Stifel Financial Corp. (SF) Earnings Call Transcript & Summary

Good day, and welcome to the Stifel Financial Q2 '26 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joel Jeffrey, Head of Investor Relations. Please go ahead.

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

Thanks, Joel. Good morning, everyone, and thank you for joining us. We enter 2026 with a clear plan. At the beginning of the year, we said we would grow revenue, increase our loan book by up to $4 billion, increased treasury deposits, improved operating leverage and deploy our substantial excess capital where it would earn the best risk-adjusted returns. Six months into the year, we're doing what we said we would do. Our second quarter and first half results reflect the strength of our business and the momentum we're seeing across the firm. Second quarter net revenue of $1.45 billion increased 13% from a year ago, while non-GAAP earnings per share of $1.42 and increased 25%. Both represented the second highest second quarter results in our history, following our strongest first quarter ever. The result was our strongest first half in Stifel's history, generating record net revenue of $2.9 billion, 15% above our previous record and record earnings per share of $2.87, up 28% from our prior record. Return on tangible common equity was approximately 24% for both the quarter and the first half of the year, while tangible book value per share increased 15% over the prior year. Our top line growth was driven by another quarter of record global wealth management revenue and continued growth in net interest income as we increased our loan book by $2.6 billion during the quarter, keeping us well on pace to achieve our full year guidance of up to $4 billion of balance sheet growth. Just as importantly, our strategy of putting advisers first continues to differentiate Stifel. Adviser recruiting remains as competitive as I've ever seen it. Client engagement remains strong. And earlier this month, Stifel was ranked #1 in employee adviser satisfaction by J.D. Power for the fourth consecutive year. I'll come back to why that's so important in just a moment. Our institutional business also continued its strong momentum, led by Investment Banking as the breadth of our platform continues to generate growth across ever-changing market environments. At the beginning of the year, we said we'd improve the profitability of our institutional business, and we've done just that. Institutional pretax margins improved to 19.5% and in the first half of '26 compared to 11% a year ago through revenue growth and lower expense ratio, reflecting the benefits of the efficiency initiatives we implemented in 2025. Our business continues to perform well, and we're generating significant capital. As I've often said, we have 4 levers for deploying capital. During the second quarter, we pulled 3 of the reinvestment into the business, share repurchases and dividend payments, which combined for more than $0.5 billion of capital deployment in the second quarter alone. This illustrates our ability and willingness to opportunistically deploy our excess capital when we believe the risk-adjusted returns are compelling. Looking ahead, the broader market remains constructive, although volatility is likely to remain part of the landscape. The economy is healthy, client dialogue remains high and the capital markets continue to broaden. At the same time, we remain mindful of the secular forces shaping our industry, including artificial intelligence, expanding capital needs, private credit, changes in market structure and geopolitical uncertainty. An environment like this, trusted advice becomes even more valuable. Given the breadth of our business and the depth of our client relationships, we believe Stifel is exceptionally well positioned to help clients navigate an increasingly complex world. Before turning the call over to Jim, I'd like to spend a few minutes talking about service technology and why I believe they go hand-in-hand. As I mentioned earlier, people was ranked #1 in employee adviser satisfaction by J.D. Power for the fourth consecutive year. I'm especially proud of that recognition because it comes directly from our advice. It tells us we're executing on our mission of making Stifel, the firm of choice for advisers. Our overall score was well above the Employee Advisor segment average and we rank #1 in leadership and culture, operational support and products and marketing. Look, awards don't define us, but 4 consecutive #1 ranking tell us we're doing something right. You own on the trust of advisors 4 years in a row by standing still. You are by listening, investing and continually improving. Our advisers are the foundation of our success. Net philosophy also shapes how we're thinking about artificial intelligence. Technology shouldn't ask advisers to adapt to software. Software should adapt to the way advisers work. That's the philosophy behind what we are building. In the first half of the year, market reactions have suggested that advances in AI will at least diminish the value of financial advice and at worse eliminate the need for financial advisers altogether. This, however, is completely disconnected from what we are seeing in the market for financial advisers. Transaction packages are elevated and adviser recruiting remains as competitive as I've seen it for experienced trusted financial advice. So either the largest wealth management firms in the world are increasing investments into a business that apparently is going away or as we see it, the industry will continue to evolve with more capable and efficient advisers using AI to benefit their productivity and their client service. I think markets sometimes confuse access to information with judgment. AI is making information more abundant. That only increases the value of judgment, trust and relationships. At Stifel, we always believe our people are our competitive advantage. AI simply raises the ceiling on what great people can accomplish. It is proving to be far more of a productivity accelerator than a replacement for talented people. It enables our bankers to evaluate more opportunities. Our research analysts uncover more insights. Our advisers spend more time with clients and our associates to focus on higher-value work. The result isn't less opportunity for our people, it's more. In short, we don't see AI as replacing human judgments. We see it as expanding human potential. In terