28
 748
 28
Mortgage-backed securities121,124
 26,519
 (133,913) —
 —
 3,285
 (3,338) 13,677
 241
Derivative contracts—
 246
 —
 —
 —
 (246) 960
 960
 960
Total financial instruments and other inventory positions owned128,837
 26,765
 (134,524) —
 (5,216) 3,050
 (2,350) 16,562
 1,229
                  
Investments at fair value109,444
 27,683
 (21,309) —
 (9,088) 10,336
 (951) 116,115
 (1,223)
Total assets$238,281
 $54,448
 $(155,833) $—
 $(14,304) $13,386
 $(3,301) $132,677
 $6
                  
Liabilities:                 
Financial instruments and other inventory positions sold, but not yet purchased:                 
Derivative contracts$7,148
 $(23,700) $171
 $—
 $—
 $23,529
 $140
 $7,288
 $7,288
Total financial instruments and other inventory positions sold, but not yet purchased$7,148
 $(23,700) $171
 $—
 $—
 $23,529
 $140
 $7,288
 $7,288
(1)Realized and unrealized gains/(losses) related to financial instruments, with the exception of customer matched-book derivatives, are reported in institutional brokerage on the consolidated statements of operations. Realized and unrealized gains/(losses) related to customer matched-book derivatives are reported in investment banking. Realized and unrealized gains/(losses) related to investments are reported in investment banking revenues or investment income/(loss) on the consolidated statements of operations.

The carrying values of the Company’s cash, securities either purchased or sold under agreements to resell, receivables and payables either from or to customers and brokers, dealers and clearing organizations and short-term financings approximate fair value due to their liquid or short-term nature.

Non-Recurring Fair Value Measurement

During the third quarter of 2017, the Company recorded a goodwill impairment charge of $114.4 million representing the full value of goodwill attributable to the asset management reporting unit. The fair value measurement used in the analysis was calculated using the income approach (discounted cash flow method) and market approach (earnings multiples of public company comparables). The discounted cash flow model was calculated using unobservable inputs, such as revenue and EBITDA forecasts, which are classified as Level III within the fair value hierarchy. See Note 11 for further discussion.


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

Note 6Variable Interest EntitiesNOTE 8 | VARIABLE INTEREST ENTITIES ("VIEs")

The Company has investments in and/or acts as the managing partner of various partnerships and limited liability companies, and registered mutual funds.companies. These entities were established for the purpose of investing in securities of public or private companies, or municipal debt obligations, or providing financing to senior living facilities, and were initially financed through the capital commitments or seed investments of the members.


VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities. The determination as to whether an entity is a VIE is based on the structure and nature of each entity. The Company also considers other characteristics such as the power through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’sentity's economic performance and how the entity is financed.


The Company is required to consolidate all VIEs for which it is considered to be the primary beneficiary. The determination as to whether the Company is considered to be the primary beneficiary is based on whether the Company has both the power to direct the activities of the VIE that most significantly impact the entity’sentity's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.


Piper Sandler Companies | 20

Table of Contents
Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

Consolidated VIEs

The Company’sCompany's consolidated VIEs at September 30, 2017 includeMarch 31, 2024 included certain alternative asset management funds in which the Company has an investment and, as the managing partner, is deemed to have both the power to direct the most significant activities of the funds and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these funds.


The following table presents information about the carrying value of the assets and liabilities of the VIEs whichthat are consolidated by the Company and included on the consolidated statements of financial condition at September 30, 2017.March 31, 2024. The assets can only be used to settle the liabilities of the respective VIE, and the creditors of the VIEs do not have recourse to the general credit of the Company. These VIEs have a combined $56.0 million of bank line financing available with interest rates based on SOFR plus an applicable margin. The assets and liabilities are presented prior to consolidation, and thus a portion of these assets and liabilities areis eliminated in consolidation.

Alternative Asset
(Amounts in thousands)Management Funds
Assets
Investments$292,161 
Other assets131 
Total assets$292,292 
Liabilities
Other liabilities and accrued expenses$10,931 
Total liabilities$10,931 
  Alternative Asset
(Dollars in thousands) Management Funds
Assets:  
Receivables from brokers, dealers and clearing organizations $15,765
Financial instruments and other inventory positions owned and pledged as collateral 149,632
Investments 112,834
Other assets 4,621
Total assets $282,852
   
Liabilities:  
Short-term financing $76,797
Payables to brokers, dealers and clearing organizations 46,627
Financial instruments and other inventory positions sold, but not yet purchased 21,813
Other liabilities and accrued expenses 18,344
Total liabilities $163,581


The Company has investments in a grantor trust which was established as part of a nonqualified deferred compensation plan. The Company is the primary beneficiary of the grantor trust. Accordingly, the assets and liabilities of the grantor trust are consolidated by the Company on the consolidated statements of financial condition. See Note 1614 for additional information on the Company's nonqualified deferred compensation plan.

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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)


Nonconsolidated VIEs

The Company determined it is not the primary beneficiary of certain VIEs and, accordingly, does not consolidate them. These VIEs had net assets approximating $0.6 billion and $0.8$1.1 billion at September 30, 2017March 31, 2024 and December 31, 2016, respectively.2023. The Company’sCompany's exposure to loss from these VIEs is $6.4$12.2 million, which is the carrying value of its capital contributions recorded in investments on the consolidated statements of financial condition at September 30, 2017.March 31, 2024. The Company had no liabilities related to these VIEs at September 30, 2017March 31, 2024 and December 31, 2016, respectively.2023. Furthermore, the Company has not provided financial or other support to these VIEs that it was not previously contractually required to provide as of September 30, 2017.March 31, 2024.


Note 7Receivables from and Payables to Brokers, Dealers and Clearing OrganizationsNOTE 9 | OTHER ASSETS

March 31,December 31,
(Amounts in thousands)20242023
Fee receivables$42,569 $27,765 
Forgivable employee loans12,685 15,771 
Prepaid expenses17,444 22,396 
Income tax receivables43,893 5,939 
Other12,650 14,084 
Total other assets$129,241 $85,955 

Piper Sandler Companies | 21

 September 30, December 31,
(Dollars in thousands)2017 2016
Receivable arising from unsettled securities transactions$15,765
 $132,724
Deposits paid for securities borrowed—
 27,573
Receivable from clearing organizations36,891
 3,293
Deposits with clearing organizations12,409
 35,713
Securities failed to deliver—
 975
Other15,815
 12,452
Total receivables from brokers, dealers and clearing organizations$80,880
 $212,730

 September 30, December 31,
(Dollars in thousands)2017 2016
Payable arising from unsettled securities transactions$49,160
 $13,948
Payable to clearing organizations—
 15,893
Securities failed to receive—
 3,043
Other5,105
 7,958
Total payables to brokers, dealers and clearing organizations$54,265
 $40,842

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

Deposits paid for securities borrowed approximate the market value of the securities. Securities failed to deliver and receive represent the contract value of securities that have not been delivered or received by the Company on settlement date.

Note 8Collateralized Securities Transactions

As discussed in Note 1, Piper Jaffray transitioned from a self clearing securities broker dealer to a fully disclosed clearing model in the third quarter of 2017.

The Company’s current financing and prior customer securities activities involve the Company using securities as collateral. In the event that the counterparty does not meet its contractual obligation to return securities used as collateral (e.g., pursuant to the terms of a repurchase agreement), or customers did not deposit additional securities or cash for margin when required, the Company may be exposed to the risk of reacquiring the securities or selling the securities at unfavorable market prices in order to satisfy its obligations. The Company seeks to control this risk by monitoring the market value of securities pledged or used as collateral on a daily basis and requiring adjustments in the event of excess market exposure. The Company also uses unaffiliated third party custodians to administer the underlying collateral for certain of its short-term financings to mitigate risk.


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Piper JaffraySandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

In a reverse repurchase agreement the Company purchases financial instruments from a seller, typically in exchange for cash, and agrees to resell the same or substantially the same financial instruments to the seller at a stated price plus accrued interest in the future. In a repurchase agreement, the Company sells financial instruments to a buyer, typically for cash, and agrees to repurchase the same or substantially the same financial instruments from the buyer at a stated price plus accrued interest at a future date. Even though repurchase and reverse repurchase agreements involve the legal transfer of ownership of financial instruments, they are accounted for as financing arrangements because they require the financial instruments to be repurchased or resold at maturity of the agreement.

In a securities borrowed transaction, the Company borrows securities from a counterparty in exchange for cash. When the Company returns the securities, the counterparty returns the cash. Interest is generally paid periodically over the life of the transaction.

Prior to transitioning to a fully disclosed clearing model, the Company obtained securities purchased under agreements to resell, securities borrowed and margin agreements on terms that permit it to repledge or resell the securities to others, typically pursuant to repurchase agreements. The Company obtained securities with a fair value of approximately $192.2 million at December 31, 2016, of which $185.2 million had been pledged or otherwise transferred to satisfy its commitments under financial instruments and other inventory positions sold, but not yet purchased.

Reverse repurchase agreements, repurchase agreements and securities borrowed and loaned are reported on a net basis by counterparty when a legal right of offset exists. The Company had no outstanding securities lending arrangements as of September 30, 2017 or December 31, 2016. See Note 4 for information related to the Company's offsetting of derivative contracts. 

Note 9Investments

The Company’s investments include investments in private companies and partnerships, registered mutual funds, warrants of public and private companies and private company debt.

 September 30, December 31,
(Dollars in thousands)2017 2016
Investments at fair value$167,938
 $156,102
Investments at cost3,068
 2,755
Investments accounted for under the equity method8,521
 9,200
Total investments179,527
 168,057
    
Less investments attributable to noncontrolling interests (1)(44,932) (45,123)
 $134,595
 $122,934
(1)Noncontrolling interests are attributable to third party ownership in consolidated merchant banking and senior living funds.

At September 30, 2017, investments carried on a cost basis had an estimated fair market value of $4.6 million. Because valuation estimates were based upon management’s judgment, investments carried at cost would be categorized as Level III assets in the fair value hierarchy, if they were carried at fair value.

Investments accounted for under the equity method include general and limited partnership interests. The carrying value of these investments is based on the investment vehicle’s net asset value. The net assets of investment partnerships consist of investments in both marketable and non-marketable securities. The underlying investments held by such partnerships are valued based on the estimated fair value determined by management in the Company's capacity as general partner or investor and, in the case of investments in unaffiliated investment partnerships, are based on financial statements prepared by the unaffiliated general partners.


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

NoteNOTE 10Other Assets

 September 30, December 31,
(Dollars in thousands)2017 2016
Fee receivables$21,968
 $22,840
Accrued interest receivables7,612
 9,259
Forgivable loans, net8,422
 9,307
Prepaid expenses5,122
 6,363
Secured loan receivables2,975
 6,236
Other9,344
 13,124
Total other assets$55,443
 $67,129

Note 11Goodwill and Intangible Assets

 Capital Asset  
(Dollars in thousands)Markets Management  Total
Goodwill     
Balance at December 31, 2016$81,855
 $114,363
 $196,218
Impairment charge—
 (114,363) (114,363)
Balance at September 30, 2017$81,855
 $—
 $81,855
      
Intangible assets     
Balance at December 31, 2016$19,320
 $17,914
 $37,234
Amortization of intangible assets(7,633) (3,833) (11,466)
Balance at September 30, 2017$11,687
 $14,081
 $25,768

| SHORT-TERM FINANCING
The Company tests goodwillhas an unsecured $100 million revolving credit facility with U.S. Bank N.A. The credit agreement will terminate on December 18, 2026, unless otherwise terminated. The interest rate is variable and indefinite-life intangible assets for impairment on an annual basis and on an interim basis when circumstances exist that could indicate possible impairment. The Company tests for impairment at the reporting unit level, which is generally one level below its operating segments. The Company has identified two reporting units: capital markets and asset management. When testing for impairment, the Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after making an assessment, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then further analysis is unnecessary. However, if the Company concludes otherwise, then the Company is required to perform a two-step impairment test, which requires management to make judgments in determining what assumptions to use in the calculation. The first step requires a comparison of the fair value of the reporting unit to its carrying value, including allocated goodwill. The estimated fair value of the reporting unit is derived based on valuation techniques that a market participant would use. The Company estimateseither the fair value of the reporting unit using the income approach (discounted cash flow method) and market approach (earnings and/federal funds rate or transaction multiples). As discussed in Note 2, the Company adopted ASU 2017-04 effective July 1, 2017. ASU 2017-04 eliminates the second step from the goodwill impairment test. Accordingly, the Company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.

The Company identified impairment indicators in the third quarter of 2017 related to the asset management reporting unit and performed an interim goodwill impairment test as of July 31, 2017, which resulted in a non-cash goodwill impairment charge of $114.4 million. The fair value of the asset management reporting unit was calculated using the income approach (discounted cash flow method based on revenue and EBITDA forecasts) and market approach (earnings multiples of comparable public companies). The impairment charge resulted from declining profitability in 2017 as decreases in revenues relating to higher fee product offerings have not been fully offset by new revenues on assets gained in lower fee product offerings. The shift in revenue mix is attributable, in part, to the extended cycle of investors favoring passive investment vehicles over active management.

The Company also evaluated its intangible assets (indefinite and definite-lived) related to the asset management reporting unit and concluded there was no impairment.


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

Note 12Short-Term Financing

 Outstanding Balance             Weighted Average Interest Rate
 September 30, December 31, September 30, December 31,
(Dollars in thousands)2017 2016 2017 2016
Commercial paper (secured)$—
 $147,021
 N/A
 2.12%
Prime broker arrangements76,797
 271,811
 1.98% 1.49%
Total short-term financing$76,797
 $418,832
    

The Company issues secured commercial paper to fund a portion of its securities inventory. The commercial paper notes ("CP Notes") can be issued with maturities of 27 days to 270 days from the date of issuance. The CP Notes are currently issued under two separate programs, CP Series A and CP Series II A, and are secured by different inventory classes. CP Series III A was discontinued during the third quarter of 2017. The CP Notes are interest bearing or sold at a discount to par with an interest rate based on LIBORprime plus an applicable margin. CP Series II AThis credit facility includes a revised covenantcustomary events of default and covenants that, requiresamong other things, require the Company’sCompany's U.S. broker dealer subsidiary to maintain excessa minimum regulatory net capital of $100 million.$120 million, limit the Company's leverage ratio, require maintenance of a minimum ratio of operating cash flow to fixed charges, and impose certain limitations on the Company's ability to make acquisitions and make payments on its capital stock. At September 30, 2017, the Company hadMarch 31, 2024, there were no CP Notes outstanding.advances against this credit facility. At December 31, 2023, there were $30.0 million of advances against this credit facility, with a weighted average interest rate of 5.33 percent.


The Company has established arrangements to obtain financing with prime brokers related to its municipal bond fund and convertible securities. Financing under these arrangements is primarily secured by municipal securities, and collateral limitations could reduce the amount of funding available under the arrangements. Prime broker financing activities are recorded net of receivables from trading activity. The funding is at the discretion of the prime brokers subject to a notice period.

The Company has both committed and uncommitted short-term bank line financing available on a secured basis. The Company uses these credit facilities in the ordinary course of business to fund a portion of its daily operations and the amount borrowed under these credit facilities varies daily based on the Company’s funding needs.

The Company’sCompany's committed short-term bank line financing at September 30, 2017March 31, 2024 consisted of a one-year $200one-year $50 million committed revolving credit facility with U.S. Bank N.A., which washas been renewed annually in December 2016.the fourth quarter of each year since 2008. Advances under this facility are secured by certain marketable securities. The interest rate is variable and based on the federal funds rate plus an applicable margin. The facility includes a covenant that requires the Company’sCompany's U.S. broker dealer subsidiary to maintain a minimum regulatory net capital of $120 million, and the unpaid principal amount of all advances under this facility will be due on December 16, 2017.6, 2024. The Company pays a nonrefundable commitment fee on the unused portion of the facility on a quarterly basis. At September 30, 2017,March 31, 2024 and December 31, 2023, the Company had no advances against this line of credit.


The Company’s uncommitted secured line at September 30, 2017 totaled $85 million and is dependent on having appropriate collateral, as determined by the bank agreement, to secure an advance under the line. The availability of the Company’s uncommitted line is subject to approval by the bank each time an advance is requested and may be denied. At September 30, 2017, the Company had no advances against this line of credit.

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Notes to the Consolidated Financial Statements
(Unaudited)

Note 13Senior Notes

The Company has entered into variable and fixed rate senior notes with certain entities advised by Pacific Investment Management Company ("PIMCO"). The following table presents the outstanding balance by note class:

 Outstanding Balance
 September 30, December 31,
(Dollars in thousands)2017 2016
Class A Notes$—
 $50,000
Class C Notes125,000
 125,000
Total senior notes$125,000
 $175,000

On October 8, 2015, the Company entered into a second amended and restated note purchase agreement ("Second Amended and Restated Note Purchase Agreement") under which the Company issued $125 million of fixed rate Class C Notes. The Class C Notes bear interest at an annual fixed rate of 5.06 percent, are payable semi-annually and mature on October 9, 2018. The unpaid principal amount is due in full on the maturity date and may not be prepaid by the Company. The variable rate Class A Notes were repaid by the Company upon maturity on May 31, 2017.

The Second Amended and Restated Note Purchase Agreement includes customary events of default and covenants that, among other things, require the Company to maintain a minimum consolidated tangible net worth and regulatory net capital, limit the Company's leverage ratio and require the Company to maintain a minimum ratio of operating cash flow to fixed charges. At September 30, 2017, the Company was in compliance with all covenants.

The senior notes are recorded at amortized cost. As of September 30, 2017, the fair value of the fixed rate Class C Notes was approximately $125.7 million.

Note 14Legal Contingencies

NOTE 11 | LEGAL CONTINGENCIES
The Company has been named as a defendant in various legal actions, including complaints and litigation and arbitration claims, arising from its business activities. Such actions include claims related to securities brokerage and investment banking activities, and certain class actions that primarily allege violations of securities laws and seek unspecified damages, which could be substantial. Also, the Company is involved from time to time in investigations and proceedings by governmental agencies and self-regulatory organizations ("SROs") which could result in adverse judgments, settlement,settlements, penalties, fines or other relief.


The Company has established reservesaccrues for potential losses that are probable and reasonably estimable that may resultresulting from pending and potential legal actions, investigations and regulatory proceedings. Reasonably possibleproceedings when such losses in excess of amounts accrued at September 30, 2017 are not material.probable and reasonably estimable. In many cases, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount or range of any potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developeddevelop before a probability of loss can be determined or range of loss can reasonably be estimated.

Given uncertainties regarding the timing, scope, volume and outcome of pending and potential legal actions, investigations and regulatory proceedings and other factors, the amounts of reservesaccruals and ranges of reasonably possible losses are difficult to determine and of necessity subject to future revision. Subject to the foregoing, management of the Company believes, based on currently available information, after consultation with outside legal counsel and taking into account its established reserves,any prior accruals, that pending legal actions, investigations and regulatory proceedings will be resolved with no material adverse effect on the consolidated statements of financial condition, results of operations or cash flows of the Company. However, ifCompany, except as described in the next paragraph.

The SEC and the Commodity Futures Trading Commission (the "CFTC") are conducting investigations of the Company regarding compliance with recordkeeping requirements for business-related communications sent over unapproved electronic messaging channels. The SEC and the CFTC have brought numerous enforcement actions relating to recordkeeping practices and are currently conducting numerous similar investigations of other broker dealers and registered investment advisors. The Company is cooperating with the investigations. The Company has engaged in settlement negotiations with the SEC and the CFTC to resolve these investigations and anticipates that the resolution will include the payment of civil money penalties. As of March 31, 2024, the Company has accrued $16.5 million as estimated civil penalties related to these investigations, and recorded a $3.5 million reversal of other operating expenses for the three months ended March 31, 2024.

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Notes to the Consolidated Financial Statements
(Unaudited)

If during any period a potential adverse contingency should becomebecomes probable or is resolved for an amount in excess of the established reserves,accrual, the results of operations and cash flows in that period and the financial condition as of the end of that period could be materially adversely affected. At March 31, 2024, the high end of the range of reasonably estimable losses in excess of amounts accrued was approximately $0.5 million. In addition, there can be no assurance that material losses will not be incurred from claims that have not yet been brought to the Company’sCompany's attention or are not yet determined to be reasonably possible.



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NOTE 12 | SHAREHOLDERS' EQUITY
Dividends
TableThe Company's current dividend policy is intended to return a metric based on fiscal year net income to its shareholders. The Company's board of Contentsdirectors determines the declaration and payment of dividends and is free to change the Company's dividend policy at any time.
Piper Jaffray Companies
NotesDuring the three months ended March 31, 2024, the Company declared and paid both a quarterly and a special cash dividend on its common stock of $0.60 and $1.00 per share, respectively. The special cash dividend related to the Consolidated Financial StatementsCompany's fiscal year 2023 results. Total dividends paid, including accrued forfeitable dividends paid on restricted stock vestings, were $35.7 million for the three months ended March 31, 2024.
(Unaudited)


On April 26, 2024, the board of directors declared a quarterly cash dividend on its common stock of $0.60 per share to be paid on June 7, 2024, to shareholders of record as of the close of business on May 24, 2024.
Note 15Shareholders’ Equity


Share Repurchases

Effective August 14, 2015,The Company purchases shares of common stock pursuant to share repurchase programs authorized by the Company's board of directors authorized the repurchase of up to $150.0 million in common shares through September 30, 2017. During the nine months ended September 30, 2017, the Company repurchased 36,936 shares at an average price of $67.62 per share for an aggregate purchase price of $2.5 million related to this authorization. During the nine months ended September 30, 2016, the Company repurchased 1,536,226 shares at an average price of $38.89 per share for an aggregate purchase price of $59.7 million related to this authorization. This authorization expired on September 30, 2017.

On August 10, 2017, the Company's board of directors authorized the repurchase of up to $150.0 million in common shares, effective from September 30, 2017 through September 30, 2019.

directors. The Company also purchases shares of common stock from restricted stock award recipients upon the award vesting as recipients sell shares to meet their employment tax obligations.

The following table summarizes the repurchase programs authorized by the Company's board of directors:
Effective DateAuthorized AmountExpiration DateRemaining Authorization at March 31, 2024
May 6, 2022$150.0 millionDecember 31, 2024$138.2 million
January 1, 2022$150.0 millionDecember 31, 2023$—

During the three months ended March 31, 2024 and 2023, the Company purchased 308,801did not repurchase shares and 255,164 shares, or $22.6 million and $10.7 million of the Company’s common stock for this purpose duringrelated to its share repurchase programs.

The following table summarizes the nine months ended September 30, 2017 and 2016, respectively.Company's share repurchase activity from employees related to employment tax obligations:

Three Months Ended
March 31,
20242023
Common shares repurchased288,977 426,031 
Aggregate purchase price (in millions)$52.1 $60.8 
Average price per share$180.26 $142.79 

Issuance of Shares

The Company issues common shares out of treasury stock as a result of employee restricted share vesting and exercise transactions as discussed in Note 16.14. During the ninethree months ended September 30, 2017March 31, 2024 and 2016,2023, the Company issued 850,925730,695 shares and 731,7581,584,696 shares, respectively, related to these obligations.


Dividends
Piper Sandler Companies | 23


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Beginning in 2017,Piper Sandler Companies
Notes to the Company initiated the payment of a quarterly cash dividend to holders of its common stock. The Company's board of directors determines the declaration and payment of dividends on a quarterly basis, and is free to change the Company's dividend policy at any time.Consolidated Financial Statements

(Unaudited)
On October 26, 2017, the board of directors declared a cash dividend of $0.3125 per share to be paid on December 15, 2017, to shareholders of record as of the close of business on November 29, 2017. During the nine months ended September 30, 2017, the Company declared and paid dividends of $0.9375 per share, totaling $14.2 million.

Noncontrolling Interests

The consolidated financial statements include the accounts of Piper JaffraySandler Companies, its wholly owned subsidiaries and other entities in which the Company has a controlling financial interest. Noncontrolling interests represent equity interests in consolidated entities that are not attributable, either directly or indirectly, to Piper JaffraySandler Companies. Noncontrolling interests includerepresent the minority equity holders’holders' proportionate share of the equity in merchant banking funds of $35.1 million and a senior living fund aggregating $13.4 million as of September 30, 2017. As of December 31, 2016, noncontrolling interests included the minority equity holders’ proportionate share of the equity in a merchant banking fund of $35.0 million, a municipal bond fund with employee investors of $9.2 million and a senior living fund aggregating $12.8 million.Company's alternative asset management funds.


Ownership interests in entities held by parties other than the Company’sCompany's common shareholders are presented as noncontrolling interests within shareholders’shareholders' equity, separate from the Company’sCompany's own equity. Revenues, expenses and net income or loss are reported on the consolidated statements of operations on a consolidated basis, which includes amounts attributable to both the Company’sCompany's common shareholders and noncontrolling interests. Net income or loss is then allocated between the Company and noncontrolling interests based upon their relative ownership interests. Net income applicableattributable to noncontrolling interests is deducted from consolidated net income to determine net income applicableattributable to the Company. There was noThe Company does not have other comprehensive income or loss attributedattributable to noncontrolling interests forinterests.

NOTE 13 | REVENUES AND BUSINESS INFORMATION
The Company's activities as an investment bank and institutional securities firm constitute a single business segment. The Company is organized as one reportable segment in order to maximize the nine months ended September 30, 2017value provided to clients by leveraging the diversified expertise and 2016, respectively.broad relationships of its experienced professionals across the Company. Substantially all of the Company's net revenues and long-lived assets are located in the U.S.



Reportable financial results are as follows:
Three Months Ended
 March 31,
(Amounts in thousands)20242023
Revenues
Investment banking:
Advisory services$157,189 $140,664 
Corporate financing52,581 26,805 
Municipal financing20,753 16,935 
Total investment banking230,523 184,404 
Institutional brokerage:
Equity brokerage49,488 53,831 
Fixed income services41,954 42,482 
Total institutional brokerage91,442 96,313 
Interest income8,306 8,712 
Investment income14,168 11,115 
Total revenues344,439 300,544 
Interest expense1,383 2,639 
Net revenues343,056 297,905 
Total non-interest expenses290,634 272,096 
Pre-tax income$52,422 $25,809 
Pre-tax margin15.3 %8.7 %

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Notes to the Consolidated Financial Statements
(Unaudited)

The following table presents the changes in shareholders' equity for the nine months ended September 30, 2017:

 Common Common   Total
 Shares Shareholders’ Noncontrolling Shareholders’
(Amounts in thousands, except share amounts)Outstanding Equity Interests Equity
Balance at December 31, 201612,391,970
 $759,250
 $57,016
 $816,266
Net income/(loss)—
 (15,865) 3,217
 (12,648)
Dividends—
 (14,228) —
 (14,228)
Amortization/issuance of restricted stock (1)—
 31,163
 —
 31,163
Issuance of treasury shares for options exercised26,149
 1,703
 —
 1,703
Issuance of treasury shares for restricted stock vestings824,776
 —
 —
 —
Repurchase of common stock through share repurchase program(36,936) (2,497) —
 (2,497)
Repurchase of common stock for employee tax withholding(308,801) (22,568) —
 (22,568)
Shares reserved/issued for director compensation2,744
 171
 —
 171
Other comprehensive income—
 1,137
 —
 1,137
Fund capital distributions, net—
 —
 (11,714) (11,714)
Balance at September 30, 201712,899,902
 $738,266
 $48,519
 $786,785
(1)Includes amortization of restricted stock as part of deal consideration for the acquisition of Simmons. See Note 3 for further discussion.


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Notes to the Consolidated Financial Statements
(Unaudited)

Note 16Compensation Plans

NOTE 14 | COMPENSATION PLANS
Stock-Based Compensation Plans

The Company maintains twohas three outstanding stock-based compensation plans,plans: the Piper Jaffray Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (the "Incentive Plan") and, the 20162020 Employment Inducement Award Plan (the "Inducement"2020 Inducement Plan") and the 2022 Employment Inducement Award Plan (the "2022 Inducement Plan"). The Company’sCompany's equity awards are recognized on the consolidated statements of operations at grant date fair value over the service period of the award, less forfeitures.


The following table provides a summary of the Company’sCompany's outstanding equity awards (in shares or units)units, as applicable) as of September 30, 2017:
March 31, 2024:
Incentive Plan
Restricted Stockstock
Annual grants906,347
Sign-on grants247,341
1,153,688
Inducement Plan
Restricted Stockstock related to compensation plans:260,231
Annual grants574,078 
Sign-on grants100,224 
Inducement grants48,336 
2020 Inducement Plan grants300,893 
2022 Inducement Plan grants126,608 
Total restricted stock related to compensation plans1,413,9191,150,139 
Simmons Deal ConsiderationRestricted stock related to acquisitions (1)821,141994,179 
Total restricted stock outstanding2,235,0602,144,318 
Incentive PlanRestricted stock units152,318 
Restricted Stock Units
Leadership grantsStock options273,574156,667 
(1)The Company issued restricted stock with service conditions as part of deal consideration for the acquisition of Simmons. See Note 3 for further discussion.

(1)Includes restricted stock with service conditions issued in conjunction with all acquisitions since January 1, 2020.

Incentive Plan

The Incentive Plan permits the grant of equity awards, including restricted stock, restricted stock units and non-qualified stock options, to the Company’sCompany's employees and directors for up to 8.210.9 million shares of common stock (1.0(1.8 million shares remained available for future issuance under the Incentive Plan as of September 30, 2017)March 31, 2024). The Company believes that such awards help align the interests of employees and directors with those of shareholders and serve as an employee retention tool. The Incentive Plan provides for accelerated vesting of awards if there is a severance event, a change in control of the Company (as defined in the Incentive Plan), in the event of a participant’sparticipant's death, and at the discretion of the compensation committee of the Company’sCompany's board of directors.


Restricted Stock Awards


Restricted stock grants are valued at the market price of the Company’sCompany's common stock on the date of grant and are amortized over the requisite service period. The Company grants shares of restricted stock to employees as part of year-end compensation ("Annual Grants") and upon initial hiring or as a retention award ("Sign-on Grants" or "Inducement Grants").



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Piper JaffraySandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)


The Company’sCompany's Annual Grants are made each year in February. Annual Grants vest ratably over three years in equal installments. TheSubstantially all Annual Grants provide for continued vesting after termination of employment, so long as the employee does not violate certain post-termination restrictions set forth in the award agreement or any agreements entered into upon termination. The Company determined the service inception date precedes the grant date for thethese Annual Grants, and that the post-termination restrictions do not meet the criteria for an in-substance service condition, as defined by ASC 718.FASB Accounting Standards Codification Topic 718, "Compensation — Stock Compensation." Accordingly, restricted stock granted as part of thethese Annual Grants is expensed in the one-yearone-year period in which those awards are deemed to be earned, which is generally the calendar year preceding the February grant date. For example, the Company recognized compensation expense during fiscal 2016year 2023 for its February 20172024 Annual Grant. If an equity award related to thethese Annual Grants is forfeited as a result of violating the post-termination restrictions, the lower of the fair value of the award at grant date or the fair value of the award at the date of forfeiture is recorded within the consolidated statements of operations as a reversal of compensation expense.


Sign-on Grants are used as a recruiting tool for new employees and are issued to current employees as a retention tool. These awards have both cliff and ratable vesting terms, and the employees must fulfill service requirements in exchange for rights to the awards. Compensation expense is amortized on a straight-line basis from the grant date over the requisite service period, generally onethree to five years. Employees forfeit unvested shares upon termination of employment and a reversal of compensation expense is recorded.


Inducement Grants are issued as a retention tool in conjunction with certain acquisitions. During 2022, the Company granted $9.3 million (65,125 shares) in restricted stock under the Incentive Plan in conjunction with its acquisitions of Cornerstone Macro Research LP, including its subsidiary, Cornerstone Macro LLC (collectively, "Cornerstone Macro") and Stamford Partners LLP. These restricted shares are subject to graded vesting, and employees must fulfill service requirements in exchange for the rights to the restricted shares. Compensation expense is amortized on a straight-line basis over the requisite service period, generally three to four years. Employees forfeit unvested shares upon termination of employment and a reversal of compensation expense is recorded.

Annually, the Company grants stock to its non-employee directors. The stock-based compensation paid to non-employee directors is fully expensed on the grant date and included within outside services expense on the consolidated statements of operations.


Restricted Stock Units


The Company grants restricted stock units to its leadership team ("Leadership Grants").

2017 Leadership Grant

Restricted stock units granted in 2017 will vest and convert to shares of common stock at the end of theeach 36-month performance period only if the Company satisfies predetermined performance and/or market conditions over the 36-month performance period from January 1, 2017 through December 31, 2019.period. The performance condition requires the Company to achieve certain average adjusted return on equity targets, as defined in the terms of the award agreements. The market condition requires the Company to achieve a certain total shareholder return ("TSR") relative to members of a predetermined peer group. Under the terms of the award,these awards, the number of units that will actually vest and convert to shares will be based on the extent to which the Company achieves the specified targets during theeach performance period. The maximum payout leverage under thisby grant year is 150 percent.as follows:

Maximum Payout Leverage
Grant YearPerformance ConditionMarket ConditionTotal
202475%75%150%
2023100%100%200%
202275%75%150%
202175%75%150%
202075%75%150%
Up
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Piper Sandler Companies
Notes to 75 percent of the award can be earned based on the Company achieving certain average adjusted return on equity targets, as defined in the terms of the award agreement. Consolidated Financial Statements
(Unaudited)

The fair value of thisthe performance condition portion of the award was based on the closing price of the Company's common stock on the grant date. If the Company determines that it is probable that the performance condition will be achieved, compensation expense is amortized on a straight-line basis over the 36-month performance period. The probability thatCompany reevaluates achievement of the performance condition will be achieved is reevaluatedby grant year each reporting period with changes in estimated outcomes accounted for using a cumulative effect adjustment to compensation expense. Compensation expense will be recognized only if the performance condition is met. Employees forfeit unvested sharerestricted stock units upon termination of employment with a corresponding reversal of compensation expense. As of September 30, 2017,March 31, 2024, the Company has determined thatexpected payout leverage for the performance condition is probable of achieving 50 percent of the grant award.

Up to 75 percentportion of the award can be earned based on the Company’s total shareholder return relative to members of a predetermined peer group. by grant year is as follows:
Expected Payout
Grant YearLeverage
202471%
202356%
202227%

The market condition must be met for the market condition portion of the award to vest and compensation costvest. Compensation expense will be recognized regardless if the market condition is satisfied. Compensation expensesatisfied, and is amortized on a straight-line basis over the 36-month requisite service period.period (or earlier if age and service conditions are met, as described below). Employees forfeit unvested sharerestricted stock units upon termination of employment with a corresponding reversal of compensation expense. For thisThe fair value of the market condition portion of the award the fair valuewas determined on the grant date was determined using a Monte Carlo simulation with the following assumptions:
Risk-FreeExpected Stock
Grant YearVesting YearInterest RatePrice Volatility
202420274.38%34.3%
202320264.35%47.5%
202220251.80%43.8%
202120240.23%43.2%
202020231.40%27.3%
  Risk-free Expected Stock
Grant Year Interest Rate Price Volatility
2017 1.62% 35.9%


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)


Because the vesting of the market condition portion of the award vesting depends on the Company’s total shareholder returnCompany's TSR relative to a peer group, the valuation modeled the performance of the peer group as well as the correlation between the Company and the peer group. The expected stock price volatility assumption was determined using historical volatility, as correlation coefficients can only be developed through historical volatility. The risk-free interest rate was determined based on the three-year U.S. Treasury bond yield.

Leadership Grants Prior to 2017

Restricted stock units granted prior to 2017 contain market condition criteria and will vest and convert to shares of common stock at the end of each 36-month performance period only if the Company's stock performance satisfies predetermined market conditions over the performance period. Under the terms of the grants, the number of units that will vest and convert to shares will be based on the Company's stock performance achieving specified targets during each performance period. Compensation expense is recognized over each 36-month performance period.

Up to 50 percent of these awards can be earned based on the Company’s total shareholder return relative to members of a predetermined peer group and up to 50 percent of the awards can be earned based on the Company’s total shareholder return. The fair value of the awards on the grant date was determined using a Monte Carlo simulation with the following assumptions:
  Risk-free Expected Stock
Grant Year Interest Rate Price Volatility
2016 0.98% 34.9%
2015 0.90% 29.8%
2014 0.82% 41.3%

The expected stock price volatility assumptions were determined using historical volatility, as correlation coefficients can only be developed through historical volatility. The risk-free interest rates were determined based on three-year U.S. Treasury bond yields.


The compensation committee of the Company's board of directors included defined retirement provisions in its Leadership Grants. Certain grantees meeting defined age and service requirements will be fully vested in the awards as long as performance and post-termination obligations are met throughout the performance period. These retirement-eligible grants are expensed in the period in which those awards are deemed to be earned, which is the calendar year preceding the February grant date.

Stock Options


TheOn February 15, 2023 and February 15, 2018, the Company previously granted options to purchase Piper Jaffray Companies common stock to employees and non-employee directors in fiscal years 2004 through 2008. Employee and directorcertain executive officers. These options wereare expensed by the Company on a straight-line basis over the required service period of five years, based on the estimated fair value of the award on the respective date of grant. The exercise price per share is equal to the closing price on the respective date of grant plus ten percent. These options are subject to graded vesting, beginning on the third anniversary of the respective grant date, so long as the employee remains continuously employed by the Company. The maximum term of these stock options is ten years.

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Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The fair value of these stock option awards was estimated on the respective date of grant using athe Black-Scholes option-pricing model. As described above pertainingmodel with the following assumptions:
February 2023February 2018
GrantGrant
Risk-free interest rate3.94 %2.82 %
Dividend yield3.21 %3.22 %
Expected stock price volatility38.50 %37.20 %
Expected life of options (in years)7.07.0
Fair value of options granted (per share)$46.71 $24.49 

The risk-free interest rate assumption was based on the U.S. Treasury bond yield with a maturity equal to the Company’s Annual Grantsexpected life of restricted shares,the options. The dividend yield assumption was based on the assumed dividend payout over the expected life of the options. The expected stock price volatility assumption was determined using historical volatility, as correlation coefficients can only be developed through historical volatility. The expected life of options grantedassumption was determined using the simplified method due to employees were expensed in the calendar year precedingCompany's limited exercise information. The simplified method calculates the annual February grant date. For example,expected term as the Company recognized compensation expense during fiscal 2007 for its February 2008 option grant. The maximummidpoint of the vesting term and the original contractual term of the stock options granted to employees and directors was ten years. The Company has not granted stock options since 2008, and all awards have been exercised or expired as of March 31, 2017.options.


Inducement PlanPlans

The Company established the Inducement Plan in conjunction with the acquisition of Simmons. The Company granted $11.6 million (286,776 shares) in restricted stock under the Inducement Plan on May 15, 2016. These shares cliff vest in three years. Inducement Planplan awards are amortized as compensation expense on a straight-line basis over theeach respective vesting period. Employees forfeit unvested Inducement Plan shares upon termination of employment and a reversal of compensation expense is recorded.

Stock-Based Compensation Activity


The Company recorded compensation expenseestablished the 2019 Employment Inducement Award Plan (the "2019 Inducement Plan") in conjunction with its acquisition of $13.5Weeden & Co. L.P. ("Weeden & Co."). On August 2, 2019, the Company granted $7.3 million (97,752 shares) in restricted stock. These restricted shares were subject to graded vesting through August 2, 2023. The Company terminated the 2019 Inducement Plan in August 2023.

The Company established the 2020 Inducement Plan in conjunction with its acquisition of SOP Holdings, LLC and $17.9its subsidiaries, including Sandler O'Neill & Partners, L.P. On January 3, 2020, the Company granted $96.9 million for(1,217,423 shares) in restricted stock. These restricted shares have both cliff and graded vesting terms with vesting periods of 18 months, three years or five years (with a weighted average service period of 3.7 years). On April 3, 2020, the three months ended September 30, 2017 and 2016, respectively, and $25.8Company granted $5.5 million and $42.0 million for the nine months ended September 30, 2017 and 2016, respectively, related to employee(114,000 shares) in restricted stock andunder the 2020 Inducement Plan in conjunction with its acquisition of The Valence Group ("Valence"). These restricted shares are subject to graded vesting, generally beginning on the third anniversary of the grant date through April 3, 2025. On December 31, 2020, the Company granted $2.9 million (29,194 shares) in restricted stock unit awards. Forfeituresunder the 2020 Inducement Plan in conjunction with its acquisition of TRS Advisors LLC ("TRS"). These restricted shares were $0.7subject to ratable vesting through December 31, 2023.

The Company established the 2022 Inducement Plan in conjunction with its acquisition of DBO Partners Holding LLC, including its subsidiary, DBO Partners LLC (collectively, "DBO Partners"). On October 7, 2022, the Company granted $17.4 million and $0.5 million for the three months ended September 30, 2017 and 2016, respectively, and $3.0 million and $0.6 million, for the nine months ended September 30, 2017 and 2016, respectively. The tax benefit related(161,030 shares) in restricted stock. These restricted shares are generally subject to stock-based compensation totaled $4.5 million and $5.2 million for the three months ended September 30, 2017 and 2016, respectively, and $16.2 million and $11.8 million for the nine months ended September 30, 2017 and 2016, respectively.ratable vesting over a five-year vesting period.



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Notes to the Consolidated Financial Statements
(Unaudited)


Stock-Based Compensation Activity
The following table summarizes the Company's stock-based compensation activity:
Three Months Ended
March 31,
(Amounts in millions)20242023
Stock-based compensation expense$26.7 $27.3 
Forfeitures0.5 0.6 
Tax benefit related to stock-based compensation expense4.0 5.1 

The following table summarizes the changes in the Company’sCompany's unvested restricted stock:
UnvestedWeighted Average
Restricted StockGrant Date
(in Shares)Fair Value
December 31, 20232,593,922 $104.89 
Granted202,445 190.36 
Vested(636,937)116.00 
Canceled(15,112)133.16 
March 31, 20242,144,318 $109.46 
 Unvested Weighted Average
 Restricted Stock Grant Date
 (in Shares) Fair Value      
December 31, 20162,874,117
 $43.12
Granted241,691
 77.95
Vested(701,380) 44.85
Canceled(179,368) 42.68
September 30, 20172,235,060
 $46.38


The following table summarizes the changes in the Company’sCompany's unvested restricted stock units:
UnvestedWeighted Average
RestrictedGrant Date
Stock UnitsFair Value
December 31, 2023181,193 $141.08 
Granted33,694 199.39 
Vested(62,569)103.69 
Canceled— — 
March 31, 2024152,318 $169.34 
 Unvested Weighted Average
 Restricted Grant Date
 Stock Units       Fair Value      
December 31, 2016374,460
 $21.63
Granted35,981
 84.10
Vested(115,290) 23.42
Canceled(21,577) 27.81
September 30, 2017273,574
 $28.61
As of September 30, 2017,March 31, 2024, there was $29.4$81.8 million of total unrecognized compensation cost related to restricted stock and restricted stock units expected to be recognized over a weighted average period of 1.62.7 years.


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Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

The following table summarizes the changes in the Company’sCompany's outstanding stock options:
Weighted Average
WeightedRemaining
OptionsAverageContractual TermAggregate
OutstandingExercise Price(in Years)Intrinsic Value
December 31, 2023156,667 $133.35 6.5$6,504,325 
Granted— — 
Exercised— — 
Canceled— — 
Expired— — 
March 31, 2024156,667 $133.35 6.3$10,204,800 
Options exercisable at March 31, 202481,667 $99.00 3.9$8,125,050 
     Weighted Average  
   Weighted Remaining  
 Options Average Contractual Term Aggregate
 Outstanding       Exercise Price      (in Years) Intrinsic Value
December 31, 201630,613
 $65.86
 0.3 $203,291
Granted—
 —
    
Exercised(26,149) 65.13
    
Canceled—
 —
    
Expired(4,464) 70.13
    
September 30, 2017—
 $—
 0.0 $—


As of September 30, 2017,March 31, 2024, there was no$2.7 million of unrecognized compensation cost related to stock options expected to be recognized over futurea weighted average period of 3.9 years. The intrinsic value of options exercised was $0.3 million and the resulting tax benefit realized was $0.1 million for the nine months ended September 30, 2017. The intrinsic value of options exercised and the resulting tax benefit realized were immaterial for the nine months ended September 30, 2016.


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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)


Deferred Compensation Plans

The Company maintains various deferred compensation arrangements for employees.


The nonqualified deferred compensation plan is an unfunded plan which allows certain highly compensated employees, at their election, to defer a percentage of their base salary, commissions and/or cash bonuses. The deferrals vest immediately and are non-forfeitable. The amounts deferred under this plan are held in a grantor trust. The Company invests, as a principal, in investments to economically hedge its obligation under the nonqualified deferred compensation plan. Investments in the grantor trust, consisting of mutual funds, totaled $29.9 million and $24.4 million as of September 30, 2017 and December 31, 2016, respectively, and are included in investments on the consolidated statements of financial condition. The compensation deferred by the employees is expensed in the period earned. The deferred compensation liability was $30.0 million and $24.5 million as of September 30, 2017 and December 31, 2016, respectively. Changes in the fair value of the investments made by the Company are reported in investment income and changes in the corresponding deferred compensation liability are reflected as compensation and benefits expense on the consolidated statements of operations. On August 9, 2017, the Company's board of directors approved the discontinuance of future deferral elections by participants for performance periods beginning after December 31, 2017.Mutual Fund Restricted Share Investment Plan

The Piper Jaffray Companies Mutual Fund Restricted Share Investment Plan is a fully funded deferred compensation plan which allows eligible employees to elect to receive a portion of thetheir incentive compensation they would otherwise receive in the form of restricted stock, instead in restricted mutual fund shares ("MFRS Awards") of investment funds. MFRS Awards are awarded to qualifying employees in February of each year, and represent a portion of their compensation for performance in the preceding year similar to the Company's Annual Grants. MFRS Awards vest ratably over three years in equal installments andinstallments. Substantially all MFRS Awards provide for continued vesting after termination of employment so long as the employee does not violate certain post-termination restrictions set forth in the award agreement or any agreement entered into upon termination. Forfeitures are recorded as a reduction of compensation and benefits expense within the consolidated statements of operations. MFRS Awards are owned by employee recipients (subject to aforementioned vesting restrictions) and as such are not included on the consolidated statements of financial condition.


Nonqualified Deferred Compensation Plan
The nonqualified deferred compensation plan is an unfunded plan which allows certain highly compensated employees, at their election, to defer a portion of their compensation. This plan was closed to future deferral elections by participants for performance periods beginning after December 31, 2017. The amounts deferred under this plan are held in a grantor trust. The Company has also granted MFRS Awards to new employeesinvests, as a recruiting tool. Employees must fulfillprincipal, in investments to economically hedge its obligation under the nonqualified deferred compensation plan. The investments in the grantor trust consist of mutual funds which are categorized as Level I in the fair value hierarchy. These investments totaled $20.1 million and $18.6 million as of March 31, 2024 and December 31, 2023, respectively, and are included in investments on the consolidated statements of financial condition. A corresponding deferred compensation liability is included in accrued compensation on the consolidated statements of financial condition. The compensation deferred by the employees was expensed in the period earned. Changes in the fair value of the investments made by the Company are reported in investment income and changes in the corresponding deferred compensation liability are reflected as compensation and benefits expense on the consolidated statements of operations.

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Piper Sandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)

Acquisition-Related Compensation Arrangements
In conjunction with the 2022 acquisition of DBO Partners, additional cash of up to $25.0 million may be earned (the "DBO Earnout") if a net revenue target is achieved during the performance period from January 1, 2023 to December 31, 2024. Of the total amount, up to $20.0 million may be earned by former partners with no service requirements. The Company recorded a $1.7 million liability as of the acquisition date for the fair value of this contingent consideration. Adjustments to this liability after the acquisition date are recorded as non-compensation expense on the consolidated statements of operations. As of March 31, 2024, the Company does not expect that the portion of the DBO Earnout with no service requirements will be earned. As a result, the Company has no accrual recorded related to this additional cash payment. The remaining $5.0 million may be earned by certain employees, whom are now employees of the Company, in exchange for rightsservice requirements. Amounts estimated to be payable, if any, will be recorded as compensation expense on the consolidated statements of operations over the requisite service period. As of March 31, 2024, the Company has no accrual recorded for the portion of the DBO Earnout with service requirements. If earned, the DBO Earnout will be paid by March 31, 2025.

In conjunction with the 2022 acquisition of Cornerstone Macro, additional cash of up to $27.8 million was available to be earned based on achieving a net revenue target during the performance period from July 1, 2022 to December 31, 2023. Of the total amount, up to $6.0 million was available to be earned by Cornerstone Macro's equity owners with no service requirements. As of March 31, 2024, the Company had accrued the maximum amount of $6.0 million related to this additional cash payment, which was subsequently paid on April 1, 2024. The remaining amount may be earned by the equity owners, whom are now employees of the Company, and certain employees in exchange for service requirements. Amounts estimated to be payable, if any, will be recorded as compensation expense on the consolidated statements of operations over the requisite service period, and will be paid by June 30, 2025 and June 30, 2026. As of March 31, 2024, the Company expects $5.5 million will be earned and has accrued $2.7 million related to these additional cash payments. The Company recorded $0.8 million and $0.5 million in compensation expense related to these additional cash payments for the three months ended March 31, 2024 and 2023, respectively.

In conjunction with the 2020 acquisition of TRS, additional cash was available to be earned by certain employees if a revenue threshold was exceeded during the three-year post-acquisition period (the "TRS Earnout"). The Company paid the maximum amount of $7.0 million related to the awards.TRS Earnout in the first quarter of 2024. Amounts payable were recorded as compensation expense on the consolidated statements of operations over the requisite service period. The Company recorded $0.5 million in compensation expense related to the TRS Earnout for the three months ended March 31, 2024 and 2023.

In conjunction with the 2020 acquisition of Valence, additional cash was available to be earned by certain employees if a revenue threshold was exceeded during the three-year post-acquisition period (the "Valence Earnout"). The Company paid $10.0 million related to the Valence Earnout in the third quarter of 2023. Amounts payable were recorded as compensation expense on the consolidated statements of operations over the requisite service period. The Company recorded $1.4 million in compensation expense related to the Valence Earnout for the three months ended March 31, 2023.

In conjunction with the 2019 acquisition of Weeden & Co., the Company granted $10.1 million in restricted cash for retention purposes. Compensation expense from these awards arewas amortized on a straight-line basis over the requisite service periodperiod. The restricted cash award was subject to graded vesting, beginning on the third anniversary of two to five years.the grant date through August 2, 2023. The final payment was made in the third quarter of 2023.





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Piper JaffraySandler Companies
Notes to the Consolidated Financial Statements
(Unaudited)


NOTE 15 | EARNINGS PER SHARE ("EPS")
Note 17Earnings Per Share

The Company calculates earnings per share using the two-class method. Basic earnings per common share is computed by dividing net income/(loss) applicableincome attributable to Piper Jaffray Companies’ common shareholdersSandler Companies by the weighted average number of common shares outstanding for the period. Net income/(loss) applicable to Piper Jaffray Companies’ common shareholders represents net income/(loss) applicable to Piper Jaffray Companies reduced by the allocation of earnings to participating securities. No allocation of undistributed earnings is made for periods in which a loss is incurred. Distributed earnings (e.g., dividends) are allocated to participating securities. All of the Company’s unvested restricted shares are deemed to be participating securities as they are eligible to share in the profits (e.g., receive dividends) of the Company. The Company’s restricted stock units are not participating securities as they are not eligible to receive dividends, or the dividends are forfeitable until vested. Diluted earnings per common share is calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive stock options, restricted stock units and restricted shares. The Company uses the treasury stock units.method to calculate diluted earnings per common share.


The computation of earnings per shareEPS is as follows:
Three Months Ended
 March 31,
(Amounts in thousands, except per share data)20242023
Net income attributable to Piper Sandler Companies$42,493 $25,634 
Shares for basic and diluted calculations
Average shares used in basic computation15,499 14,507 
Stock options37 25 
Restricted stock units157 157 
Restricted shares1,811 2,493 
Average shares used in diluted computation17,504 17,182 
Earnings per common share
Basic$2.74 $1.77 
Diluted$2.43 $1.49 
 Three Months Ended Nine Months Ended
 September 30, September 30,
(Amounts in thousands, except per share data)2017 2016 2017 2016
Net income/(loss) applicable to Piper Jaffray Companies$(49,713) $10,658
 $(15,865) $15,033
Earnings allocated to participating securities (1)(702) (2,076) (2,241) (2,557)
Net income/(loss) applicable to Piper Jaffray Companies’ common shareholders (2)$(50,415) $8,582
 $(18,106) $12,476
        
Shares for basic and diluted calculations:       
Average shares used in basic computation12,898
 12,282
 12,774
 12,787
Stock options—
 16
 —
 14
Restricted stock units77
 —
 171
 —
Average shares used in diluted computation12,975
(3)12,298
 12,945
(3)12,801
        
Earnings/(loss) per common share:       
Basic$(3.91) $0.70
 $(1.42) $0.98
Diluted$(3.91)(3)$0.70
 $(1.42)(3)$0.97
(1)
Represents the allocation of distributed and undistributed earnings to participating securities. No allocation of undistributed earnings is made for periods in which a loss is incurred. Distributed earnings (e.g., dividends) are allocated to participating securities. Participating securities include all of the Company’s unvested restricted shares. The weighted average participating shares outstanding were 2,246,663 and 2,974,676 for the three months ended September 30, 2017 and 2016, respectively, and 2,389,755 and 2,623,095 for the nine months ended September 30, 2017 and 2016, respectively.
(2)
Net income/(loss) applicable to Piper Jaffray Companies’ common shareholders for diluted and basic EPS may differ under the two-class method as a result of adding the effect of the assumed exercise of stock options and restricted stock units to dilutive shares outstanding, which alters the ratio used to allocate earnings to Piper Jaffray Companies’ common shareholders and participating securities for purposes of calculating diluted and basic EPS.
(3)Earnings per diluted common share is calculated using the basic weighted average number of common shares outstanding for periods in which a loss is incurred. Common shares of 2,235,060 were excluded from diluted EPS at September 30, 2017, as the Company had a net loss for these periods.


The anti-dilutive effects from stock options and restricted stock unitsshares were immaterial for the ninethree months ended September 30, 2017March 31, 2024 and 2016, respectively.2023.



39
Table of ContentsNOTE 16 | NET CAPITAL REQUIREMENTS AND OTHER REGULATORY MATTERS
Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

Note 18Segment Reporting

Basis for Presentation

The Company structures its segments primarily based upon the nature of the financial products and services provided to customers and the Company’s management organization. The Company evaluates performance and allocates resources based on segment pre-tax operating income or loss and segment pre-tax operating margin. Revenues and expenses directly associated with each respective segment are included in determining their operating results. Other revenues and expenses that are not directly attributable to a particular segment are allocated based upon the Company’s allocation methodologies, including each segment’s respective net revenues, use of shared resources, headcount or other relevant measures. Segment assets are based on those directly associated with each segment, and include an allocation of certain assets based on the most relevant measures applicable, including headcount and other factors. The substantial majority of the Company's net revenues and long-lived assets are located in the U.S.

Reportable segment financial results are as follows:
 Three Months Ended Nine Months Ended
 September 30, September 30,
(Dollars in thousands)2017 2016 2017 2016
        
Capital Markets       
Investment banking       
Financing       
Equities$22,117
 $30,479
 $70,229
 $53,831
Debt21,687
 30,898
 60,066
 80,195
Advisory services146,816
 75,230
 332,205
 204,971
Total investment banking190,620
 136,607
 462,500
 338,997
        
Institutional sales and trading       
Equities18,410
 20,492
 59,085
 62,773
Fixed income20,676
 25,812
 63,137
 71,818
Total institutional sales and trading39,086
 46,304
 122,222
 134,591
        
Management and performance fees678
 1,353
 4,172
 4,112
        
Investment income/(loss)(660) 4,472
 15,155
 14,009
        
Long-term financing expenses(1,736) (2,253) (6,003) (6,838)
        
Net revenues227,988
 186,483
 598,046
 484,871
        
Operating expenses (1)196,409
 169,745
 524,702
 460,628
        
Segment pre-tax operating income$31,579
 $16,738
 $73,344
 $24,243
        
Segment pre-tax operating margin13.9 % 9.0% 12.3 % 5.0%
        
Continued on next page

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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

 Three Months Ended Nine Months Ended
 September 30, September 30,
(Dollars in thousands)2017 2016 2017 2016
        
Asset Management       
Management and performance fees       
Management fees$12,140
 $13,903
 $39,839
 $39,587
Performance fees—
 —
 —
 —
Total management and performance fees12,140
 13,903
 39,839
 39,587
        
Investment income439
 461
 956
 428
        
Net revenues12,579
 14,364
 40,795
 40,015
        
Operating expenses (1)126,394
 12,651
 153,699
 35,856
        
Segment pre-tax operating income/(loss)$(113,815) $1,713
 $(112,904) $4,159
        
Segment pre-tax operating margin(904.8)% 11.9% (276.8)% 10.4%
        
        
Total       
Net revenues$240,567
 $200,847
 $638,841
 $524,886
        
Operating expenses (1)322,803
 182,396
 678,401
 496,484
        
Pre-tax operating income/(loss)$(82,236) $18,451
 $(39,560) $28,402
        
Pre-tax operating margin(34.2)% 9.2% (6.2)% 5.4%
(1)Operating expenses include a $114.4 million goodwill impairment charge for the Asset Management segment, as well as intangible asset amortization as set forth in the table below:
 Three Months Ended Nine Months Ended
 September 30, September 30,
(Dollars in thousands)2017 2016 2017 2016
Capital Markets$2,544
 $6,623
 $7,633
 $11,239
Asset Management1,278
 1,387
 3,833
 4,161
Total intangible asset amortization$3,822
 $8,010
 $11,466
 $15,400

Reportable segment assets are as follows:
 September 30, December 31,
(Dollars in thousands)2017 2016
Capital Markets$1,627,722
 $1,934,528
Asset Management112,114
 190,975
Total assets$1,739,836
 $2,125,503




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Piper Jaffray Companies
Notes to the Consolidated Financial Statements
(Unaudited)

Note 19Net Capital Requirements and Other Regulatory Matters

Piper JaffraySandler is registered as a securities broker dealer with the SEC and is a member of various SROs and securities exchanges. The Financial Industry Regulatory Authority, Inc. ("FINRA") serves as Piper Jaffray’sSandler's primary SRO. Piper JaffraySandler is subject to the uniform net capital rule of the SEC and the net capital rule of FINRA. Piper JaffraySandler has elected to use the alternative method permitted by the SEC rule which requires that it maintain minimum net capital of $1.0 million. Advances to affiliates, repayment of subordinated debt, dividend payments and other equity withdrawals by Piper JaffraySandler are subject to certain approvals, notifications and other provisions of SEC and FINRA rules.


At September 30, 2017,March 31, 2024, net capital calculated under the SEC rule was $215.5$188.8 million, and exceeded the minimum net capital required under the SEC rule by $214.5$187.8 million.


The Company’sCompany's committed short-termline and revolving credit facility and its senior notes include covenants requiring Piper JaffraySandler to maintain a minimum regulatory net capital of $120 million. CP Notes issued under CP Series II A include a covenant that requires Piper Jaffray to maintain excess net capital of $100 million. The Company's fully disclosed clearing agreement with Pershing also includes a covenant requiring Piper JaffraySandler to maintain excess net capital of $120 million.


Piper JaffraySandler Ltd., a broker dealer subsidiary registered in the United Kingdom,U.K., is subject to the capital requirements of the Prudential Regulation Authority and the Financial Conduct Authority. As of September 30, 2017,March 31, 2024, Piper JaffraySandler Ltd. was in compliance with the capital requirements of the Prudential Regulation Authority and the Financial Conduct Authority.


Piper JaffraySandler Hong Kong Limited is licensed by the Hong Kong Securities and Futures Commission, which is subject to the liquid capital requirements of the Securities and Futures (Financial Resources) Rule promulgated under the Securities and Futures Ordinance. At September 30, 2017,March 31, 2024, Piper JaffraySandler Hong Kong Limited was in compliance with the liquid capital requirements of the Hong Kong Securities and Futures Commission.

Note 20Income Taxes

The Company recorded an income tax benefit of $31.4 million and $26.9 million for the three and nine months ended September 30, 2017, respectively, as a result of pre-tax losses related to the $114.4 million non-cash goodwill impairment charge for the asset management reporting unit, generating a $44.2 million deferred income tax asset. See Note 11 for additional information related to the goodwill impairment charge.

The tax benefit related to stock-based compensation awards vesting at values greater than the grant price was $0.3 million and $9.1 million for the three and nine months ended September 30, 2017, respectively. See Note 2 regarding the tax impact from the adoption of ASU 2016-09.

The Company's effective tax rate, excluding noncontrolling interests, for the nine months ended September 30, 2017 was 62.9 percent, compared to 36.8 percent for the nine months ended September 30, 2016. The effective tax rate was higher for the nine months ended September 30, 2017, due to the impact of the $9.1 million tax benefit related to stock-based compensation awards vesting at values greater than the grant price during a period of pre-tax losses.



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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and exhibits included elsewhere in this report.Quarterly Report on Form 10-Q. Certain statements in this reportQuarterly Report on Form 10-Q may be considered forward-looking. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These forward-looking statements include, among other things, statements other than historical information or statements of current conditionconditions and may relate to our future plans and objectives and results, and also may include our belief regarding the effect of various legal proceedings, as set forth under "Legal Proceedings" in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2016 and2023, as updated in our subsequent reports filed with the SEC.Securities and Exchange Commission ("SEC"), and under "Legal Proceedings" in Part II, Item 1 of this Quarterly Report on Form 10-Q. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including those factors discussed below under "External Factors Impacting Our Business" as well as the factors identified under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016,2023, as updated in our subsequent reports filed with the SEC, and under "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q. These reports are available at our Web site at www.piperjaffray.com and at the SEC Web site at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.


Explanation of Non-GAAP Financial Measures

EXPLANATION OF NON-GAAP FINANCIAL MEASURES
We have included financial measures that are not prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). TheseAdjustments to these non-GAAP financial measures include adjustments to exclude (1) revenuesthe exclusion of investment income and non-compensation expenses related to noncontrolling interests, (2) the exclusion of interest expense on long-term financing from net revenues, (3) the exclusion of amortization of intangible assets related to acquisitions, (3)(4) the exclusion of compensation and non-compensation expenses from acquisition-related agreements, (4) restructuring and acquisition integration coststhe exclusion of non-compensation expenses from potential regulatory settlements (see Note 11 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information) and (5) goodwill impairment charges.the income tax impact allocated to the adjustments. The adjusted weighted average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains an adjustment to include the common shares for unvested restricted stock awards with service conditions granted pursuant to all acquisitions since January 1, 2020. These adjustments affect the following financial measures: net revenues, compensation expenses, non-compensation expenses, income tax expense/(benefit), net income applicableattributable to Piper JaffraySandler Companies, earnings per diluted common share, return on average common shareholders' equity, segment net revenues, segment operatingtotal non-interest expenses, segment pre-tax operating income and segment pre-tax operating margin. Management believes that presenting these results and measures on an adjusted basis in conjunction with the corresponding U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.



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Executive Overview

EXECUTIVE OVERVIEW
Our business principally consists of providing investment banking and institutional brokerage asset management and related financial services to corporations, private equity groups, public entities, non-profit entities and institutional investors in the United StatesU.S. and Europe. We operate through twoone reportable business segments: Capital Marketssegment in order to maximize the value we provide to clients by leveraging our diversified expertise and Asset Management.broad relationships of the experienced professionals across our company. Refer to our Annual Report on Form 10-K for the year ended December 31, 20162023 for a full description of our business, including our strategic growth initiatives.business strategy.

Our Asset Management segment has experienced declining profitability in 2017 as decreases in revenues relating to higher fee product offerings have not been fully offset by new revenues on assets gained in lower fee product offerings. The shift in revenue mix is attributable to our efforts to remix our product offerings to a broader set of more scalable products and an extended cycle of investors favoring passive investment vehicles over active management. We identified goodwill impairment indicators in the third quarter of 2017 necessitating a full impairment testing of goodwill. The interim impairment testing related to our Asset Management segment goodwill resulted in a pre-tax non-cash impairment charge of $114.4 million. For more information on our goodwill impairment testing, please refer to the "Critical Accounting Policies" section.

Financial Highlights
Three Months Ended
(Amounts in thousands, except per share data)Mar. 31,Mar. 31,2024
20242023v2023
U.S. GAAP
Net revenues$343,056$297,90515.2 %
Compensation and benefits222,446199,39411.6 
Non-compensation expenses68,18872,702(6.2)
Income before income tax expense/(benefit)52,42225,809103.1 
Net income attributable to Piper Sandler Companies42,49325,63465.8 
Earnings per diluted common share$2.43$1.4963.1 
Ratios and margin
Compensation ratio64.8 %66.9 %
Non-compensation ratio19.9 %24.4 %
Pre-tax margin15.3 %8.7 %
Effective tax rate5.4 %(29.6)%
Non-GAAP(1)
Adjusted net revenues$333,905$289,22615.4 %
Adjusted compensation and benefits210,698183,14415.0 
Adjusted non-compensation expenses67,26165,3063.0 
Adjusted operating income55,94640,77637.2 
Adjusted net income attributable to Piper Sandler Companies49,98442,29618.2 
Adjusted earnings per diluted common share$2.79$2.3518.7 
Adjusted ratios and margin
Adjusted compensation ratio63.1 %63.3 %
Adjusted non-compensation ratio20.1 %22.6 %
Adjusted operating margin16.8 %14.1 %
Adjusted effective tax rate10.7 %(8.0)%
  Three Months Ended Nine Months Ended
(Amounts in thousands, except per share data) Sept. 30, Sept. 30, Percent Sept. 30, Sept. 30, Percent
 2017 2016 Inc/(Dec) 2017 2016 Inc/(Dec)
U.S. GAAP            
Net revenues $240,567
 $200,847
 19.8 % $638,841
 $524,886
 21.7%
Compensation and benefits expenses 169,469
 135,186
 25.4
 438,161
 356,770
 22.8
Non-compensation expenses 153,334
 47,210
 224.8
 240,240
 139,714
 72.0
Net income/(loss) applicable to Piper Jaffray Companies (49,713) 10,658
 N/M
 (15,865) 15,033
 N/M
Earnings/(loss) per diluted common share $(3.91) $0.70
 N/M
 $(1.42) $0.97
 N/M
             
Non-GAAP(1)
            
Adjusted net revenues $241,551
 $199,001
 21.4 % $633,961
 $518,396
 22.3%
Adjusted compensation and benefits expenses 155,160
 127,010
 22.2
 407,860
 335,226
 21.7
Adjusted non-compensation expenses 34,862
 38,632
 (9.8) 112,320
 112,220
 0.1
Adjusted net income applicable to Piper Jaffray Companies 32,521
 20,976
 55.0
 81,276
 45,523
 78.5
Adjusted earnings per diluted common share $2.13
 $1.37
 55.5
 $5.31
 $2.95
 80.0

N/M – Not meaningful


See the "Results of Operations" section for additional information.
44
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(1)Reconciliation of U.S. GAAP to adjusted non-GAAP financial information:
For the three months ended September 30, 2017

Net revenues increased 19.8 percent from the year-ago period as significantly higher advisory services revenues were partially offset by lower equity and debt financing and institutional brokerage revenues.
Compensation and benefits expenses increased 25.4 percent compared with the prior-year period due to higher revenues, as well as higher acquisition-related compensation costs.
The increase in non-compensation expenses was driven by a $114.4 million non-cash goodwill impairment charge.

For the nine months ended September 30, 2017

Net revenues increased 21.7 percent from the year-ago period. Higher advisory services and equity financing revenues were partially offset by lower debt financing and institutional brokerage revenues.
Compensation and benefits expenses increased 22.8 percent compared with the prior-year period due primarily to higher revenues.
Non-compensation expenses were up 72.0 percent compared to the year-ago period, driven by a $114.4 million goodwill impairment charge. Incremental back office conversion costs in the current period were more than offset by lower restructuring costs. In the first nine months of 2016, non-compensation expenses included $10.2 million of restructuring and integration costs primarily related to the acquisition of Simmons & Company International ("Simmons"), which we acquired on February 26, 2016.
Three Months Ended
March 31,
(Amounts in thousands, except per share data)20242023
 Net revenues:
Net revenues – U.S. GAAP basis$343,056 $297,905 
Adjustments:
Investment income related to noncontrolling interests(9,151)(10,304)
Interest expense on long-term financing— 1,625 
Adjusted net revenues$333,905 $289,226 
Compensation and benefits:
Compensation and benefits – U.S. GAAP basis$222,446 $199,394 
Adjustment:
Compensation from acquisition-related agreements(11,748)(16,250)
Adjusted compensation and benefits$210,698 $183,144 
Non-compensation expenses:
Non-compensation expenses – U.S. GAAP basis$68,188 $72,702 
Adjustments:
Non-compensation expenses related to noncontrolling interests(2,066)(2,492)
Amortization of intangible assets related to acquisitions(2,361)(4,904)
Non-compensation expenses from potential regulatory settlements3,500 — 
Adjusted non-compensation expenses$67,261 $65,306 
Income before income tax expense/(benefit):
Income before income tax expense/(benefit) – U.S. GAAP basis$52,422 $25,809 
Adjustments:
Investment income related to noncontrolling interests(9,151)(10,304)
Interest expense on long-term financing— 1,625 
Non-compensation expenses related to noncontrolling interests2,066 2,492 
Compensation from acquisition-related agreements11,748 16,250 
Amortization of intangible assets related to acquisitions2,361 4,904 
Non-compensation expenses from potential regulatory settlements(3,500)— 
Adjusted operating income$55,946 $40,776 
Interest expense on long-term financing— (1,625)
Adjusted income before adjusted income tax expense/(benefit)$55,946 $39,151 
Income tax expense/(benefit):
Income tax expense/(benefit) – U.S. GAAP basis$2,844 $(7,637)
Tax effect of adjustments:
Compensation from acquisition-related agreements2,492 3,227 
Amortization of intangible assets related to acquisitions626 1,265 
Adjusted income tax expense/(benefit)$5,962 $(3,145)
Net income attributable to Piper Sandler Companies:
Net income attributable to Piper Sandler Companies – U.S. GAAP basis$42,493 $25,634 
Adjustments:
Compensation from acquisition-related agreements9,256 13,023 
Amortization of intangible assets related to acquisitions1,735 3,639 
Non-compensation expenses from potential regulatory settlements(3,500)— 
Adjusted net income attributable to Piper Sandler Companies$49,984 $42,296 
For the nine months ended September 30, 2017, we recorded a tax benefit of $9.1 million related to restricted stock vesting at values greater than the grant price. The tax benefit increased earnings per diluted common share by $0.71 in the first nine months of 2017.
•
For the twelve months ended September 30, 2017, our rolling twelve month return on average common shareholders' equity was a negative 6.8 percent due to the non-cash goodwill impairment charge, compared with 3.6 percent for the rolling twelve months ended September 30, 2016. On an adjusted basis, we generated a rolling twelve month return on average common shareholders' equity of 13.9 percent(2) for the twelve months ended September 30, 2017, compared with 8.4 percent(2) for the rolling twelve months ended September 30, 2016.

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(1)Reconciliation of U.S. GAAP to adjusted non-GAAP financial information
Three Months Ended
March 31,
(Amounts in thousands, except per share data)20242023
Earnings per diluted common share:
 Earnings per diluted common share – U.S. GAAP basis$2.43 $1.49 
Adjustment for inclusion of unvested acquisition-related stock(0.07)(0.11)
$2.36 $1.38 
Adjustments:
Compensation from acquisition-related agreements0.53 0.76 
Amortization of intangible assets related to acquisitions0.10 0.21 
Non-compensation expenses from potential regulatory settlements(0.20)— 
Adjusted earnings per diluted common share$2.79 $2.35 
Weighted average diluted common shares outstanding:
Weighted average diluted common shares outstanding – U.S. GAAP basis17,504 17,182 
Adjustment:
Unvested acquisition-related restricted stock with service conditions419 816 
Adjusted weighted average diluted common shares outstanding17,923 17,998 
 Three Months Ended Nine Months Ended
 September 30, September 30,
(Amounts in thousands, except per share data)2017 2016 2017 2016
 Net revenues:       
Net revenues – U.S. GAAP basis$240,567
 $200,847
 $638,841
 $524,886
Adjustments:       
Revenue related to noncontrolling interests984
 (1,846) (4,880) (6,490)
Adjusted net revenues$241,551
 $199,001
 $633,961
 $518,396
        
Compensation and benefits:       
Compensation and benefits – U.S. GAAP basis$169,469
 $135,186
 $438,161
 $356,770
Adjustments:       
Compensation from acquisition-related agreements(14,309) (8,176) (30,301) (21,544)
Adjusted compensation and benefits$155,160
 $127,010
 $407,860
 $335,226
        
Non-compensation expenses:       
Non-compensation expenses – U.S. GAAP basis$153,334
 $47,210
 $240,240
 $139,714
Adjustments:       
Non-compensation expenses related to noncontrolling interests(116) (568) (1,663) (1,888)
Restructuring and integration costs—
 —
 —
 (10,206)
Goodwill impairment(114,363) —
 (114,363) —
Amortization of intangible assets related to acquisitions(3,822) (8,010) (11,466) (15,400)
Non-compensation expenses from acquisition-related agreements(171) —
 (428) —
Adjusted non-compensation expenses$34,862
 $38,632
 $112,320
 $112,220
        
Net income/(loss) applicable to Piper Jaffray Companies:       
Net income/(loss) applicable to Piper Jaffray Companies – U.S. GAAP basis$(49,713) $10,658
 $(15,865) $15,033
 Adjustments:       
Compensation from acquisition-related agreements9,444
 5,424
 19,498
 14,067
Restructuring and integration costs—
 —
 —
 7,014
Goodwill impairment70,219
 —
 70,219
 —
Amortization of intangible assets related to acquisitions2,347
 4,894
 7,042
 9,409
Non-compensation expenses from acquisition-related agreements

224
 —
 382
 —
Adjusted net income applicable to Piper Jaffray Companies$32,521
 $20,976
 $81,276
 $45,523
        
Earnings/(loss) per diluted common share:       
 Earnings/(loss) per diluted common share – U.S. GAAP basis$(3.91) $0.70
 $(1.42) $0.97
Adjustment for loss allocated to participating shares (3)0.64
 —
 0.39
 —
 (3.27) 0.70
 (1.03) 0.97
 Adjustments:       
Compensation from acquisition-related agreements0.62
 0.36
 1.27
 0.91
Restructuring and integration costs—
 —
 —
 0.45
Goodwill impairment4.61
 —
 4.58
 —
Amortization of intangible assets related to acquisitions0.15
 0.32
 0.46
 0.61
Non-compensation expenses from acquisition-related agreements

0.02
 —
 0.03
 —
 Adjusted earnings per diluted common share$2.13
 $1.37
 $5.31
 $2.95
(2)Adjusted return on average common shareholders' equity, a non-GAAP financial measure, is computed by dividing adjusted net income applicable to Piper Jaffray Companies for the last 12 months by average monthly common shareholders' equity. For a detailed explanation of the components of adjusted net income, see "Reconciliation of U.S. GAAP to adjusted non-GAAP financial information" in footnote (1).
(3)Piper Jaffray Companies calculates earnings per common share using the two-class method, which requires the allocation of consolidated adjusted net income between common shareholders and participating security holders, which in the case of Piper Jaffray Companies, represents unvested stock with dividend rights. No allocation of undistributed earnings is made for periods in which a loss is incurred.


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External Factors Impacting Our Business

Performance in the financial services industry in which we operate is highly correlated to the overall strength of economicmacroeconomic conditions, and financial market activity.activity and the effect of geopolitical events. Overall market conditions are a product of many factors, which are beyond our control, often unpredictable and at times inherently volatile. These factors may affect the financial decisions made by investors, including their level of participation in the financial markets. In turn, these decisions may affect our business results. With respect to financial market activity, our profitability is sensitive to a variety of factors, including the demand for investment banking services as reflected by the number and size of advisory transactions, equity and debt corporate financings, and merger and acquisition transactions,municipal financings; the relative level of volatility of the equity and fixed income markets,markets; changes in interest rates and credit spreads (especially rapid and extreme changes),; overall market liquidity,liquidity; the level and shape of various yield curves,curves; the volume and value of trading in securities,securities; and overall equity valuations, and the demand for active asset management services.valuations.


Factors that differentiate our business within the financial services industry also may affect our financial results. For example, our capital markets business focuses on specific industry sectors while serving principally a middle-market clientele. If the business environment for our focus sectors is impacted adversely, our business and results of operations could reflect these impacts. In addition, our business, with its specific areas of focus and investment, may not track overall market trends. Given the variability of the capital markets and securities businesses, our earnings may fluctuate significantly from period to period, and results for any individual period should not be considered indicative of future results.


Proposed Tax Reform Legislation
Piper Sandler Companies | 36


On November 2, 2017, the Committee on Ways and Means
Table of the U.S. House of Representatives introduced the "Tax Cuts and Jobs Act," a bill which could have significant impacts to the federal tax code. Key provisions, as currently proposed, include a corporate rate reduction from 35 percent to 20 percent effective in 2018. A corporate rate reduction would result in a one-time non-cash write-off of an estimated $50 to $55 million of our deferred tax assets based on the lower proposed rate. In addition, certain corporate tax deductions may be repealed or amended. For example, corporate tax deductions for certain public company executive compensation in excess of $1 million will no longer be allowed. The proposed legislation may impact our employee compensation arrangements and certain sectors of our businesses, such as our public finance operations. With regard to our public finance operations, the repeal of advance refunding bonds and certain private activity bond issuances may be impacted by this proposed legislation. We will continue to monitor and evaluate the impact of this proposed legislation on our businesses.Contents

Outlook for the remainderRemainder of 2017

2024
We would expectbelieve U.S. monetary policy will remain a factor impacting the U.S. economy to continue to grow at a slow and steady pace forfinancial markets throughout the remainder of 2017. Administrative and legislative policies, including increased fiscal spending, deregulation and tax reform, may provide catalysts to accelerate economic growth. However, uncertainty over the details of these policies, their timing, the probability of implementation and their transition, as well as political or economic instability internationally, may inject periods of heightened volatility into the U.S. equity and debt markets. Through the first nine months of 2017, the2024. The U.S. Federal Reserve continued to hold its short-term benchmark interest rate steady in the first quarter of 2024. Inflation moderated during the quarter, albeit at a slower pace resulting in uncertainty in the direction of interest rates. The economy continues to be strained from elevated prices for goods and services, labor shortages and tightened lending standards. Geopolitical concerns, including the conflicts in the Middle East and Eastern Europe, could negatively impact financial market activity. Additionally, the 2024 U.S. presidential election may influence the volatility or direction of the markets in the second half of the year based on investors' assessment of the outcome and the overall political outlook in the U.S.

Our advisory services results continue to benefit from our sector and product diversification along with our focus on advising on larger transactions to generate a higher average fee. The outlook for mergers and acquisitions ("M&A") activity has improved as CEO confidence strengthens. We expect our second quarter advisory services revenues to be consistent with the first quarter of 2024 before improving in the second half of the year.

Equity financing activity improved considerably during the first quarter of 2024 to more normalized levels driven by a more accommodative backdrop and increased short-termdemand from companies needing to raise capital in order to execute on their strategic plans. The sub-$5 billion equity fee pool increased meaningfully during the quarter and included an outsized contribution from the healthcare sector. If this level of market activity is sustained, we expect client participation will broaden across sectors.

The equity markets experienced muted volatility during the quarter as markets ground higher with indexes hitting new highs. Our client research votes continue to increase, which we believe will drive further market share gains over time. We expect near-term results to be relatively consistent with the first quarter of 2024 and anticipate increased volumes and activity in the second half of the year.

Our client activity within fixed income services is slowly improving, but remains fairly muted as market participants wait for more certainty on interest rates.

Overall market conditions continue to be challenging for our municipal financing business. While interest rates two times ontrended higher during the expectationquarter, the market softened for higher yielding specialty municipal debt offerings. Credit spreads have tightened due to increased investor demand resulting in higher municipal negotiated issuance activity among our specialty sector clients. We believe a period of stronger economic growth. However, long-termsustained municipal fund inflows and lower interest rates have not moved in step with increases in short-term interest rates resulting in a flattening of the yield curve. We anticipate that the U.S. Federal Reserve will attemptare needed for middle-market issuance volume to pursue a gradual and steady path to rate normalization, absent significant shifts in tax and monetary policy. Resistance in long-term interest rates to these policies, however, could produce an extended period of a flat yield curve, which could adversely impact our fixed income sales and trading business. In addition, exogenous conditions may trigger episodes of volatility with respect to interest rates. A rising or volatile interest rate environment could manifest itself in changes to the yield curve or relative spreads which may have a mixed impact on certain of our businesses.increase.

We expect conditions in the equity markets to remain conducive to our equity capital raising and advisory activities for the remainder of 2017. While lower volatility benefits our capital raising business, it has the inverse effect on our equity sales and trading business. If we experience sustained bouts of higher volatility or a material market correction, however, our equity brokerage business may benefit while our equity capital raising and advisory businesses may suffer. We believe our advisory services business will continue to perform well for the remainder of 2017 on the strength of our market position, recent investments, diversity in our practice, readily available capital and a combination of high CEO and small business confidence levels. Advisory services revenues for any given quarter are impacted by the timing and size of the deals closing, which can result in fluctuations in revenues period over period.

While higher interest rates across the yield curve would be favorable to our fixed income institutional brokerage business, the move to higher rates could adversely impact our public finance business in the short-term as the level of refunding activity eases


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RESULTS OF OPERATIONS
while greater economic growth has not yet spurred a ramp in new money issuance volumes. Although the outlook is constructive, we believe that municipal debt underwriting activity for the remainder of 2017 will remain at lower levels compared to the record market issuance volumes in 2016. Our geographic range, product capabilities, and industry expertise should serve to mitigate over time the impact of less favorable market conditions on the performance of our public finance business.

As economic growth continues, we would expect rising market valuations, which have a positive impact on our asset management business. However, this impact may be eroded by the shift to passive investment strategies as extremely low volatility in a market with slow but steady growth generally favors lower-cost passive investment vehicles. We would expect that active asset managers, ourselves included, will remain under pressure to create alpha for their clients and to maintain or grow AUM.



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Results of Operations

Financial Summary for the three months ended September 30, 2017March 31, 2024 and September 30, 2016

March 31, 2023
The following table provides a summary of the results of our operations on a U.S. GAAP basis and the results of our operations as a percentage of net revenues for the periods indicated.indicated:
      As a Percentage of
      Net Revenues for the
Three Months Ended Three Months Ended
September 30, September 30,
    2017    
(Dollars in thousands)2017 2016 v2016 2017 2016
Revenues:         
As a Percentage ofAs a Percentage of
Net Revenues for theNet Revenues for the
Three Months EndedThree Months EndedThree Months Ended
March 31,March 31,March 31,
2024
(Amounts in thousands)
(Amounts in thousands)
(Amounts in thousands)20242023v202320242023
Revenues
Investment banking
Investment banking
Investment banking$190,482
 $136,682
 39.4 % 79.2 % 68.1%$230,523 $$184,404 25.0 25.0 %67.2 %61.9 %
Institutional brokerage34,873
 42,189
 (17.3) 14.5
 21.0
Asset management12,818
 15,256
 (16.0) 5.3
 7.6
Interest7,164
 7,343
 (2.4) 3.0
 3.7
Investment income/(loss)(422) 4,806
 N/M
 (0.2) 2.4
Interest income
Investment income
Total revenues244,915
 206,276
 18.7
 101.8
 102.7
         
Interest expense4,348
 5,429
 (19.9) 1.8
 2.7
         
Net revenues240,567
 200,847
 19.8
 100.0
 100.0
         
Non-interest expenses:         
Non-interest expenses
Non-interest expenses
Non-interest expenses
Compensation and benefits
Compensation and benefits
Compensation and benefits169,469
 135,186
 25.4
 70.4
 67.3
Outside services7,495
 10,288
 (27.1) 3.1
 5.1
Occupancy and equipment8,127
 8,743
 (7.0) 3.4
 4.4
Communications7,136
 7,845
 (9.0) 3.0
 3.9
Marketing and business development6,683
 7,629
 (12.4) 2.8
 3.8
Deal-related expenses
Trade execution and clearance2,125
 2,008
 5.8
 0.9
 1.0
Goodwill impairment114,363
 —
 N/M
 47.5
 —
Intangible asset amortization3,822
 8,010
 (52.3) 1.6
 4.0
Back office conversion costs1,293
 —
 N/M
 0.5
 —
Intangible asset amortization
Intangible asset amortization
Other operating expenses2,290
 2,687
 (14.8) 1.0
 1.3
Total non-interest expenses322,803
 182,396
 77.0
 134.2
 90.8
         
Income/(loss) before income tax expense/(benefit)(82,236) 18,451
 N/M
 (34.2) 9.2
         
Income before income tax expense/(benefit)
Income before income tax expense/(benefit)
Income before income tax expense/(benefit)
Income tax expense/(benefit)(31,423) 6,515
 N/M
 (13.1) 3.2
         
Net income/(loss)(50,813) 11,936
 N/M
 (21.1) 5.9
         
Net income/(loss) applicable to noncontrolling interests(1,100) 1,278
 N/M
 (0.5) 0.6
         
Net income/(loss) applicable to Piper Jaffray Companies$(49,713) $10,658
 N/M
 (20.7)% 5.3%
Net income
Net income attributable to noncontrolling interests
Net income attributable to Piper Sandler Companies
N/M – Not meaningful

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For the three months ended September 30, 2017,March 31, 2024, we recorded a net loss applicableincome attributable to Piper JaffraySandler Companies of $49.7 million, driven by a $70.2 million, net of tax, goodwill impairment charge.$42.5 million. Net revenues for the three months ended September 30, 2017March 31, 2024 were $240.6$343.1 million, a 19.815.2 percent increase compared to $200.8with $297.9 million in the year-ago period. In the thirdfirst quarter of2017, 2024, investment banking revenues were $190.5$230.5 million, up 39.425.0 percent compared with $136.7to $184.4 million in the prior-year period, as higherresulting from increases in corporate financing and advisory services revenues, were partially offset by lower equity and debtas well as higher municipal financing revenues. For the three months ended

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September 30, 2017, March 31, 2024, institutional brokerage revenues decreased 17.3were $91.4 million, a 5.1 percent to $34.9 million,decrease compared with $42.2$96.3 million in the thirdfirst quarter of 2016,2023, primarily due to lower fixed income and equity institutional brokerage revenues. In the third quarter of 2017, asset management fees of $12.8 million were down 16.0 percent compared with $15.3 million in the third quarter of 2016 due primarily to lower management fees from our equity product offerings. For the three months ended September 30, 2017,March 31, 2024, net interest income was $2.8$6.9 million, up from $1.9compared to $6.1 million in the prior-year period. In the thirdfirst quarter of 2017,2024, we recorded an investment lossincome of $0.4$14.2 million, compared with income of $4.8to $11.1 million in the prior-year period.first quarter of 2023. In the thirdcurrent quarter, of 2016, we recorded higher unrealized gains on our investmentinvestments and the noncontrolling interests in the merchant banking fundalternative asset management funds that we manage compared with losses in the current period.manage. Non-interest expenses were $322.8$290.6 million for the three months ended September 30, 2017,March 31, 2024, up 77.06.8 percent compared to $182.4with $272.1 million in the prior-year period. The increase wasperiod, primarily due to the $114.4 million goodwill impairment charge, as well as higherincreased compensation expenses resulting from increased revenues.higher revenues and profitability.


Consolidated Non-Interest Expenses

Compensation and Benefits –
Compensation and benefits expenses, which are the largest component of our expenses, include salaries, incentive compensation, benefits, stock-based compensation, employment taxes, incomethe reversal of expenses associated with the forfeiture of stock-based compensation, and other employee-related costs. A significant portion of compensation expense is comprised of variable incentive arrangements, including discretionary incentive compensation, the amount of which fluctuates in proportion to the level of business activity, increasing with higher revenues and operating profits and decreasing with lower revenues and operating profits. Other compensation costs, primarily base salaries and benefits, are more fixed in nature. The timing of incentive compensation payments, which is generally occur in February, has a greater impact on our cash position and liquidity than is reflected on our consolidated statements of operations. WeIn conjunction with our acquisitions, we have granted restricted stock and restricted cash with service conditions, as a component of our acquisition deal consideration, which isare amortized to compensation expense over the service period. We have also entered into forgivable loans with service conditions, which are amortized to compensation expense over the loan term. Additionally, expense estimates related to revenue-based earnout arrangements with service conditions entered into as part of our acquisitions are amortized to compensation expense over the service period.


The following table summarizes our future acquisition-related compensation expense for restricted stock and forgivable loans with service conditions, as well as expense estimates related to revenue-based earnout arrangements:
(Amounts in thousands)
Remainder of 2024$29,905 
202522,132 
202614,764 
20279,366 
Total$76,167 

For the three months ended September 30, 2017,March 31, 2024, compensation and benefits expenses increased 11.6 percent to $169.5$222.4 million, compared with $135.2$199.4 million in the corresponding period of 2016,2023, due to higher revenues as well as higher acquisition-related compensation costs primarily resulting from the Simmons acquisition.and profitability. Compensation and benefits expenses as a percentage of net revenues was 70.464.8 percent in the thirdfirst quarter of 2017,2024, compared with 67.3to 66.9 percent in the thirdfirst quarter of 2016. The increased2023. Excluding the impact of noncontrolling interests, our compensation ratio wasdecreased to 66.6 percent in the first quarter of 2024, compared with 69.3 percent in the first quarter of 2023, primarily attributabledue to higher revenues and a decrease in acquisition-related compensation costs.expenses.


Outside Services –
Outside services expenses include securities processing expenses, outsourced technology functions, outside legal fees, fund expenses associated with our consolidated alternative asset management funds and other professional fees. Outside services expenses decreased 27.1 percentincreased slightly to $7.5$12.4 million in the thirdfirst quarter of 2017,2024, compared with $10.3$12.1 million in the corresponding period of 2016. Excluding the portion2023.

Piper Sandler Companies | 39

Table of expenses from non-controlled equity interests in our consolidated alternative asset management funds, outside services expenses decreased 21.4 percent due primarily to lower professional and legal fees during the current period resulting from strong market conditions which enabled us to complete a high percentage of investment banking transactions whereby we can recover expenses. The year-ago period included incremental expenses related to our acquisition of Simmons.Contents

Occupancy and Equipment –
For the three months ended September 30, 2017,March 31, 2024, occupancy and equipment expenses decreased 7.0 percentincreased slightly to $8.1$16.0 million, compared with $8.7$15.7 million forin the three months ended September 30, 2016.corresponding period of 2023.


Communications –
Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third partythird-party market data information. For the three months ended September 30, 2017,March 31, 2024, communication expenses decreased 9.07.6 percent to $7.1$13.2 million, compared with $7.8$14.3 million forin the three months ended September 30, 2016. The decrease wascorresponding period of 2023, primarily due to lower market data services.services expenses.


Marketing and Business Development –
Marketing and business development expenses include travel and entertainment costs, advertising and third partythird-party marketing fees. For the three months ended September 30, 2017,March 31, 2024, marketing and business development expenses decreased 12.4increased 7.1 percent to $6.7$10.8 million, compared with $7.6$10.1 million in the corresponding period of 2016.2023. The declineincrease was attributableprimarily due to lowerhigher travel expenses.

Deal-Related Expenses
Deal-related expenses driven by strong market conditions which enabled us to completeinclude costs we incurred over the course of a high percentage ofcompleted investment banking transactions whereby we can recover expenses.
Trade Executiondeal, which primarily consist of legal fees, offering expenses, and Clearance –travel costs. For the three months ended September 30, 2017,March 31, 2024, deal-related expenses were $6.4 million, compared with $6.0 million for the three months ended March 31, 2023. The amount of deal-related expenses is principally dependent on the level and mix of deal activity and may vary from period to period as the recognition of deal-related costs typically coincides with the closing of a transaction.

Trade Execution and Clearance
For the three months ended March 31, 2024, trade execution and clearance expenses increased slightlywere $4.9 million, essentially flat compared to $2.1 million, compared with $2.0 million in the corresponding period of 2016.2023.



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Goodwill Impairment – During the third quarter of 2017, we performed an interim goodwill impairment test, which resulted in a non-cash goodwill impairment charge of $114.4 million related to the asset management reporting unit.

Intangible Asset Amortization –
Intangible asset amortization includes the amortization of definite-lived intangible assets consisting of customer relationships and the Simmons trade name.assets. For the three months ended September 30, 2017,March 31, 2024, intangible asset amortization was $3.8$2.4 million, compared with $8.0to $4.9 million in the corresponding period of 2016. In the third quarter of 2016, we recorded a measurement period adjustment to reflect the final fair value of Simmons intangible assets. Based on this final fair value, we recorded additional amortization of $2.3 million in the third quarter of 2016.

Back Office Conversion Costs – In the third quarter of 2017, we migrated to a fully disclosed clearing model and are no longer self clearing. Back office conversion costs include costs incurred to transition to a fully disclosed clearing model, such as contract termination fees, vendor migration fees, professional fees, and severance benefits for impacted personnel. For the three months ended September 30, 2017, we incurred back office conversion costsMarch 31, 2023. The decrease was primarily due to lower intangible asset amortization expense associated with our 2022 acquisition of $1.3 million. We expect to incur additional back office conversion costs inDBO Partners Holding LLC, including its subsidiary, DBO Partners LLC.

The following table summarizes the fourth quarterfuture aggregate amortization expense of 2017.our intangible assets with determinable lives:

(Amounts in thousands)
Remainder of 2024$7,084 
20257,887 
20267,253 
20273,480 
20282,191 
Thereafter541 
Total$28,436 

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Other Operating Expenses –
Other operating expenses primarily include insurance costs, license and registration fees, expenses related to our charitable giving program and litigation-related expenses, which consist of the amounts we reserveaccrue for and/or pay out related to legal and regulatory matters. Other operating expenses were $2.3$2.1 million in the thirdfirst quarter of 2017,2024, compared with $2.7$4.7 million in the third quarter of 2016.corresponding period in 2023. The decrease was primarily due to a $3.5 million reduction in the accrual for estimated civil penalties related to our potential regulatory settlements regarding recordkeeping requirements for business-related communications.


Income Taxes–
For the three months ended September 30, 2017, our benefit from income taxes was $31.4 million as a result of pre-tax losses related to the $114.4 million non-cash goodwill impairment charge. Our effective tax rate, excluding noncontrolling interests, was 38.7 percent for the third quarter of 2017. For the three months ended September 30, 2016,March 31, 2024, our provision for income taxes was $6.5$2.8 million, equatingwhich included $10.6 million of tax benefits related to anstock-based compensation awards vesting at values greater than the grant price and accrued forfeitable dividends paid on vested restricted stock related to acquisitions. Excluding the impact of these benefits and noncontrolling interests, our effective tax rate excludingwas 29.7 percent.

For the three months ended March 31, 2023, our provision for income taxes was a benefit of $7.6 million, which included $14.1 million of tax benefits related to stock-based compensation awards vesting at values greater than the grant price and accrued forfeitable dividends paid on vested restricted stock related to acquisitions. Excluding the impact of these benefits and noncontrolling interests, of 37.9our effective tax rate was 35.9 percent.


SegmentFinancial Performance

We measure financial performance byOur activities as an investment bank and institutional securities firm constitute a single business segment. Our two reportable segments are Capital Markets and Asset Management. We determined these segments based upon the nature of the financial products and services provided to customers and our management organization. Segment pre-tax operating income and segment pre-tax operating margin are used to evaluate and measure segment performance by our chief operating decision maker in deciding how to allocate resources and in assessing performance in relation to our competitors. Revenues and expenses directly associated with each respective segment are included in determining segment operating results. Revenues and expenses that are not directly attributable to a particular segment are allocated based upon our allocation methodologies, generally based on each segment’s respective net revenues, use of shared resources, headcount or other relevant measures.


Throughout this section, we have presented segment results on both a U.S. GAAP and non-GAAP basis. Management believes that presenting results and measures on an adjusted, segment pre-tax operating income and adjusted segment pre-tax operating marginnon-GAAP basis in conjunction with the corresponding U.S. GAAP measures provides a more meaningful basis for comparison of its operating results and underlying trends between periods, and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP segment results should be considered in addition to, not as a substitute for, the segment results prepared in accordance with U.S. GAAP.


Adjusted segment pre-tax operatingThe adjusted financial results exclude (1) investment income and adjusted segment pre-tax operating margin exclude (1) revenues andnon-compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from net revenues, (3) amortization of intangible assets related to acquisitions, (3)(4) compensation and non-compensation expenses from acquisition-related agreements (4) restructuring and acquisition integration costs and (5) goodwill impairment charges.non-compensation expenses from potential regulatory settlements. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.



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Capital Markets

The following table sets forth the Capital Markets adjusted, segmentnon-GAAP financial results and adjustments necessary to reconcile to our consolidated U.S. GAAP pre-tax operating income and pre-tax operating marginfinancial results for the periods presented:
Three Months Ended March 31,
20242023
Adjustments (1)Adjustments (1)
TotalNoncontrollingOtherU.S.TotalNoncontrollingOtherU.S.
(Amounts in thousands)AdjustedInterestsAdjustmentsGAAPAdjustedInterestsAdjustmentsGAAP
Revenues
Investment banking:
Advisory services$157,189 $— $— $157,189 $140,664 $— $— $140,664 
Corporate financing52,581 — — 52,581 26,805 — — 26,805 
Municipal financing20,753 — — 20,753 16,935 — — 16,935 
Total investment banking230,523 — — 230,523 184,404 — — 184,404 
Institutional brokerage:
Equity brokerage49,488 — — 49,488 53,831 — — 53,831 
Fixed income services41,954 — — 41,954 42,482 — — 42,482 
Total institutional brokerage91,442 — — 91,442 96,313 — — 96,313 
Interest income8,306 — — 8,306 8,712 — — 8,712 
Investment income5,017 9,151 — 14,168 811 10,304 — 11,115 
Total revenues335,288 9,151 — 344,439 290,240 10,304 — 300,544 
Interest expense1,383 — — 1,383 1,014 — 1,625 2,639 
Net revenues333,905 9,151 — 343,056 289,226 10,304 (1,625)297,905 
Total non-interest expenses277,959 2,066 10,609 290,634 248,450 2,492 21,154 272,096 
Pre-tax income$55,946 $7,085 $(10,609)$52,422 $40,776 $7,812 $(22,779)$25,809 
 Three Months Ended September 30,
 2017 2016
   Adjustments (1)     Adjustments (1)  
 Total Noncontrolling Other U.S. Total Noncontrolling Other U.S.
(Dollars in thousands)Adjusted Interests Adjustments GAAP Adjusted Interests Adjustments GAAP
Investment banking               
Financing               
Equities$22,117
 $—
 $—
 $22,117
 $30,479
 $—
 $—
 $30,479
Debt21,687
 —
 —
 21,687
 30,898
 —
 —
 30,898
Advisory services146,816
 —
 —
 146,816
 75,230
 —
 —
 75,230
Total investment banking190,620
 —
 —
 190,620
 136,607
 —
 —
 136,607
                
Institutional sales and trading               
Equities18,410
 —
 —
 18,410
 20,492
 —
 —
 20,492
Fixed income20,676
 —
 —
 20,676
 25,399
 413
 —
 25,812
Total institutional sales and trading39,086
 —
 —
 39,086
 45,891
 413
 —
 46,304
                
Management and performance fees678
 —
 —
 678
 1,353
 —
 —
 1,353
                
Investment income/(loss)324
 (984) —
 (660) 3,039
 1,433
 —
 4,472
                
Long-term financing expenses(1,736) —
 —
 (1,736) (2,253) —
 —
 (2,253)
                
Net revenues228,972
 (984) —
 227,988
 184,637
 1,846
 —
 186,483
                
Operating expenses179,269
 116
 17,024
 196,409
 154,378
 568
 14,799
 169,745
                
Segment pre-tax operating income$49,703
 $(1,100) $(17,024) $31,579
 $30,259
 $1,278
 $(14,799) $16,738
                
Segment pre-tax operating margin21.7%     13.9% 16.4%     9.0%
Pre-tax margin16.8 %15.3 %14.1 %8.7 %
(1)The following is a summary of the adjustments needed to reconcile our consolidated U.S. GAAP segment pre-tax operating income and segment pre-tax operating margin to the adjusted segment pre-tax operating income and adjusted segment pre-tax operating margin:
(1)The following is a summary of the adjustments needed to reconcile our consolidated U.S. GAAP financial results to the adjusted, non-GAAP financial results:
Noncontrolling interests – The impacts of consolidating noncontrolling interests in our alternative asset management funds are not included in our adjusted segment pre-tax operating income and adjusted segment pre-tax operating margin.financial results.
Other adjustments – The following table sets forth the items are not included in our adjusted segment pre-tax operating income and adjusted segment pre-tax operating margin for the periods presented:financial results:
Three Months Ended March 31,
(Amounts in thousands)20242023
Other adjustments
Interest expense on long-term financing$— $1,625 
Other adjustments to total non-interest expenses:
Compensation from acquisition-related agreements11,748 16,250 
Amortization of intangible assets related to acquisitions2,361 4,904 
Non-compensation expenses from potential regulatory settlements(3,500)— 
Total other adjustments to total non-interest expenses10,609 21,154 
Total other adjustments$10,609 $22,779 
 Three Months Ended September 30,
(Dollars in thousands)2017 2016
Compensation from acquisition-related agreements$14,309
 $8,176
Amortization of intangible assets related to acquisitions2,544
 6,623
Non-compensation expenses from acquisition-related agreements171
 —
 $17,024
 $14,799


Capital Markets netNet revenues on a U.S. GAAP basis were $228.0$343.1 million for the three months ended September 30, 2017,March 31, 2024, compared with $186.5$297.9 million in the prior-year period. For the three months ended September 30, 2017,March 31, 2024, adjusted net revenues were $229.0$333.9 million, compared with $184.6$289.2 million in the thirdfirst quarter of 2016.2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis.basis unless stated otherwise.



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The following table provides supplemental business information:
Three Months Ended
March 31,
20242023
Advisory services
Completed M&A and restructuring transactions48 55 
Completed capital advisory transactions9 14 
Total completed advisory transactions57 69 
Corporate financings
Total equity transactions priced25 19 
Book run equity transactions priced20 14 
Total debt and preferred transactions priced10 4 
Book run debt and preferred transactions priced6 2 
Advisory services and corporate financing
Number of managing directors171 171 
Municipal negotiated issues
Aggregate par value of issues priced (in billions)$4.0 $2.8 
Total issues priced86 81 
Equity brokerage
Number of shares traded (in billions)2.6 2.8 

Investment banking revenues comprise all of the revenues generated through equity and debt financing and advisory services activities, which include mergersM&A, equity and acquisitions, equitydebt private placements, debt and restructuring advisory, and municipal financial advisory transactions. To assess the profitability of investmentCollectively, debt advisory transactions and equity and debt private placements are referred to as capital advisory transactions. Investment banking we aggregate investment banking fees with the net interest income or expense associated with these activities.revenues also include equity and debt corporate financing activities and municipal financings.


In the thirdfirst quarter of 2017,2024, investment banking revenues increased 39.525.0 percent to $190.6$230.5 million, compared with $136.6$184.4 million in the corresponding period of the prior year.prior-year period. For the three months ended September 30, 2017,March 31, 2024, advisory services revenues were $146.8$157.2 million, up 95.211.7 percent compared to $75.2$140.7 million in the thirdfirst quarter of 2016. The2023, driven by a higher average fee, which more than offset the decline in completed transactions. During the first quarter of 2024, our activity was broad based across sectors, led by our energy & power group with solid contributions from the financial services, consumer and healthcare sectors. In addition, both our restructuring and debt advisory product teams registered strong results reflect the continuation of our strong performance over the past three quarters elevated by several large fees. We completed 43 transactions with an aggregate enterprise value of $11.3 billion in the third quarter of 2017, compared with 46 transactions with an aggregate enterprise value of $5.8 billion in the third quarter of 2016.quarter. For the three months ended September 30, 2017, equityMarch 31, 2024, corporate financing revenues were $22.1$52.6 million, down 27.4up 96.2 percent compared with $30.5$26.8 million for the three months ended March 31, 2023, due to both a higher average fee and more completed corporate financings. Equity financing activity improved significantly during the quarter driven by a more accommodative backdrop and increased demand from companies needing to raise capital, particularly biopharma companies. Activity for us during the first quarter of 2024 was principally in a strongthe healthcare sector, and we served as book runner on 19 of the 20 completed healthcare equity deals. In the prior-year period, due to fewer completed transactions, whichthe overall market activity for equity capital raising was partially offset by higher revenue per transaction. During the third quarter of 2017, we completed 16 equity financings, raising $1.9 billion for our clients, compared with 25 equity financings, raising $4.9 billion for our clients in the comparable year-ago period. Debtbelow historic levels. Municipal financing revenues for the three months ended September 30, 2017March 31, 2024 were $21.7$20.8 million, down 29.8up 22.5 percent compared with $30.9to $16.9 million in a strong year-ago period. The decrease was due to a decline in municipal market issuance volumes,the prior-year period as we executed more specialty sector financings driven by lower levels of refunding activity. During the third quarter of 2017, we completed 139 negotiated municipal issues with a total par value of $3.4 billion, compared with 184 negotiated municipal issues with a total par value of $4.3 billion during the prior-year period.increased investor demand.


Institutional sales and tradingbrokerage revenues comprise all of the revenues generated through trading activities, which principally consist of facilitating customer trades, executing competitive municipal underwritingsas well as fees received for our research services and our strategic trading activities in municipal bonds, mortgage-backed securities and U.S. government agency securities. To assess the profitability of institutional brokerage activities, we aggregate institutional brokerage revenues with the net interest income or expense associated with financing, economically hedging and holding long or short inventory positions.corporate access offerings. Our results may vary from quarter to quarter as a result of changes in trading margins, trading gains and losses, net interest spreads, trading volumes and the timing of transactions based on market opportunities.fees received for research services.


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For the three months ended September 30, 2017,March 31, 2024, institutional brokerage revenues were $39.1$91.4 million, a decrease of 15.6down 5.1 percent compared with $46.3$96.3 million in the prior-year period, due to lower equity and fixed income institutional brokerage revenues.period. Equity institutional brokerage revenues were $18.4$49.5 million in the thirdfirst quarter of 2017,2024, down 10.28.1 percent compared with $20.5$53.8 million in the corresponding period of 2016. Historically low2023, due to lower volatility resulted in lower trading volumes in the third quarter of 2017.and volumes. For the three months ended September 30, 2017,March 31, 2024, fixed income institutional brokerageservices revenues were $20.7$42.0 million, down 19.9 percentessentially flat compared with $25.8to $42.5 million in the prior-year period. A decline in customer flow activityperiod as interest rate uncertainty continues to mute client activity.

Interest income represents amounts earned from holding long inventory positions and fewer trading opportunities due to the lack of volatility reduced our revenues.

Management and performance fees include the fees generated from our merchant banking, energy and senior living funds with outside investors.cash balances. For the three months ended September 30, 2017, management and performance fees were $0.7March 31, 2024, interest income decreased slightly to $8.3 million, compared with $1.4$8.7 million infor the prior-year period.three months ended March 31, 2023.


Investment income/(loss)income includes realized and unrealized gains and losses on investments, including amounts attributable to noncontrolling interests, in our merchant banking, energyalternative asset management funds, as well as management and senior living funds, and other firm investments.performance fees generated from those funds. For the three months ended September 30, 2017,March 31, 2024, we recorded investment loss was $0.7income of $14.2 million, compared with investment income of $4.5$11.1 million in the corresponding period of 2016.2023. In the thirdfirst quarter of 2016,2024, we recorded higher unrealized gains on our investments and the merchant banking fundnoncontrolling interests in the alternative asset management funds that we manage compared with losses in the current period.manage. Excluding the impact of noncontrolling interests, adjusted investment income was $0.3$5.0 million for the three months ended September 30, 2017.March 31, 2024, compared with $0.8 million for the three months ended March 31, 2023.


Long-termInterest expense represents amounts associated with financing, expenses primarily representeconomically hedging and holding short inventory positions, including interest paid on our senior notes.short- and long-term financing arrangements, as well as commitment fees on our committed line and revolving credit facility. For the three months ended September 30, 2017, long-term financing expensesMarch 31, 2024, interest expense decreased to $1.7$1.4 million, from $2.3compared with $2.6 million in the prior-year period. WeThe decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid the $50our $125 million of Class AB unsecured fixed rate senior notes upon maturity on May 31, 2017.October 15, 2023.


Capital Markets segment pre-tax operatingPre-tax margin for the three months ended September 30, 2017 was 13.9March 31, 2024 increased to 15.3 percent, compared with 9.0to 8.7 percent for the corresponding period of 2016. Pre-tax operating margin was higher in the third quarter of 2017 compared to the prior-year period due to a lower non-compensation ratio driven by an increase in revenues, which was partially offset by higher acquisition-related costs.2023. Adjusted segment pre-tax operating margin for the three months ended September 30, 2017 was 21.7March 31, 2024 increased to 16.8 percent, compared with 16.414.1 percent for the corresponding period of 2016. Adjusted pre-tax operating margin was higher compared to the third quarter of 2016 due to operating leverage as a result of higher revenues. Adjusted net revenues increased

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24.0 percent and adjusted operating expenses increased 16.1 percent compared to the third quarter of 2016, reflecting operating leverage in the business.

Asset Management

The following table sets forth the Asset Management segment financial results and adjustments necessary to reconcile to our consolidated U.S. GAAP pre-tax operating income and pre-tax operating margin for the periods presented:
 Three Months Ended September 30,
 2017 2016
   Adjustments (1)     Adjustments (1)  
 Total Noncontrolling Other U.S. Total Noncontrolling Other U.S.
(Dollars in thousands)Adjusted Interests Adjustments GAAP Adjusted Interests Adjustments GAAP
Management fees               
Equity$5,296
 $—
 $—
 $5,296
 $6,750
 $—
 $—
 $6,750
MLP6,844
 —
 —
 6,844
 7,153
 —
 —
 7,153
Total management fees12,140
 —
 —
 12,140
 13,903
 —
 —
 13,903
                
Performance fees               
Equity—
 —
 —
 —
 —
 —
 —
 —
MLP—
 —
 —
 —
 —
 —
 —
 —
Total performance fees—
 —
 —
 —
 —
 —
 —
 —
                
Total management and performance fees12,140
 —
 —
 12,140
 13,903
 —
 —
 13,903
                
Investment income439
 —
 —
 439
 461
 —
 —
 461
                
Total net revenues12,579
 —
 —
 12,579
 14,364
 —
 —
 14,364
                
Operating expenses10,753
 —
 115,641
 126,394
 11,264
 —
 1,387
 12,651
                
Segment pre-tax operating income/(loss)$1,826
 $—
 $(115,641) $(113,815) $3,100
 $—
 $(1,387) $1,713
                
Segment pre-tax operating margin14.5%     (904.8)% 21.6%     11.9%
                
Adjusted segment pre-tax operating margin excluding investment income (2)11.4%     
 19.0%     
(1)Other Adjustments – The following table sets forth the items not included in adjusted segment pre-tax operating income/(loss) and adjusted segment pre-tax operating margin for the periods presented:
 Three Months Ended September 30,
(Dollars in thousands)2017 2016
Goodwill impairment$114,363
 $—
Amortization of intangible assets related to acquisitions1,278
 1,387
 $115,641
 $1,387
(2)Management believes that presenting adjusted segment pre-tax operating margin excluding investment income, a non-GAAP measure, provides the most meaningful basis for comparison of Asset Management operating results across periods.

Management and performance fee revenues comprise the revenues generated from management and investment advisory services performed for separately managed accounts, registered funds and partnerships. Client asset inflows and outflows and investment performance have a direct effect on management and performance fee revenues. Management fees are generally based on the level of AUM measured monthly or quarterly, and an increase or reduction in AUM, due to market price fluctuations or net client asset flows, will result in a corresponding increase or decrease in management fees. Fees vary with the type of assets managed and the vehicle in which they are managed. Performance fees are earned when the investment return on AUM exceeds certain benchmark targets or other performance targets over a specified measurement period. The level of performance fees earned can vary significantly from period to period and these fees may not necessarily be correlated to changes in total AUM. The majority of performance fees, if earned, are generally recorded in the fourth quarter of the applicable year or upon withdrawal of client assets. At September 30, 2017, approximately four percent of our AUM was eligible to earn performance fees.

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For the three months ended September 30, 2017, management fees were $12.1 million, a decrease of 12.7 percent, compared with $13.9 million in the prior-year period, due primarily to lower management fees from our equity product offerings.2023. In the thirdcurrent quarter, of 2017, management fees related to our equity strategies were $5.3 million, down 21.5 percent compared to $6.8 millionthe increase in the corresponding period of 2016 due to lower average AUM resulting from net client outflows, and a lower average effective revenue yield. The net client outflows were exacerbated by our efforts to remix our product offerings to a broader set of products and the lower yield resulted from changes in our product mix. The average effective revenue yield (total annualized management fees as a percentage of our average month-end AUM) for our equity strategies was 61 basis points for the third quarter of 2017, compared with 70 basis points for the prior-year period. Management fees from our master limited partnership ("MLP") strategies decreased 4.3 percent in the third quarter of 2017 to $6.8 million, compared with $7.2 million in the third quarter of 2016 as lower average AUM was partially offset by a higher average effective revenue yield. Our average effective revenue yield for our MLP strategies was 66 basis points for the third quarter of 2017, compared with 64 basis points for the prior-year period.

Investment income includes gains and losses from our investments in registered funds and private funds or partnerships that we manage. For the three months ended September 30, 2017, investment income was $0.4 million, compared with $0.5 million for the prior-year period.

The negative segment pre-tax operating margin for the three months ended September 30, 2017 was due to the $114.4 million non-cash goodwill impairment charge. Excluding investment income on firm capital invested in our strategies, adjusted segment operating margin declined from 19.0 percent in the third quarter of 2016 to 11.4 percent in the third quarter of 2017 due to lower management fees.

The following table summarizes the changes in our AUM for the periods presented:
     Twelve
 Three Months Ended Months Ended
 September 30, September 30,
(Dollars in millions)2017 2016 2017
Equity     
Beginning of period$4,276
 $3,681
 $3,878
Net outflows(862) (103) (784)
Net market appreciation171
 300
 491
End of period$3,585
 $3,878
 $3,585
      
MLP     
Beginning of period$4,304
 $4,410
 $4,551
Net outflows(210) (122) (333)
Net market appreciation/(depreciation)(51) 263
 (175)
End of period$4,043
 $4,551
 $4,043
      
Total     
Beginning of period$8,580
 $8,091
 $8,429
Net outflows(1,072) (225) (1,117)
Net market appreciation120
 563
 316
End of period$7,628
 $8,429
 $7,628

Total AUM was $7.6 billion at September 30, 2017. Equity AUM decreased to $3.6 billion at September 30, 2017 as net client outflows of $0.9 billion during the quarter were partially offset by net market appreciation of $0.2 billion. In the third quarter of 2017, we exited our Japan value product, which reduced our AUM by approximately $0.8 billion. The reduction from client outflows was partially offset by client inflows into our new global dividend strategy during the quarter. This product, which we added in the first quarter of 2017, is part of our strategy to remix our product offerings. MLP AUM decreased to $4.0 billion at September 30, 2017 as we experienced net client outflows of $0.2 billion during the quarter.


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Financial Summary for the nine months ended September 30, 2017 and September 30, 2016

The following table provides a summary of the results of our operations on a U.S. GAAP basis and the results of our operations as a percentage of net revenues for the periods indicated.
       As a Percentage of
       Net Revenues for the
 Nine Months Ended Nine Months Ended
 September 30, September 30,
     2017    
(Dollars in thousands)2017 2016 v2016 2017 2016
Revenues:         
Investment banking$461,260
 $338,034
 36.5 % 72.2 % 64.4%
Institutional brokerage111,083
 122,423
 (9.3) 17.4
 23.3
Asset management44,011
 43,699
 0.7
 6.9
 8.3
Interest22,649
 24,094
 (6.0) 3.5
 4.6
Investment income15,406
 14,019
 9.9
 2.4
 2.7
Total revenues654,409
 542,269
 20.7
 102.4
 103.3
          
Interest expense15,568
 17,383
 (10.4) 2.4
 3.3
          
Net revenues638,841
 524,886
 21.7
 100.0
 100.0
          
Non-interest expenses:         
Compensation and benefits438,161
 356,770
 22.8
 68.6
 68.0
Outside services27,612
 28,923
 (4.5) 4.3
 5.5
Occupancy and equipment24,846
 25,311
 (1.8) 3.9
 4.8
Communications22,025
 22,469
 (2.0) 3.4
 4.3
Marketing and business development22,512
 23,804
 (5.4) 3.5
 4.5
Trade execution and clearance5,864
 5,686
 3.1
 0.9
 1.1
Restructuring and integration costs—
 10,206
 (100.0) —
 1.9
Goodwill impairment114,363
 —
 N/M
 17.9
 —
Intangible asset amortization11,466
 15,400
 (25.5) 1.8
 2.9
Back office conversion costs3,027
 —
 N/M
 0.5
 —
Other operating expenses8,525
 7,915
 7.7
 1.3
 1.5
Total non-interest expenses678,401
 496,484
 36.6
 106.2
 94.6
          
Income/(loss) before income tax expense/(benefit)(39,560) 28,402
 N/M
 (6.2) 5.4
          
Income tax expense/(benefit)(26,912) 8,767
 N/M
 (4.2) 1.7
          
Net income/(loss)(12,648) 19,635
 N/M
 (2.0) 3.7
          
Net income applicable to noncontrolling interests3,217
 4,602
 (30.1) 0.5
 0.9
          
Net income/(loss) applicable to Piper Jaffray Companies$(15,865) $15,033
 N/M
 (2.5)% 2.9%
N/M – Not meaningful

Except as discussed below, the description of non-interest expense and net revenues as well as the underlying reasons for variances to prior year are substantially the same as the comparative quarterly discussion.


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For the nine months ended September 30, 2017, we recorded a net loss applicable to Piper Jaffray Companies of $15.9 million due to a $70.2 million, net of tax, goodwill impairment charge. Net revenues for the nine months ended September 30, 2017 were $638.8 million, compared to $524.9 million in the year-ago period. In the first nine months of 2017, investment banking revenues were $461.3 million, up 36.5 percent compared with $338.0 million in the prior-year period as higher advisory services and equity financing revenues were partially offset by lower debt financing revenues. For the nine months ended September 30, 2017, institutional brokerage revenues decreased 9.3 percent to $111.1 million, compared with $122.4 million in the first nine months of 2016, due to lower fixed income and equity institutional brokerage revenues. In the first nine months of 2017, asset management fees were $44.0 million, up slightly compared with $43.7 million in the first nine months of 2016, as higher management fees from our MLP product offerings were offset by lower management fees from our equity product offerings. In the first nine months of 2017, net interest income increased to $7.1 million, compared with $6.7 million in the prior-year period. For the nine months ended September 30, 2017, investment income was $15.4 million, compared with $14.0 million in the prior-year period, due to higher gains on our investment and the noncontrolling interests in the merchant banking fund that we manage, as well as higher gains on our firm investments. Non-interest expenses were $678.4 million for the nine months ended September 30, 2017, up 36.6 percent compared with $496.5 million in the year-ago period. The increase was driven by a $114.4 million goodwill impairment charge. The increase was also due to higher compensation expense resulting from increased revenues, as well as incremental costs related to our back office conversion. These increases were partially offset by lower restructuring costs.

Consolidated Non-Interest Expenses

Restructuring and Integration Costs – For the nine months ended September 30, 2016, we recorded restructuring and acquisition integration costs of $10.2 million primarily related to the acquisition of Simmons. The expenses consisted of $6.6 million of severance, benefits and outplacement costs, $1.3 million of vacated redundant leased office space, $1.3 million of transaction costs, and $1.0 million of contract termination costs.

Other Operating Expenses – Other operating expenses increased 7.7 percent to $8.5 million for the nine months ended September 30, 2017, compared with $7.9 million for the nine months ended September 30, 2016. The increase was primarily due to higher expense related to our charitable giving program driven by increased profitability, which was partially offset by decreased insurance costs. Additionally, in the first nine months of 2017 we recorded foreign currency losses from our foreign cash accounts versus gains in the first nine months of 2016.

Income Taxes– For the nine months ended September 30, 2017, our benefit from income taxes was $26.9 million equating to an effective tax rate, excluding noncontrolling interests, of 62.9 percent, compared with a provision for income taxes of $8.8 million in the prior-year period equating to an effective tax rate, excluding noncontrolling interests, of 36.8 percent. The effective tax rate for the nine months ended September 30, 2017 was due to the impact of a $9.1 million tax benefit related to stock-based compensation awards vesting at values greater than the grant price in a period of pre-tax losses. As discussed in Note 2, "Accounting Policies and Pronouncements" in the notes to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, effective as of January 1, 2017, new accounting guidance requires us to recognize the income tax effects of stock-based compensation awards in the income statement when the awards vest, rather than as additional paid-in capital. The amount recognized in the income statement in future periods may vary depending upon, among other things, the number of restricted shares vesting and their change in value since the grant date. We would expect that the impact of this guidance will be more meaningful in the first half of each year as the majority of our restricted stock vestings related to our employees' incentive compensation occurs in February.


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Segment Performance

Capital Markets

The following table sets forth the Capital Markets adjusted segment financial results and adjustments necessary to reconcile to our consolidated U.S. GAAP pre-tax operating income and pre-tax operating margin for the periods presented:
 Nine Months Ended September 30,
 2017 2016
   
Adjustments (1)
     
Adjustments (1)
  
 Total Noncontrolling Other U.S. Total Noncontrolling Other U.S.
(Dollars in thousands)Adjusted Interests Adjustments GAAP Adjusted Interests Adjustments GAAP
Investment banking               
Financing               
Equities$70,229
 $—
 $—
 $70,229
 $53,831
 $—
 $—
 $53,831
Debt60,066
 —
 —
 60,066
 80,195
 —
 —
 80,195
Advisory services332,205
 —
 —
 332,205
 204,971
 —
 —
 204,971
Total investment banking462,500
 —
 —
 462,500
 338,997
 —
 —
 338,997
                
Institutional sales and trading               
Equities59,085
 —
 —
 59,085
 62,773
 —
 —
 62,773
Fixed income63,137
 —
 —
 63,137
 70,665
 1,153
 —
 71,818
Total institutional sales and trading122,222
 —
 —
 122,222
 133,438
 1,153
 —
 134,591
                
Management and performance fees4,172
 —
 —
 4,172
 4,112
 —
 —
 4,112
                
Investment income10,275
 4,880
 —
 15,155
 8,672
 5,337
 —
 14,009
                
Long-term financing expenses(6,003) —
 —
 (6,003) (6,838) —
 —
 (6,838)
                
Net revenues593,166
 4,880
 —
 598,046
 478,381
 6,490
 —
 484,871
                
Operating expenses484,677
 1,663
 38,362
 524,702
 415,760
 1,888
 42,980
 460,628
                
Segment pre-tax operating income$108,489
 $3,217
 $(38,362) $73,344
 $62,621
 $4,602
 $(42,980) $24,243
                
Segment pre-tax operating margin18.3%     12.3% 13.1%     5.0%
(1)The following is a summary of the adjustments needed to reconcile our consolidated U.S. GAAP segment pre-tax operating income and segment pre-tax operating margin to the adjusted segment pre-tax operating income and adjusted segment pre-tax operating margin:
Noncontrolling interests – The impacts of consolidating noncontrolling interests in our alternative asset management funds are not included in adjusted segment pre-tax operating income and adjusted segment pre-tax operating margin.
Other adjustments – The following table sets forth the items not included in adjusted segment pre-tax operating income and adjusted segment pre-tax operating margin for the periods presented:
 Nine Months Ended September 30,
(Dollars in thousands)2017 2016
Compensation from acquisition-related agreements$30,301
 $21,544
Restructuring and integration costs—
 10,197
Amortization of intangible assets related to acquisitions7,633
 11,239
Non-compensation expenses from acquisition-related agreements428
 —
 $38,362
 $42,980

Capital Markets net revenues on a U.S. GAAP basis were $598.0 million for the nine months ended September 30, 2017, compared with $484.9 million in the prior-year period. In the first nine months of 2017, Capital Markets adjusted net revenues were $593.2 million, compared with $478.4 million in the first nine months of 2016. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis.


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In the first nine months of 2017, investment banking revenues increased 36.4 percent to $462.5 million, compared with $339.0 million in the corresponding period of the prior year. For the nine months ended September 30, 2017, advisory services revenues increased 62.1 percent to $332.2 million, compared with $205.0 million in the first nine months of 2016. The increase reflects our long-term efforts to grow the advisory services business and the diversity in our business. These factors have led to market share gains. We completed 118 transactions with an aggregate enterprise value of $27.8 billion in the first nine months of 2017, compared with 104 transactions with an aggregate enterprise value of $14.1 billion in the first nine months of 2016. For the nine months ended September 30, 2017, equity financing revenues were $70.2 million, up 30.5 percent compared with $53.8 million in the prior-year period, due to more completed transactions and higher revenue per transaction. On a year-to-dateadjusted basis the overall fee pool in our target market was up approximately 75 percent compared to the corresponding period of the prior year. During the first nine months of 2017, we completed 60 equity financings, raising $12.0 billion for our clients, compared with 48 equity financings, raising $9.7 billion for our clients in the year-ago period. Debt financing revenues for the nine months ended September 30, 2017 were $60.1 million, down 25.1 percent compared with $80.2 million in the year-ago period, due to lower public finance revenues as refunding activity has declined compared to the prior-year period and new money issuance volumes have remained essentially flat. During the first nine months of 2017, we completed 421 negotiated municipal issues with a total par value of $10.5 billion, compared with 512 negotiated municipal issues with a total par value of $11.6 billion during the prior-year period.

For the nine months ended September 30, 2017, institutional brokerage revenues decreased 9.2 percent to $122.2 million, compared with $134.6 million in the prior-year period, due to lower equity and fixed income institutional brokerage revenues. Equity institutional brokerage revenues decreased 5.9 percent to $59.1 million in the first nine months of 2017, compared with $62.8 million in the corresponding period of 2016, due to lower client trading volumes. For the nine months ended September 30, 2017, fixed income institutional brokerage revenues were $63.1 million, down 12.1 percent compared with $71.8 million in the prior-year period, due to a decline in customer flow activity and fewer opportunities for trading gains.

For the nine months ended September 30, 2017, management and performance fees were $4.2 million, compared with $4.1 million in the prior-year period.

For the nine months ended September 30, 2017, investment income was $15.2 million, compared to $14.0 million in the corresponding period of 2016. In the first nine months of 2017, we recored higher gains in our merchant banking fund and on our other firm investments, which were partially offset by lower gains in our senior living fund. Excluding the impact of noncontrolling interests, adjusted investment income was $10.3 million for the nine months ended September 30, 2017.

For the nine months ended September 30, 2017, long-term financing expenses decreased to $6.0 million, compared with $6.8 million in the prior-year period. We repaid the $50 million of Class A senior notes upon maturity on May 31, 2017.

Capital Markets segment pre-tax operating margin for the nine months ended September 30, 2017 was 12.3 percent, compared with 5.0 percent for the corresponding period of 2016. The increased pre-tax operating margin was primarily due to a lower non-compensation ratio driven by higher revenues and lower levels of restructuring costs. In the year-ago period, we recorded $10.2 million of restructuring and integration costs primarily related to the acquisition of Simmons. Adjusted segment pre-tax operating margin for the nine months ended September 30, 2017 was 18.3 percent, compared with 13.1 percent for the corresponding period of 2016, primarily due to operating leverage as a result of highernet revenues.



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Asset Management

The following table sets forth the Asset Management segment financial results and adjustments necessary to reconcile to our consolidated U.S. GAAP pre-tax operating income and pre-tax operating margin for the periods presented:
 Nine Months Ended September 30,
 2017 2016
   
Adjustments (1)
     
Adjustments (1)
  
 Total Noncontrolling Other U.S. Total Noncontrolling Other U.S.
(Dollars in thousands)Adjusted Interests Adjustments GAAP Adjusted Interests Adjustments GAAP
Management fees               
Equity$18,478
 $—
 $—
 $18,478
 $21,051
 $—
 $—
 $21,051
MLP21,361
 —
 —
 21,361
 18,536
 —
 —
 18,536
Total management fees39,839
 —
 —
 39,839
 39,587
 —
 —
 39,587
                
Performance fees               
Equity—
 —
 —
 —
 —
 —
 —
 —
MLP—
 —
 —
 —
 —
 —
 —
 —
Total performance fees—
 —
 —
 —
 —
 —
 —
 —
                
Total management and performance fees39,839
 —
 —
 39,839
 39,587
 —
 —
 39,587
                
Investment income956
 —
 —
 956
 428
 —
 —
 428
                
Total net revenues40,795
 —
 —
 40,795
 40,015
 —
 —
 40,015
                
Operating expenses35,503
 —
 118,196
 153,699
 31,686
 —
 4,170
 35,856
                
Segment pre-tax operating income/(loss)$5,292
 $—
 $(118,196) $(112,904) $8,329
 $—
 $(4,170) $4,159
                
Segment pre-tax operating margin13.0%     (276.8)% 20.8%     10.4%
                
Adjusted segment pre-tax operating margin excluding investment income (2)10.9%     
 20.0%     
(1)Other Adjustments – The following table sets forth the items not included in adjusted segment pre-tax operating income/(loss) and adjusted segment pre-tax operating margin for the periods presented:
 Nine Months Ended September 30,
(Dollars in thousands)2017 2016
Restructuring and integration costs$—
 $9
Goodwill impairment114,363
 —
Amortization of intangible assets related to acquisitions3,833
 4,161
 $118,196
 $4,170
(2)Management believes that presenting adjusted segment pre-tax operating margin excluding investment income, a non-GAAP measure, provides the most meaningful basis for comparison of Asset Management operating results across periods.

For the nine months ended September 30, 2017, management fees were $39.8 million, essentially flat compared with $39.6 million in the prior-year period as higher management fees from our MLP product offerings were offset by lower management fees from our equity product offerings. In the first nine months of 2017, management fees related to our equity strategies were $18.5 million, down 12.2 percent compared to $21.1 million in the corresponding period of 2016, due to a lower average effective revenue yield. The average effective revenue yield for our equity strategies was 63 basis points for the nine months ended September 30, 2017, down from 71 basis points for the nine months ended September 30, 2016. Management fees from our MLP strategies increased 15.2 percent in the first nine months of 2017 to $21.4 million, compared with $18.5 million in the first nine months of 2016, due to higher average AUM.

The negative segment pre-tax operating margin for the nine months ended September 30, 2017 was driven by the $114.4 million non-cash goodwill impairment charge. Excluding investment income on firm capital invested in our strategies, adjusted segment operating margin declined from 20.0 percent in the first nine months of 2016 to 10.9 percent in the first nine months of 2017, due to higher compensation and non-compensation ratios.

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The following table summarizes the changes in our AUM for the periods presented:
     Twelve
 Nine Months Ended Months Ended
 September 30, September 30,
(Dollars in millions)2017 2016 2017
Equity     
Beginning of period$4,115
 $4,954
 $3,878
Net outflows(832) (1,379) (784)
Net market appreciation302
 303
 491
End of period$3,585
 $3,878
 $3,585
      
MLP     
Beginning of period$4,616
 $3,924
 $4,551
Net outflows(240) (193) (333)
Net market appreciation/(depreciation)(333) 820
 (175)
End of period$4,043
 $4,551
 $4,043
      
Total     
Beginning of period$8,731
 $8,878
 $8,429
Net outflows(1,072) (1,572) (1,117)
Net market appreciation/(depreciation)(31) 1,123
 316
End of period$7,628
 $8,429
 $7,628

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements are set forth in Note 23 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and are incorporated herein by reference.


Critical Accounting Policies

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting and reporting policies comply with U.S. GAAP and conform to practices within the securities industry. The preparation of financial statements in compliance with U.S. GAAP and industry practices requires us to make estimates and assumptions that could materially affect amounts reported in our consolidated financial statements. Critical accounting policies are those policies that we believe to be the most important to the portrayal of our financial condition and results of operations and that require us to make estimates that are difficult, subjective or complex. Most accounting policies are not considered by us to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical, including whether the estimates are significant to the consolidated financial statements taken as a whole, the nature of the estimates, the ability to readily validate the estimates with other information (e.g., third partythird-party or independent sources), the sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be used under U.S. GAAP.


We believe that of our significant accounting policies, the following are our critical accounting policies:policies and estimates:


•Valuation of Financial Instruments
•Goodwill and Intangible Assets
•Stock-Based Compensation Plans
•Income Taxes


Our accounting policies related to goodwill and intangible assets are described below. See the "Critical Accounting Policies"Policies and Estimates" section and Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20162023 for further information on our other critical accounting policies. See also Note 2, "Accounting Policiespolicies and Pronouncements" in the notes to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for changes to our significant accounting policies, as well as the impact from the adoption of new accounting standards.estimates.



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Goodwill and Intangible Assets

LIQUIDITY, FUNDING AND CAPITAL RESOURCES
We record all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangible assets, at fair value. Determining the fair value of assets and liabilities acquired requires certain management estimates. At September 30, 2017, we had goodwill of $81.9 million, all ofregularly monitor our liquidity position, which relates to our capital markets segment. At September 30, 2017, we had intangible assets of $25.8 million, of which $11.7 million relates to our capital markets segment and $14.1 million relates to our asset management segment.

We are required to perform impairment tests of our goodwill and indefinite-life intangible assets annually and on an interim basis when circumstances exist that could indicate possible impairment. We have elected to test for goodwill impairment in the fourth quarter of each calendar year. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after making an assessment, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if we conclude otherwise, then we are required to perform the two-step impairment test, which requires management to make judgments in determining what assumptions to use in the calculation. As discussed in Note 2, "Accounting Policies and Pronouncements" in the notes to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, we adopted new accounting guidance effective July 1, 2017 which eliminates the second step from the goodwill impairment test. Accordingly, we evaluate impairment charges based on the excess of a reporting unit’s carrying amount over its fair value. See Note 11 to our unaudited consolidated financial statements for additional information on our goodwill impairment testing.

The initial recognition of goodwill and other intangible assets and the subsequent quantitative impairment analysis involves significant judgment in determining the estimates of future cash flows, discount rates, economic forecast and other assumptions which are then used in acceptable valuation techniques, such as the market approach (earnings and/or transaction multiples) and/or the income approach (discounted cash flow method). Changes in these estimates and assumptions could have a significant impact on the fair value and any resulting impairment of goodwill. Our estimated cash flows, by their nature, are difficult to determine over an extended time period. Events and factors that may significantly affect the estimates include, among others, competitive forces and changes in revenue growth trends, cost structures, technology, and market conditions. To assess the reasonableness of cash flow estimates and validate assumptions used in our estimates, we review historical performance of the underlying assets or similar assets. In assessing the fair value of our reporting units, the volatile nature of the securities markets and our industry requires us to consider the business and market cycle and assess the stage of the cycle in estimating the timing and extent of future cash flows. In addition to discounted cash flows, we consider earnings multiples of comparable public companies and multiples of recent mergers and acquisitions transactions of similar businesses in our subsequent impairment analysis.

We identified impairment indicators in the third quarter of 2017 related to our asset management reporting unit and performed an interim goodwill impairment test as of July 31, 2017, which resulted in a non-cash goodwill impairment charge of $114.4 million. The impairment charge resulted from declining profitability in 2017 as decreases in revenues relating to higher fee product offerings have not been fully offset by new revenues on assets gained in lower fee product offerings. We believe the shift in revenue mix is attributable, in part, to the extended cycle of investors favoring passive investment vehicles over active management. The fair value of the asset management reporting unit was calculated using the income approach (discounted cash flow method based on revenue and EBITDA forecasts) and market approach (earnings multiples of comparable public companies), which are valuation techniques we believe market participants would use for the reporting unit.

We also evaluated the intangible assets (indefinite and definite-lived) related to the asset management reporting unit and concluded there was no impairment in the third quarter of 2017.

We anticipate completing our 2017 annual goodwill and intangible asset impairment testing for the capital markets reporting unit in the fourth quarter of 2017.


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Liquidity, Funding and Capital Resources

Liquidity is of critical importance to us given the nature of our business. Insufficient liquidity resulting from adverse circumstances contributes to, and may be the cause of, financial institution failure. Accordingly, we regularly monitor our liquidity position and maintain a liquidity strategy designed to enable our business to continue to operate even under adverse circumstances, although there can be no assurance that our strategy will be successful under all circumstances. Insufficient liquidity resulting from adverse circumstances contributes to, and may be the cause of, financial institution failure.


The majority of our tangible assets consist of assets readily convertible into cash. Financial instruments and other inventory positions owned are stated at fair value and are generally readily marketable in most market conditions. Receivables and payables with brokers, dealers and clearing organizations usually settle within a few days. As part of our liquidity strategy, we emphasize diversification of funding sources to the extent possible while considering tenor and cost. Our assets are financed by our cash flows from operations, equity capital and our funding arrangements. The fluctuations in cash flows from financing activities are directly related to daily operating activities from our various businesses. One of our most important risk management disciplines is our ability to manage the size and composition of our balance sheet. While our asset base changes due to client activity, market fluctuations and business opportunities, the size and composition of our balance sheet reflect our overall risk tolerance, our ability to access stable funding sources and the amount of equity capital we hold.


Certain market conditions can impact the liquidity of our inventory positions, requiring us to hold larger inventory positions for longer than expected or requiring us to take other actions that may adversely impact our results.


A significant component of our employees’employees' compensation is paid in annual discretionary incentive compensation. The timing of these incentive compensation payments, which is generally are made in February, has a significant impact on our cash position and liquidity.


Beginning in 2017, we initiated the payment of a quarterly cashOur dividend policy is intended to holdersreturn between 30 percent and 50 percent of our common stock.fiscal year adjusted net income to shareholders. Our board of directors determines the declaration and payment of dividends on a quarterly basis, and is free to change our dividend policy at any time.

Our board of directors declared the following dividends:dividends on shares of our common stock:
Declaration DateDividend Per ShareRecord DatePayment Date
Related to 2022:
February 3, 2023(1)$1.25 March 3, 2023March 17, 2023
Related to 2023:
February 3, 20230.60 March 3, 2023March 17, 2023
May 2, 20230.60 May 26, 2023June 9, 2023
July 28, 20230.60 August 25, 2023September 8, 2023
October 27, 20230.60 November 21, 2023December 8, 2023
February 2, 2024(1)1.00 March 4, 2024March 15, 2024
Related to 2024:
February 2, 20240.60 March 4, 2024March 15, 2024
April 26, 20240.60 May 24, 2024June 7, 2024
Declaration Date Dividend Per Share
 Record Date Payment Date
February 2, 2017 $0.3125
 February 20, 2017 March 13, 2017
April 27, 2017 $0.3125
 May 26, 2017 June 15, 2017
July 27, 2017 $0.3125
 August 28, 2017 September 15, 2017
October 26, 2017 $0.3125
 November 29, 2017 December 15, 2017
(1)Represents a special cash dividend.


As part of our capital management strategy, we repurchase our common stock over time in order to offset the dilutive effect of our employee stock-based compensation awards and our grants of acquisition-related restricted stock, as well as to return capital to shareholders.

Effective August 14, 2015,May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million in common shares through September 30, 2017.December 31, 2024. During the ninethree months ended September 30, 2017,March 31, 2024, we repurchased 36,936did not repurchase any shares of our common stock at an average price of $67.62 per share for an aggregate purchase price of $2.5 million related to this authorization. This authorization expired on September 30, 2017.At March 31, 2024, we had $138.2 million remaining under this authorization.


On August 10, 2017, our board of directors authorized the repurchase of up to $150.0 million in common shares through September 30, 2019. The authorization became effective on September 30, 2017.

We also purchase shares of common stock from restricted stock award recipients upon the award vesting as recipients sell shares to meet their employment tax obligations. During the first nine monthsquarter of 2017,2024, we purchased 308,801288,977 shares or $22.6 million of our common stock at an average price of $180.26 per share for this purpose.an aggregate purchase price of $52.1 million for these purposes.



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Leverage

The following table presents total assets, adjusted assets, total shareholders’shareholders' equity and tangible shareholders’common shareholders' equity with the resulting leverage ratios as of:ratios:
March 31,December 31,
(Dollars in thousands)20242023
Total assets$1,822,453 $2,140,983 
Deduct: Goodwill and intangible assets(415,596)(417,957)
Deduct: Right-of-use lease assets(67,335)(69,387)
Deduct: Assets attributable to noncontrolling interests(234,230)(217,411)
Adjusted assets$1,105,292 $1,436,228 
Total shareholders' equity$1,325,030 $1,299,473 
Deduct: Goodwill and intangible assets(415,596)(417,957)
Deduct: Noncontrolling interests(224,455)(213,975)
Tangible common shareholders' equity$684,979 $667,541 
Leverage ratio (1)1.4 1.6 
Adjusted leverage ratio (2)1.6 2.2 
 September 30, December 31,
(Dollars in thousands)2017 2016
Total assets$1,739,836
 $2,125,503
Deduct: Goodwill and intangible assets(107,623) (233,452)
Deduct: Assets from noncontrolling interests(52,271) (109,179)
Adjusted assets$1,579,942
 $1,782,872
    
Total shareholders' equity$786,785
 $816,266
Deduct: Goodwill and intangible assets(107,623) (233,452)
Deduct: Noncontrolling interests(48,519) (57,016)
Tangible common shareholders' equity$630,643
 $525,798
    
Leverage ratio (1)2.2
 2.6
    
Adjusted leverage ratio (2)2.5
 3.4
(1)Leverage ratio equals total assets divided by total shareholders' equity.
(1)
Leverage ratio equals total assets divided by total shareholders’ equity.
(2)
Adjusted leverage ratio equals adjusted assets divided by tangible common shareholders’ equity.

(2)Adjusted leverage ratio equals adjusted assets divided by tangible common shareholders' equity.

Adjusted assets and tangible common shareholders’shareholders' equity are non-GAAP financial measures. Goodwill and intangible assets are subtracted from total assets and total shareholders’shareholders' equity in determining adjusted assets and tangible common shareholders’shareholders' equity, respectively, as we believe that goodwill and intangible assets do not constitute operating assets whichthat can be deployed in a liquid manner. Right-of-use lease assets are also subtracted from total assets in determining adjusted assets as these are not operating assets that can be deployed in a liquid manner. Amounts attributedattributable to noncontrolling interests are subtracted from total assets and total shareholders' equity in determining adjusted assets and tangible common shareholders' equity, respectively, as they represent assets and equity interests in consolidated entities that are not attributable, either directly or indirectly, to Piper JaffraySandler Companies. We view the resulting measure of adjusted leverage, also a non-GAAP financial measure, as a more relevant measure of financial risk when comparing financial services companies. Our adjusted leverage ratio decreased from December 31, 2016,2023, primarily due to a decline in cash and cash equivalents driven by the $114.4 million non-cash goodwill impairment charge recorded forpayment of annual incentive compensation in the asset management reporting unit, as well as reduced asset levels resulting from our migration to a fully disclosed clearing model.first quarter of 2024.


Funding and Capital Resources

The primary goal of our funding activities is to ensure adequate funding over a wide range of market conditions. Given the mix of our business activities, funding requirements are fulfilled through a diversified range of short-term and long-term financing.financing arrangements. We attempt to ensure that the tenor of our borrowing liabilities equals or exceeds the expected holding period of the assets being financed. Our ability to support increases in total assets is largely a function of our ability to obtain funding from external sources. Access to these external sources, as well as the cost of that financing, is dependent upon various factors, including market conditions, the general availability of credit and credit ratings. We currently do not have a credit rating, which could adversely affect our liquidity and competitive position by increasing our financing costs and limiting access to sources of liquidity that require a credit rating as a condition to providing the funds.

In the third quarter of 2017, we migrated to a fully disclosed clearing model and are no longer self clearing. Pershing LLC ("Pershing") is our clearing broker dealer. The conversion provided us with a new funding source through Pershing and, as a result, changed our mix of funding sources.



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Our day-to-day funding and liquidity is obtained primarily through the use of cash from our operating activities, as well as through the use of a clearing arrangement with Pershing commercial paper issuance, prime broker agreements,LLC ("Pershing"), a clearing arrangement with bank financing, and a bank linesline of credit, and iswhich are typically collateralized by our securities inventory. These funding sources are critical to our ability to finance and hold inventory, which is a necessary part of our institutional brokerage business. The majority of our inventory is liquid and is therefore funded by short-term facilities. Certain of these short-term facilities (i.e.,or cash from our operating activities. Our committed line and commercial paper) havehas been established to mitigate changes in the liquidity of our inventory based on changing market conditions. In the case of our committed line, itconditions, and is available to us regardless of changes in market liquidity conditions through the end of its term, although there may be limitations on the type of securities available to pledge. Our commercial paper program helps mitigate changes in market liquidity conditions given it is not an overnight facility, but provides funding with a term of 27 to 270 days. Our funding sources are also dependent on the types of inventory that our counterparties are willing to accept as collateral and the number of counterparties available. Funding is generally obtained at rates based upon the federal funds rate or the London Interbank Offer Rate.rate.


Pershing Clearing Arrangement –
We have established an arrangement to obtain financing from Pershing related to the majority of our trading activities. Under our fully disclosed clearing agreement, the majorityall of our securities inventories with the exception of convertible securities, and all of our customer activities are held by or cleared through Pershing. Financing under this arrangement is secured primarily by securities, and collateral limitations could reduce the amount of funding available under this arrangement. We may accommodate non-standard settlement timeframes for our clients, which can impact our funding and collateral balances. Our clearing arrangement activities are recorded net fromof trading activity and reported within receivables from or payables to brokers, dealers and clearing organizations. The funding is at the discretion of Pershing (i.e., uncommitted) and could be denied.denied without a notice period. Our fully disclosed clearing agreement includes a covenant requiring Piper JaffraySandler & Co., our U.S. broker dealer subsidiary, to maintain excess net capital of $120 million. At September 30, 2017,March 31, 2024, we had $75.1$208.6 million of financing outstanding under this arrangement.


Commercial Paper Program – Our U.S. broker dealer subsidiary, Piper Jaffray & Co., issues secured commercial paper to fund a portion of its securities inventory. This commercial paper is currently issued under two separate programs, CP Series A and CP Series II A, and is secured by different inventory classes, which is reflected in the interest rate paid on the respective program. The programs can issue commercial paperClearing Arrangement with maturities of 27 to 270 days. CP Series II A includes a revised covenant that requires Piper Jaffray & Co. to maintain excess net capital of $100 million. During the third quarter of 2017, we retired the CP Series III A program, and increased the maximum amount that may be issued under CP Series II A from $150 million to $200 million. The following table provides information about our commercial paper programs at September 30, 2017:Bank Financing
(Dollars in millions) CP Series A CP Series II A
Maximum amount that may be issued $300.0
 $200.0
Amount outstanding —
 —

We resumed issuing commercial paper in the fourth quarter of 2017.

Prime Broker Arrangements – We have established an arrangement to obtain overnight financing by a single prime broker related to certain strategic trading activities in municipal securities. Additionally, we have established a second overnight financing arrangement with another broker dealera U.S. branch of Canadian Imperial Bank of Commerce ("CIBC") related to our convertible securities inventories. Under this arrangement, our convertible securities inventories are cleared through a broker dealer affiliate of CIBC and held by CIBC. We generally economically hedge changes in the market value of our convertible securities inventories using the underlying common stock or the stock options of the underlying common stock. Financing under these arrangementsthis arrangement is secured primarily by convertible securities and collateral limitations could reduce the amount of funding available under these arrangements. Our prime broker financing activities are recorded net of receivables from trading activity.available. The funding is at the discretion of the prime brokersCIBC (i.e., uncommitted) and could be denied subject to a notice period. This arrangement is reported within receivables from or payables to brokers, dealers and clearing organizations, net of trading activity. At September 30, 2017,March 31, 2024, we had $76.8$105.5 million of financing outstanding under these prime broker arrangements.this arrangement.


Revolving Credit Facility
We have an unsecured $100 million revolving credit facility with U.S. Bank N.A. The credit agreement will terminate on December 18, 2026, unless otherwise terminated. At March 31, 2024, there were no advances against this credit facility.

This credit facility includes customary events of default and covenants that, among other things, require Piper Sandler & Co. to maintain a minimum regulatory net capital of $120 million, limit our leverage ratio, require maintenance of a minimum ratio of operating cash flow to fixed charges, and impose certain limitations on our ability to make acquisitions and make payments on our capital stock. At March 31, 2024, we were in compliance with all covenants.

Committed Lines – We elected to decrease ourLine
Our committed line from $250 million tois a one-year $200$50 million revolving secured credit facility in 2016 based on our liquidity needs and our back office conversion, completed in the third quarter of 2017, which provided us with an additional funding source from our clearing broker Pershing. We use our committed credit facility in the ordinary course of business to fund a portion of our daily operations, and the amount borrowed under the facility varies daily based on our funding needs.facility. Advances under this facility are secured by certain marketable securities. The facility includes a covenant that requires Piper JaffraySandler & Co. to maintain a minimum regulatory net capital of $120$120 million,, and the unpaid principal amount of all advances under the facility will be due on December 16, 2017. This credit facility has been in place since 2008 and we anticipate being able to renew the facility for another one-year term in the fourth quarter of 2017.6, 2024. At September 30, 2017,March 31, 2024, we had no advances against this line of credit.



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Uncommitted Line – We use this uncommitted line in the ordinary course of business to fund a portion of our daily operations, and the amount borrowed under our uncommitted line varies daily based on our funding needs. Our $85 million uncommitted secured line is dependent on having appropriate collateral, as determined by the bank agreement, to secure an advance under the line. Collateral limitations could reduce the amount of funding available under this secured line. Our uncommitted line is discretionary and is not a commitment by the bank to provide an advance under the line. More specifically, the line is subject to approval by the bank each time an advance is requested and advances may be denied, which may be particularly true during times of market stress or market perceptions of our exposures. We manage our relationship with the bank that provides this uncommitted facility in order to have appropriate levels of funding for our business. At September 30, 2017, we had no advances against this line of credit.

The following tables presenttable presents the average balances outstanding for our various funding sources by quarter for 20172024 and 2016, respectively.2023:
 Average Balance for the Three Months Ended
(Dollars in millions)Sept. 30, 2017 June 30, 2017 Mar. 31, 2017
Funding source:     
Pershing clearing arrangement$42.5
 $—
 $—
Commercial paper30.3
 117.1
 137.7
Prime broker arrangements87.7
 103.7
 127.2
Short-term bank loans6.0
 67.1
 2.5
Total$166.5
 $287.9
 $267.4
Average Balance for the Three Months Ended
(Amounts in millions)Mar. 31, 2024Dec. 31, 2023Sept. 30, 2023June 30, 2023Mar. 31, 2023
Funding source
Pershing clearing arrangement$43.2 $27.5 $7.1 $26.8 $8.5 
Clearing arrangement with bank financing85.3 43.5 96.1 99.6 55.2 
Revolving credit facility4.9 40.5 — — — 
Total$133.4 $111.5 $103.2 $126.4 $63.7 
 Average Balance for the Three Months Ended
(Dollars in millions)Dec. 31, 2016 Sept. 30, 2016 June 30, 2016 Mar. 31, 2016
Funding source:       
Repurchase agreements$3.5
 $14.8
 $28.9
 $30.5
Commercial paper165.8
 235.8
 279.7
 279.2
Prime broker arrangements225.6
 200.6
 169.2
 159.0
Short-term bank loans5.3
 —
 6.4
 0.8
Total$400.2
 $451.2
 $484.2
 $469.5


The average funding in the thirdfirst quarter of 2017 decreased2024 increased to $166.5$133.4 million, compared with $287.9$111.5 million during the secondfourth quarter of 2017,2023 and $63.7 million during the first quarter of 2023, primarily due to a decrease in average inventory balances and the accumulation of cash from operations. Average funding decreasednon-standard settlements for certain clients. The increase compared to the corresponding periodfourth quarter of 2016 as we used cash from operations2023 was also due to reduce funding.higher average balances of convertible securities inventories, partially offset by the repayment of the outstanding balance on our revolving credit facility.


The following table presents the maximum daily funding amount by quarter for 20172024 and 2016, respectively.2023:
(Amounts in millions)20242023
First Quarter$544.2 $146.6 
Second Quarter370.1 
Third Quarter224.2 
Fourth Quarter550.8 
(Dollars in millions) 2017 2016
First Quarter $543.4
 $576.4
Second Quarter $538.3
 $669.7
Third Quarter $418.7
 $525.6
Fourth Quarter 
 $445.9


Senior Notes

We have entered into variable and fixed rate senior notes with certain entities advised by Pacific Investment Management Company ("PIMCO"). The following table presents the outstanding balance by note class:
 Outstanding Balance
 September 30, December 31,
(Dollars in thousands)2017 2016
Class A Notes$—
 $50,000
Class C Notes125,000
 125,000
Total senior notes$125,000
 $175,000


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On October 8, 2015, we entered into a second amended and restated note purchase agreement ("Second Amended and Restated Note Purchase Agreement") under which we issued $125 million of fixed rate Class C Notes. The Class C Notes bear interest at an annual fixed rate of 5.06 percent, are payable semi-annually and mature on October 9, 2018. The unpaid principal amount is due in full on the maturity date and may not be prepaid. The $50 million of variable rate Class A Notes issued in 2014 were repaid in full on the May 31, 2017 maturity date.

The Second Amended and Restated Note Purchase Agreement includes customary events of default and covenants that, among other things, require us to maintain a minimum consolidated tangible net worth and minimum regulatory net capital, limit our leverage ratio and require maintenance of a minimum ratio of operating cash flow to fixed charges. At September 30, 2017, we were in compliance with all covenants.

Contractual Obligations

Our contractual obligations have not materially changed from those reported in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016, except for our purchase commitments. On June 30, 2017, we entered into an agreement to move all of our self clearing broker dealer operations to a fully disclosed clearing model with Pershing.
 Remainder of 2018 2020 2022 and  
(Dollars in millions)2017  - 2019  - 2021 thereafter Total
Purchase commitments$8.4
 $21.5
 $6.7
 $18.7
 $55.3

Purchase commitments include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction. Purchase commitments with variable pricing provisions are included in the table based on the minimum contractual amounts. Certain purchase commitments contain termination or renewal provisions. The table reflects the minimum contractual amounts likely to be paid under these agreements assuming the contracts are not terminated.

Capital Requirements

As a registered broker dealer and member firm of the Financial Industry Regulatory Authority, Inc. ("FINRA"), Piper JaffraySandler & Co., our U.S. broker dealer subsidiary, is subject to the uniform net capital rule of the SEC and the net capital rule of FINRA. We have elected to use the alternative method permitted by the uniform net capital rule which requires that we maintain minimum net capital of $1.0 million.$1.0 million. Advances to affiliates, repayment of subordinated liabilities, dividend payments and other equity withdrawals are subject to certain approvals, notifications and other provisions of the uniform net capital rules. We expect that these provisions will not impact our ability to meet current and future obligations. At September 30, 2017,March 31, 2024, our net capital under the SEC’sSEC's uniform net capital rule was $215.5$188.8 million, and exceeded the minimum net capital required under the SEC rule by $214.5$187.8 million.


Although we operate with a level of net capital substantially greater than the minimum thresholds established by FINRA and the SEC, a substantial reduction of our capital would curtail many of our Capital Marketscapital markets revenue producing activities.


Our committed short-termline and revolving credit facility and our senior notes with PIMCO include covenants requiring Piper JaffraySandler & Co. to maintain a minimum regulatory net capital of $120 million. Secured commercial paper issued under CP Series II A includes a covenant that requires Piper Jaffray & Co. to maintain excess net capital of $100 million. Our fully disclosed clearing agreement with Pershing also includes a covenant requiring Piper JaffraySandler & Co. to maintain excess net capital of $120 million.


At September 30, 2017,March 31, 2024, Piper JaffraySandler Ltd., our broker dealer subsidiary registered in the United Kingdom,U.K., was subject to, and was in compliance with, the capital requirements of the Prudential Regulation Authority and the Financial Conduct Authority pursuant to the Financial Services Act of 2012.


Piper JaffraySandler Hong Kong Limited is licensed by the Hong Kong Securities and Futures Commission, which is subject to the liquid capital requirements of the Securities and Futures (Financial Resources) Rule promulgated under the Securities and Futures Ordinance. At September 30, 2017,March 31, 2024, Piper JaffraySandler Hong Kong Limited was in compliance with the liquid capital requirements of the Hong Kong Securities and TradeFutures Commission.



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OFF-BALANCE SHEET ARRANGEMENTS
Off-Balance Sheet Arrangements


In the ordinary course of business we enter into various types of off-balance sheet arrangements. The following table summarizes the notional contract value of our off-balance sheet arrangements for the periods presented:
 Expiration Per Period at December 31,Total Contractual Amount
20272029March 31,December 31,
(Amounts in thousands)202420252026- 2028- 2030Later20242023
Customer matched-book derivative contracts (1) (2)$46,190 $30,000 $6,960 $47,244 $101,392 $1,132,118 $1,363,904 $1,356,924 
Trading securities derivative contracts (2)162,350 12,500 — — — 5,000 179,850 196,250 
Investment commitments (3)— — — — — — 93,549 95,142 
 Expiration Per Period at December 31, Total Contractual Amount
 
     2020 2022   September 30, December 31,
(Dollars in thousands)2017 2018 2019 - 2021 - 2023 Later 2017 2016
Customer matched-book derivative contracts (1) (2)$22,100
 $—
 $32,850
 $42,360
 $143,460
 $2,937,955
 $3,178,725
 $3,330,207
Trading securities derivative contracts (2)301,100
 26,000
 —
 —
 —
 18,750
 345,850
 423,550
Credit default swap index contracts (2)—
 —
 —
 —
 —
 —
 —
 7,470
Investment commitments (3)—
 —
 —
 —
 —
 —
 40,905
 22,776
(1)Consists of interest rate swaps. We have minimal market risk related to these matched-book derivative contracts; however, we do have counterparty risk with one major financial institution, which is mitigated by collateral deposits. In addition, we have a limited number of counterparties (contractual amount of $78.3 million at March 31, 2024) who are not required to post collateral. The uncollateralized amounts, representing the fair value of the derivative contracts, expose us to the credit risk of these counterparties. At March 31, 2024, we had $5.0 million of credit exposure with these counterparties, including $4.6 million of credit exposure with one counterparty.
(1)
Consists of interest rate swaps. We have minimal market risk related to these matched-book derivative contracts; however, we do have counterparty risk with one major financial institution, which is mitigated by collateral deposits. In addition, we have a limited number of counterparties (contractual amount of $181.8 million at September 30, 2017) who are not required to post collateral. The uncollateralized amounts, representing the fair value of the derivative contracts, expose us to the credit risk of these counterparties. At September 30, 2017, we had $20.8 million of credit exposure with these counterparties, including $15.4 million of credit exposure with one counterparty.
(2)
We believe the fair value of these derivative contracts is a more relevant measure of the obligations because we believe the notional or contract amount overstates the expected payout. At September 30, 2017 and December 31, 2016, the net fair value of these derivative contracts approximated $16.9 million and $24.0 million, respectively.
(3)
The investment commitments have no specified call dates. The timing of capital calls is based on market conditions and investment opportunities.

(2)We believe the fair value of these derivative contracts is a more relevant measure of the obligations because we believe the notional or contract amount overstates the expected payout. At March 31, 2024 and December 31, 2023, the net fair value of these derivative contracts approximated $6.0 million and $6.9 million, respectively.
(3)The investment commitments have no specified call dates. The timing of capital calls is based on market conditions and investment opportunities.

Derivatives

Derivatives’Derivatives' notional or contract amounts are not reflected as assets or liabilities on our consolidated statements of financial condition. Rather, the fair value of the derivative transactions are reported on the consolidated statements of financial condition as assets or liabilities in financial instruments and other inventory positions owned and financial instruments and other inventory positions sold, but not yet purchased, as applicable. For a complete discussion of our activities related to derivative products, see Note 4, "Financial Instruments and Other Inventory Positions Owned and Financial Instruments and Other Inventory Positions Sold, but Not Yet Purchased," in the notes6 to our unaudited consolidated financial statements.statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


Investment Commitments

We have investments, including those made as part of our merchant bankingalternative asset management activities, in various limited partnerships or limited liability companies that provide financingmake direct or makeindirect equity or debt investments in private equity companies. We commit capital and/or act as the managing partner of these entities.

We have committed capital of $93.5 million to certain entities and these commitments generally have no specified call dates. We had $40.9 million of commitments outstanding at September 30, 2017, of which $33.3 million relate to affiliated merchant banking funds and $2.0 million relate to an affiliated fund, which provides financing for senior living facilities.



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Risk Management

RISK MANAGEMENT
Risk is an inherent part of our business. The principal risks we face in operating our business include: strategic risk, market risk, liquidity risk, credit risk, operational risk, human capital risk, and legal and regulatory risks.risk. The extent to which we properly identify and effectively manage each of these risks is critical to our financial condition and profitability. We have a formal risk management process to identify, assess and monitor each risk and mitigating controls in accordance with defined policies and procedures. The risk management functions are independent of our business lines. Our management takes an active role in the risk management process, and the results are reported to senior management and the Boardboard of Directors.directors.


The audit committee of the Boardboard of Directorsdirectors oversees management’smanagement's processes for identifying and evaluating our major risks, and the policies, procedures and practices employed by management to govern its risk assessment and risk management processes. The nominating and governance committee of the Boardboard of Directorsdirectors oversees the Boardboard of Directors’directors' committee structures and functions as they relate to the various committees’committees' responsibilities with respect to oversight of our major risk exposures. With respect to these major risk exposures, the audit committee is responsible for overseeing management’smanagement's monitoring and control of our major risk exposures relating to market risk, credit risk, liquidity risk, legal and regulatory risk, operational risk (including cybersecurity, as further described in Part I, Item 1C "Cybersecurity" in our Annual Report on Form 10-K for the year ended December 31, 2023), and human capital risk relating to misconduct, fraud, and legal and compliance matters. Our compensation committee is responsible for overseeing management’smanagement's monitoring and control of our major risk exposures relating to compensation, organizational structure, and succession. Our Boardboard of Directorsdirectors is responsible for overseeing management’smanagement's monitoring and control of our major risk exposures related to our corporate strategy. Our Chief Executive Officer and Chief Financial Officer and Senior Vice President of Finance meet with the audit committee on a quarterly basis to discuss our market, liquidity, and legal and regulatory risks, and provide updates to the Boardboard of Directors,directors, audit committee, and compensation committee concerning the other major risk exposures on a regular basis.


We use internal committees to assist in governing risk and ensure that our business activities are properly assessed, monitored and managed. Our executive financial risk committees managecommittee manages our market, liquidity and credit risks, and overseerisks; oversees risk management practices related to these risks, including defining acceptable risk tolerances and approving risk management policies.policies; and responds to market changes in a dynamic manner. Membership is comprised of senior leadership, including but not limited to, our Chief Executive Officer, President, Chief Financial Officer, Senior Vice President of Finance, General Counsel, Treasurer, Head of Market and Credit Risk, Head of Public Finance,and Head of Fixed Income Services and Firm Investments and Trading and Head of Equities.Risk. Other committees that help evaluate and monitor risk include underwriting, leadership team and operating committees. These committees help manage risk by ensuring that business activities are properly managed and within a defined scope of activity. Our valuation committee,committees, comprised of members of senior management and risk management, provide oversight and overall responsibility for the internal control processes and procedures related to fair value measurements. Additionally, our operational risk committees address and monitor risk related to information systems and security, legal, regulatory and compliance matters, and third parties such as vendors and service providers.


With respect to market risk and credit risk, the cornerstone of our risk management process is daily communication among traders, trading department management and senior management concerning our inventory positions including those associated with our strategic trading activities, and overall risk profile. Our risk management functions supplement this communication process by providing their independent perspectives on our market and credit risk profile on a daily basis. The broader objectives of our risk management functions are to understand the risk profile of each trading area, to consolidate risk monitoring company-wide, to assist in implementing effective hedging strategies, to articulate large trading or position risks to senior management, and to ensure accurate fair values of our financial instruments.


Risk management techniques, processes and strategies may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, and any risk management failures could expose us to material unanticipated losses.


Strategic Risk

Strategic risk represents the risk associated with executive management failing to develop and execute on the appropriate strategic vision which demonstrates a commitment to our culture, leverages our core competencies, appropriately responds to external factors in the marketplace, and is in the best interests of our clients, employees and shareholders.


Our leadership team is responsible for managing our strategic risks. The Boardboard of Directorsdirectors oversees the leadership team in setting and executing our strategic plan.

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Market Risk

Market risk represents the risk of losses, or financial volatility, that may result from the change in value of a financial instrument due to fluctuations in its market price. Our exposure to market risk is directly related to our role as a financial intermediary for our clients and to our market-making activities and our strategic trading activities. Market risks are inherent to both cash and derivative financial instruments. The scope of our market risk management policies and procedures includes all market-sensitive cash and derivative financial instruments.


Our different types of market risk include:


Interest Rate Risk—
Interest rate risk represents the potential volatility from changes in market interest rates. We are exposed to interest rate risk arising from changes in the level and volatility of interest rates, changes in the slope of the yield curve, changes in credit spreads, and the rate of prepayments on our interest-earning assets (e.g., inventories) and our funding sources (e.g., short-term financing) which finance these assets. Interest rate risk is managed by selling short U.S. government securities, agency securities, corporate debt securities and derivative contracts. See Note 4 of6 to our accompanying unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our derivative contracts. Our interest rate hedging strategies may not work in all market environments and as a result may not be effective in mitigating interest rate risk. Also, we establish limits on our long fixed income securities inventory, monitor these limits on a daily basis and manage within those limits. Our limits include but are not limited to the notional levelfollowing: position and concentration size, dollar duration (i.e., DV01), credit quality and aging.

We estimate that a parallel 50 basis point adverse change in the market would result in a decrease of approximately $0.2 million in the carrying value of our fixed income securities inventory as of March 31, 2024, including the effect of the hedging transactions.

We also measure and monitor the aging and turnover of our long fixed income securities inventory. Turnover is evaluated based on a five-day average by category of security. The vast majority of our fixed income securities inventory generally turns over within three weeks.

In addition to the measures discussed above, we monitor and manage net positions within those limits.market risk exposure through evaluation of spread DV01 and the MMD basis risk for municipal securities to movements in U.S. treasury securities. All metrics are aggregated by asset concentration and are used for monitoring limits and exception approvals. In times of market volatility, we may also perform ad hoc stress tests and scenario analysis as market conditions dictate.


Equity Price Risk—
Equity price risk represents the potential loss in value due to adverse changes in the level or volatility of equity prices. We are exposed to equity price risk through our trading activities primarily in the U.S. market. We attempt to reduce the risk of loss inherent in our market-making and in our inventory of equity securities by establishing limits on the notional level of our long inventory, monitoring these limits on a daily basis, and by managing net position levels within those limits.


Foreign Exchange Risk —
Foreign exchange risk represents the potential volatility to earnings or capital arising from movement in foreign exchange rates. A modest portion of our business is conducted in currencies other than the U.S. dollar, and changes in foreign exchange rates relative to the U.S. dollar can therefore affect the value of non-U.S. dollar net assets, revenues and expenses. A change in the foreign currency rates could create either a foreign currency transaction gain/loss (recorded in our consolidated statements of operations) or a foreign currency translation adjustment (recorded to accumulated other comprehensive income/ (loss) within the shareholders’equity section of our consolidated statements of financial condition and other comprehensive income/ (loss) within the consolidated statements of comprehensive income).

Value-at-Risk ("VaR")

We use the statistical technique known as VaR to measure, monitor and review the market risk exposures in our trading portfolios. VaR is the potential loss in value of our trading positions, excluding noncontrolling interests, due to adverse market movements over a defined time horizon with a specified confidence level. We perform a daily VaR analysis on substantially all of our trading positions, including fixed income, equities, convertible bonds, mortgage-backed securities and all associated economic hedges. These positions encompass both customer-related and strategic trading activities. A VaR model provides a common metric for assessing market risk across business lines and products. Changes in VaR between reporting periods are generally due to changes in levels of risk exposure, volatilities and/or correlations among asset classes and individual securities.

We use a Monte Carlo simulation methodology for VaR calculations. We believe this methodology provides VaR results that properly reflect the risk profile of all our instruments, including those that contain optionality, and also accurately models correlation movements among all of our asset classes. In addition, it provides improved tail results as there are no assumptions of distribution, and can provide additional insight for scenario shock analysis.

Model-based VaR derived from simulation has inherent limitations including: reliance on historical data to predict future market risk; VaR calculated using a one-day time horizon does not fully capture the market risk of positions that cannot be liquidated or offset with hedges within one day; and published VaR results reflect past trading positions while future risk depends on future positions.

The modeling of the market risk characteristics of our trading positions involves a number of assumptions and approximations. While we believe that these assumptions and approximations are reasonable, different assumptions and approximations could produce materially different VaR estimates. When comparing our VaR numbers to those of other firms, it is important to remember that different methodologies, assumptions and approximations could produce significantly different results.


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The following table quantifies the model-based VaR simulated for each component of market risk for the periods presented, which are computed using the past 250 days of historical data. When calculating VaR we use a 95 percent confidence level and a one-day time horizon. This means that, over time, there is a one in 20 chance that daily trading net revenues will fall below the expected daily trading net revenues by an amount at least as large as the reported VaR. Shortfalls on a single day can exceed reported VaR by significant amounts. Shortfalls can also accumulate over a longer time horizon, such as a number of consecutive trading days. Therefore, there can be no assurance that actual losses occurring on any given day arising from changes in market conditions will not exceed the VaR amounts shown below or that such losses will not occur more than once in a 20-day trading period.
 September 30, December 31,
(Dollars in thousands)2017 2016
Interest Rate Risk$740
 $696
Equity Price Risk82
 41
Diversification Effect (1)(57) (26)
Total Value-at-Risk$765
 $711
(1)
Equals the difference between total VaR and the sum of the VaRs for the two risk categories. This effect arises because the two market risk categories are not perfectly correlated.

We view average VaR over a period of time as more representative of trends in the business than VaR at any single point in time. The table below illustrates the daily high, low and average VaR calculated for each component of market risk during the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively.
(Dollars in thousands)High Low Average
For the Nine Months Ended September 30, 2017     
Interest Rate Risk$1,235
 $480
 $769
Equity Price Risk178
 32
 87
Diversification Effect (1)    (62)
Total Value-at-Risk$1,244
 $506
 $794
(Dollars in thousands)High Low Average
For the Year Ended December 31, 2016     
Interest Rate Risk$990
 $251
 $533
Equity Price Risk412
 6
 150
Diversification Effect (1)    (72)
Total Value-at-Risk$1,049
 $362
 $611
(1)
Equals the difference between total VaR and the sum of the VaRs for the two risk categories. This effect arises because the two market risk categories are not perfectly correlated. Because high and low VaR numbers for these risk categories may have occurred on different days, high and low numbers for diversification benefit would not be meaningful.

Trading losses exceeded our one-day VaR on one occasion during the first nine months of 2017.

The aggregate VaR as of September 30, 2017 was higher than the reported VaR on December 31, 2016. The increase in VaR was due to increased average inventory levels in asset classes that are accretive to VaR in the first nine months of 2017, compared to the end of 2016.

In addition to VaR, we also employ additional measures to monitor and manage market risk exposure including net market position, duration exposure, option sensitivities, and inventory turnover. All metrics are aggregated by asset concentration and are used for monitoring limits and exception approvals. In times of market volatility, we also perform ad hoc stress tests and scenario analysis as market conditions dictate. Unlike our VaR, which measures potential losses within a given confidence level, stress scenarios do not have an associated implied probability. Rather, stress testing is used to estimate the potential loss from market moves outside our VaR confidence levels.


Liquidity Risk

Liquidity risk is the risk that we are unable to timely access necessary funding sources in order to operate our business, as well as the risk that we are unable to timely divest securities that we hold in connection with our market-making and sales and trading, and strategic trading activities. We are exposed to liquidity risk in our day-to-day funding activities, by holding potentially illiquid inventory positions and in our role as a remarketing agent for variable rate demand notes.


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See the section entitled "Liquidity, Funding and Capital Resources" in Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," in this Quarterly Report on Form 10-Q for information regarding our liquidity and how we manage liquidity risk.

Our inventory positions including those associated with strategic trading activities, subject us to potential financial losses from the reduction in value of illiquid positions. Market risk can be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal quantities and/or at normal bid-offer spreads. Depending on the specific security, the structure of the financial product, and/or overall market conditions, we may be forced to hold a security for substantially longer than we had planned or forced to liquidate into a challenging market if funding becomes unavailable.


See the section entitled "Liquidity, Funding and Capital Resources" for information regarding our liquidity and how we manage liquidity risk.

Credit Risk

Credit risk refers to the potential for loss due to the default or deterioration in credit quality of a counterparty, customer, borrower or issuer of securities we hold in our trading inventory. The nature and amount of credit risk depends on the type of transaction, the structure and duration of that transaction and the parties involved. Credit risk also results from an obligor's failure to meet the terms of any contract with us or otherwise fail to perform as agreed. This may be reflected through issues such as settlement obligations or payment collections.


A key tenet of our risk management procedures related to credit risk is the daily monitoring of the credit quality of our long fixed income securities inventory. These rating trends and the credit quality mix are regularly reviewed with the executive financial risk committee. The following table summarizes the credit rating for our long corporate fixed income securities, taxable and tax-exempt municipal securities, and U.S. government and agency securities as a percentage of the total of these asset classes as of March 31, 2024:
AAAAAABBBBBNot Rated
Corporate fixed income securities— %— %— %0.1 %— %— %
Taxable and tax-exempt municipal securities14.5 %48.0 %19.4 %— %— %1.0 %
U.S. government and agency securities— %16.6 %— %— %— %0.4 %
14.5 %64.6 %19.4 %0.1 %— %1.4 %

Convertible and preferred securities are excluded from the table above as they are typically unrated.

Our different types of credit risk include:


Credit Spread Risk —
Credit spread risk arises from the possibility that changes in credit spreads will affect the value of financial instruments. Credit spreads represent the credit risk premiums required by market participants for a given credit quality (e.g., the additional yield that a debt instrument issued by a AA-rated entity must produce over a risk-free alternative). Changes in credit spreads result from potential changes in an issuer’sissuer's credit rating or the market’smarket's perception of the issuer’s credit worthiness.issuer's creditworthiness. We are exposed to credit spread risk with the debt instruments held in our trading inventory, including those held for strategic trading activites.inventory. We enter into transactions to hedge our exposure to credit spread risk through the use ofwith derivatives and certain other financial instruments. These hedging strategies may not work in all market environments and as a result may not be effective in mitigating credit spread risk.


Deterioration/Default Risk —
Deterioration/default risk represents the risk due to an issuer, counterparty or borrower failing to fulfill its obligations. We are exposed to deterioration/default risk in our role as a trading counterparty to dealers and customers, as a holder of securities, and as a member of exchanges. The risk of default depends on the creditworthiness of the counterparty and/or issuer of the security. We mitigate this risk by establishing and monitoring individual and aggregate position limits for each counterparty relative to potential levels of activity, holding and marking to market collateral on certain transactions. Our risk management functions also evaluate the potential risk associated with institutional counterparties with whom we hold derivatives, TBAs and other documented institutional counterparty agreements that may give rise to credit exposure.


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Collections Risk —
Collections risk arises from ineffective management and monitoring of collecting outstanding debts and obligations, including those related to our customer trading activities and margin lending.activities. Our client activities involve the execution, settlement and financing of various transactions. Client activities are transacted on a delivery versus payment, cash or margin basis. Our credit exposure to institutional client business is mitigated by the use of industry-standard delivery versus payment through depositories and clearing banks. Credit exposure associated with our customer margin accounts in the U.S. is monitored daily. Our risk management functions have credit risk policies establishing appropriate credit limits and collateralization thresholds for our customers utilizing margin lending.and counterparties.


Concentration Risk—
Concentration risk is the risk due to concentrated exposure to a particular product; individual issuer, borrower or counterparty; financial instrument; or geographic area. We are subject to concentration risk if we hold large individual securities positions, execute large transactions with individual counterparties or groups of related counterparties, or make substantial underwriting commitments. Concentration risk can occur by industry, geographic area or type of client. Securities purchased under agreements to resell consist primarily of securities issued by the U.S. government or its agencies. The counterparties to these agreements typically are primary dealers of U.S. government securities and major financial institutions. Inventory and investment positions taken and commitments made, including underwritings, may result in exposure to individual issuers and businesses. Potential concentration risk is carefully monitored through review of counterparties and borrowers and is managed through the use ofusing policies and limits established by senior management.



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We have concentrated counterparty credit exposure with fivethree non-publicly rated entities totaling $20.8$5.0 million at September 30, 2017.March 31, 2024. This counterparty credit exposure is part of our matched-book derivative program related to our public finance business, consisting primarily of interest rate swaps. One derivative counterparty represents 74.3represented 92.1 percent,, or $15.4$4.6 million,, of this exposure. Credit exposure associated with our derivative counterparties is driven by uncollateralized market movements in the fair value of the interest rate swap contracts and is monitored regularly by our financial risk committee. We attempt to minimize the credit (or repayment) risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically by senior management.


Operational Risk

Operational risk is the risk of loss, or damage to our reputation, resulting from inadequate or failed processes, people and systems or from external events. We rely on the ability of our employees and our systems, both internal and at computer centers operated by third parties, to process a large number of transactions. Our systems may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control. In the event of a breakdown or improper operation of our systems or improper action by our employees or third partythird-party vendors, we could suffer financial loss, a disruption of our businesses, regulatory sanctions and damage to our reputation. We also face the risk of operational failure or termination of our relationship with any of the exchanges, clearing houses, fully disclosed clearing firms, or other financial intermediaries we use to facilitate our securities transactions. Any such failure or termination could adversely affect our ability to effect transactions and manage our exposure to risk.


Our operations rely on secure processing, storage and transmission of confidential and other information in our internal and outsourced computer systems and networks. Our computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code, internal misconduct or inadvertent errors and other events that could have an information security impact. The occurrence of one or more of these events could jeopardize our or our clients' or counterparties' confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our clients', our counterparties' or third parties' operations. We take protective measures and endeavor to modify them as circumstances warrant. A further discussion of our procedures for cybersecurity risk management is included in Part I, Item 1C "Cybersecurity" in our Annual Report on Form 10-K for the year ended December 31, 2023.


In order to mitigate and control operational risk, we have developed and continue to enhance policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization. Important aspects of these policies and procedures include segregation of duties, management oversight, internal control over financial reporting and independent risk management activities within such functions as Risk Management, Compliance, Operations, Internal Audit, Treasury, Finance, Information Technology and Legal. Internal Audit oversees, monitors, evaluates, analyzes and reports on operational risk across the firm. We also have business continuity plans in place that we believe will cover critical processes on a company-wide basis, and redundancies are built into our systems as we have deemed appropriate. These control mechanisms attempt to ensure that operational policies and procedures are being followed and that our various businesses are operating within established corporate policies and limits.


In the third quarter
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Table of 2017, we migrated toContents
We operate under a fully disclosed clearing model for all of our selfsecurities inventories with the exception of convertible securities, and for all of our client clearing operations.activities. In a fully disclosed clearing model, we act as an introducing broker for client transactions and rely on Pershing, our clearing broker dealer, to facilitate clearance and settlement of our clients' securities transactions. The migration process introduced unique risks that could have caused disruptions inclearing services provided by Pershing are critical to our business or createdoperations, and similar to other unexpected capital charges or losses. We had preventative measures in place, including a project governance committee comprised of members of senior management, as well as senior management at our third party partner. In order to mitigate and control operational risk inherent in the migration, we had developed procedures specificservices performed by third-party vendors, any failure by Pershing with respect to the project implementation process, including parallel system operations, mock conversion testing,services we rely upon Pershing to provide could cause financial loss, significantly disrupt our business, damage our reputation, and ongoing monitoring and reporting to members of the project governance committee. We also had theadversely affect our ability to obtain additional methods of financing from existing creditors in the event unknown capital charges arose.serve our clients and manage our exposure to risk.


Human Capital Risk

Our business is a human capital business and our success is dependent upon the skills, expertise and performance of our employees. Human capital risks represent the risks posed if we fail to attract and retain qualified individuals who are motivated to serve the best interests of our clients, thereby serving the best interests of our company. Attracting and retaining employees depends, among other things, on our company's culture, management, work environment, geographic locations and compensation. There are risks associated with the proper recruitment, development and rewards of our employees to ensure quality performance and retention.


Legal and Regulatory Risk

Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements and loss to our reputation we may suffer as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. We are generally subject to extensive regulation in the various jurisdictions in which we conduct our business. We have established procedures that are reasonably designed to ensureachieve compliance with applicable statutory and regulatory requirements, such as public company reporting obligations, regulatory net capital requirements, sales and trading practices, potential conflicts of interest, use and safekeeping of customer funds and securities, anti-money laundering, privacy, and

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financial and electronic recordkeeping. We have also established procedures that are reasonably designed to require thatachieve compliance with our policies relating to ethics and business conduct are followed.conduct. The legal and regulatory focus on the financial services industry presents a continuing business challenge for us.


Our business also subjects us to the complex income tax laws of the jurisdictions in which we have business operations, and these tax laws may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes.


Effects of Inflation

EFFECTS OF INFLATION
Because our assets are liquid and generally short-term in nature, they are not significantly affected by inflation. However, the rate of inflation affects our expenses, such as employee compensation, office space leasingoccupancy costs, and communications charges and travel costs, which may not be readily recoverable in the price of services we offer to our clients. To the extent inflation results in rising interest rates and has adverse effects upon the securities markets, it may adversely affect our financial position and results of operations.


ITEMItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Quantitative and Qualitative Disclosures About Market Risk.
The information under the caption "Risk Management" in Part I, Item 2, "Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations," in this Quarterly Report on Form 10-Q is incorporated herein by reference.


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ITEMItem 4. CONTROLS AND PROCEDURES.

Controls and Procedures.
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)1934, as amended (the "Exchange Act")). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (a) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange CommissionSEC rules and forms and (b) accumulated and communicated to our management, including our principal executive officer and our principal financial officer, to allow timely decisions regarding disclosure.


During the thirdfirst quarter of our fiscal year ending December 31, 2017, we migrated to a fully disclosed clearing model for all of our self clearing broker dealer operations. Management believes this conversion may constitute a2024, there was no change in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934)Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II.    Other than as described above, there were no other changes in our system of internal control over financial reporting during the third quarter of our fiscal year ending December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Information


PART II.    OTHER INFORMATION

ITEMItem 1.    LEGAL PROCEEDINGS.

Legal Proceedings.
The discussion of our business and operations should be read together with the legal proceedings contained in Note 11 to our unaudited consolidated financial statements included in Part I, Item 3 "Legal Proceedings" in our Annual1 of this Quarterly Report on Form 10-K for the fiscal year ended December 31, 2016.10-Q is incorporated herein by reference.



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ITEMItem 1A. RISK FACTORS.

Risk Factors.
The discussion of our business and operations should be read together with the risk factors contained in Part I, Item 1A of"Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as updated in our subsequent reports on Form 10-Q filed with the SEC.2023. These risk factors describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. The following information updates

There have been no material changes to the risk factors fromdisclosed under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2023.

The use of estimates and valuations in measuring fair value involve significant estimation and judgment by management.

We make various estimates that affect reported amounts and disclosures. Broadly, those estimates are used in measuring fair value of certain financial instruments, investments in private companies, accounting for goodwill and intangible assets, establishing provisions for potential losses that may arise from litigation, and regulatory proceedings and tax examinations. Estimates are based on available information and judgment. Therefore, actual results could differ from our estimates and that difference could have a material effect on our consolidated financial statements. With respect to accounting for goodwill, we complete our annual goodwill and intangible asset impairment testing in the fourth quarter of each year or earlier if goodwill impairment indicators are present. Impairment charges resulting from this valuation analysis could materially adversely affect our results of operations. In 2016, we recorded an $82.9 million non-cash impairment charge to reduce the carrying value of the goodwill associated with our Asset Management segment following significant net client outflows of AUM in 2016, primarily from our value equity strategies, due to investment performance below benchmarks and an extended cycle of investors favoring passive investment vehicles over active management. Throughout 2017, our Asset Management segment has experienced a further decline in profitability as revenues have decreased in product offerings with higher management fees, which has not been fully offset with earnings from new product offerings. As a result, we identified impairment indicators in the third quarter of 2017 related to our Asset Management segment, and performed an interim goodwill impairment test as of July 31, 2017, which resulted in a non-cash goodwill impairment charge of $114.4 million.

Financial instruments and other inventory positions owned, and financial instruments and other inventory positions sold but not yet purchased, are recorded at fair value, and unrealized gains and losses related to these financial instruments are reflected on our consolidated statements of operations. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity. Difficult market environments, such as those experienced in 2008, may cause financial instruments to become substantially more illiquid and difficult to value, increasing the use of valuation models. Our future results of operations and financial condition may be adversely affected by the valuation adjustments that we apply to these financial instruments.

Investments in private companies are valued based on an assessment of each underlying security, considering rounds of financing, third party transactions and market-based information, including comparable company transactions, trading multiples (e.g., multiples of revenue and EBITDA) and changes in market outlook, among other factors. These valuation techniques require significant management estimation and judgment.

A failure to protect our computer systems, networks and information, and our clients’ information, against cyber attacks, data breaches, and similar threats could impair our ability to conduct our businesses, result in the disclosure, theft or destruction of confidential information, damage our reputation and cause significant financial and legal exposure.

Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. There have been several highly publicized cases involving financial services companies, consumer-based companies and other companies, as well as governmental and political organizations, reporting breaches in the security of their websites, networks or other systems. Some of the publicized breaches have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, including through the introduction of computer viruses or malware, cyberattacks and other means. There have also been several highly publicized cases where hackers have requested "ransom" payments in exchange for not disclosing customer information.



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A successful penetration or circumvention of the security of our systems could cause serious negative consequences for us, including significant disruption of our operations and those of our clients, customers and counterparties; misappropriation of our confidential information or that of our clients, customers, counterparties or employees; or damage to our computers or systems and those of our clients, customers and counterparties; and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and reputational harm, all of which could have a material adverse effect on us.

We must continuously monitor and develop our systems to protect our technology infrastructure and data from misappropriation or corruption. Despite our efforts to ensure the integrity of our systems and information, we have not been and may not be able to anticipate, detect or implement effective preventive measures against all cyber threats, especially because the techniques used are increasingly sophisticated, change frequently, and are often not recognized until months after the attack. Cyber attacks can originate from a variety of sources, including third parties who are affiliated with foreign governments or employees acting negligently or in a manner adverse to our interests. Third parties may seek to gain access to our systems either directly or using equipment or security passwords belonging to employees, customers, third-party service providers or other users of our systems. In addition, due to our interconnectivity with third-party vendors, central agents, exchanges, clearing houses and other financial institutions, we could be adversely impacted if any of them is subject to a successful cyber attack or other information security event.

Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks have been and may be vulnerable to unauthorized access, misuse, computer viruses or other malicious code and other events that could have a security impact. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities, exposures, or information security events. Due to the complexity and interconnectedness of our systems, the process of enhancing our protective measures can itself create a risk of systems disruptions and security issues.

The increased use of cloud technologies can heighten these and other operational risks. Certain aspects of the security of such technologies are unpredictable or beyond our control, and this lack of transparency may inhibit our ability to discover a failure by cloud service providers to adequately safeguard their systems and prevent cyber attacks that could disrupt our operations and result in misappropriation, corruption or loss of confidential and other information. In addition, there is a risk that encryption and other protective measures, despite their sophistication, may be defeated, particularly to the extent that new computing technologies vastly increase the speed and computing power available.

Legislative and regulatory proposals could significantly curtail the revenue from certain products that we currently provide or otherwise have a material adverse effect on our results of operations.

Proposed changes in laws or regulations relating to our business could decrease, perhaps significantly, the revenue that we receive from certain products or services that we provide, or otherwise have a material adverse effect on our results of operations. For example, proposed legislation brought under consideration by the U.S. House of Representatives in November 2017 would reduce the income tax rates paid by U.S. corporations, as well as limit certain other deductions that U.S. corporations can take. Although a reduction in overall corporate tax rates would generally be positive for our results of operations, it would cause us to incur a one-time non-cash write-off of our existing deferred tax assets based on the proposed lower rate. This write-off could be significant (i.e., $50 to $55 million) based on the tax rates currently proposed.  

In addition, the U.S. House of Representatives’ proposed tax reform legislation contains provisions that would eliminate advance refunding bonds and the tax exemption currently available for certain private activity bonds. Advance refunding bonds are those issued by a local or state government to refinance outstanding bonds before the original bonds mature or are callable in order to take advantage of lower borrowing costs. Tax-exempt private activity bonds are bonds issued by or on behalf of a local or state government for the purpose of financing facilities owned or used by private entities or 501(c)(3) organizations, including non-profit hospitals, universities, and multifamily and senior living housing developers. Our public finance investment banking business receives significant revenues as a result of underwriting activity in connection with debt issuances by government and non-profit clients, primarily on a tax-exempt basis. If advance refunding bonds and the tax exemption for certain private activity bonds are eliminated, our public finance business would be adversely effected to the extent that the elimination reduces the number of bond offerings, or those bond offerings are instead completed on a taxable basis and we are not able to compete effectively to serve as underwriter for those bonds. Also, federal law currently allows investors in debt issuances by government and non-profit entities to exclude the bond interest for federal income tax purposes, resulting in lower interest expense for the issuer as compared to a taxable financing. As the U.S. House of Representatives and U.S. Senate considers tax reform legislation, any other changes to, or a reduction or elimination of tax-exempt bond interest, or a reduction in individual income tax rates, could negatively impact the value of the municipal securities we hold in our securities inventory as well as our public finance investment banking business

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more generally, which would negatively impact the results of operations for these businesses.  At this time, however, it is not possible to ascertain which provisions will be included in a final legislative package or whether the legislation will pass at all and, therefore, we cannot estimate the total effect that these changes, if enacted, may have on our financial condition or results of operations.

ITEMItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.Unregistered Sales of Equity Securities and Use of Proceeds.

The table below sets forth the information with respect to purchases made by or on behalf of Piper JaffraySandler Companies or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934)Act), of our common stock during the quarter ended September 30, 2017.March 31, 2024.
Total Number of SharesApproximate Dollar
Purchased as Part ofValue of Shares Yet to be
Total Number ofAverage PricePublicly AnnouncedPurchased Under the
PeriodShares PurchasedPaid per SharePlans or ProgramsPlans or Programs (1)
Month #1
January 1, 2024 to January 31, 202499,888 $167.60 — $138 million
Month #2
February 1, 2024 to February 29, 2024189,089 $186.94 — $138 million
Month #3
March 1, 2024 to March 31, 2024— $— — $138 million
Total288,977 $180.26 — $138 million
(1)Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million of common stock through December 31, 2024.

Item 3. Defaults Upon Senior Securities.
Not applicable.

Item 4. Mine Safety Disclosures.
Not applicable.

Item 5. Other Information.
During the quarter ended March 31, 2024, no director or officer of the Company adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K, except as follows:

On February 13, 2024, Debbra L. Schoneman, our President, through the Debbra L Schoneman Revocable Trust, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 14,050 shares of our common stock. The arrangement is effective until March 28, 2025. This Rule 10b5-1 trading arrangement is in accordance with our policies regarding insider trading and actual sale transactions made pursuant to this trading arrangement will be disclosed publicly in Section 16 filings with the SEC in accordance with applicable securities laws, rules and regulations.

Piper Sandler Companies | 56

      Total Number of Shares Approximate Dollar
      Purchased as Part of Value of Shares Yet to be
  Total Number of Average Price Publicly Announced Purchased Under the
Period Shares Purchased Paid per Share Plans or Programs 
Plans or Programs (1)
Month #1         
  (July 1, 2017 to July 31, 2017) 12,619
 $64.00
 —
 $70
million
Month #2         
  (August 1, 2017 to August 31, 2017) 2,825
 $57.75
 —
 $70
million
Month #3         
  (September 1, 2017 to September 30, 2017) 9,406
 $52.96
 9,406
 $150
million
Total 24,850
 $59.11
 9,406
 $150
million
(1)
Effective August 14, 2015, our board of directors authorized the repurchase of up to $150.0 million of common stock through September 30, 2017. On August 10, 2017, our board of directors authorized the repurchase of up to $150.0 million of common stock, effective from September 30, 2017 through September 30, 2019. There were no share repurchases under the authorization that became effective on September 30, 2017.


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ITEMItem 6. EXHIBITS.Exhibits.
Exhibit   Method
Number     Description of Filing
     
4.1 
First Amendment to Second Amended and Restated Indenture (Secured Commercial Paper Notes - Series I), dated September 29, 2017, between Piper Jaffray & Co. and the Bank of New York Mellon.
 Filed herewith
4.2 
Amended and Restated Indenture (Secured Commercial Paper Notes - Series II), dated as of April 30, 2015, between Piper Jaffray & Co. and the Bank of New York Mellon.
 (1)
4.3 
First Amendment to Amended and Restated Indenture (Secured Commercial Paper Notes - Series II), dated as of September 29, 2017, between Piper Jaffray & Co. and the Bank of New York Mellon.
 (2)
31.1 
Rule 13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive Officer.
 Filed herewith
31.2 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. 
 Filed herewith
32.1 
Section 1350 Certifications.
 Filed herewith
101 Interactive data files pursuant to Rule 405 Registration S-T: (i) the Consolidated Statements of Financial Condition as of September 30, 2017 and December 31, 2016, (ii) the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016, (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 and (v) the notes to the Consolidated Financial Statements. Filed herewith

_________________
(1)
NumberFiled asDescription
3.1
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 4.13.1 to the Company's Current Report on Form 8-K, filed with the SecuritiesMay 18, 2023).
3.2
Amended and Exchange Commission on October 2, 2017, and incorporatedRestated Bylaws (as of February 9, 2023) (incorporated by reference herein.

(2)Filed asto Exhibit 4.23.1 to the Company's Current Report on Form 8-K, filed withFebruary 10, 2023).
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive Officer. *
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. *
32.1
Section 1350 Certifications. **
101The following financial information from our Quarterly Report on Form 10-Q for the Securitiesquarter ended March 31, 2024, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders' Equity, (v) the Consolidated Statements of Cash Flows and Exchange Commission(vi) the Notes to the Consolidated Financial Statements. *
104The cover page from our Quarterly Report on October 2, 2017,Form 10-Q for the quarter ended March 31, 2024, formatted in iXBRL and incorporated by reference herein.included in Exhibit 101. *



*    Filed herewith.
**    This information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report has beento be signed belowon its behalf by the following persons on behalf of the registrant and in the capacities indicated on November 8, 2017.undersigned thereunto duly authorized.



PIPER SANDLER COMPANIES
Date:May 7, 2024By/s/ Chad R. Abraham
PIPER JAFFRAY COMPANIESNameChad R. Abraham
Its
By/s/ Andrew S. Duff
ItsChairman and Chief Executive Officer
ByDate:May 7, 2024By/s/ Debbra L. SchonemanKatherine P. Clune
ItsNameKatherine P. Clune
ItsChief Financial Officer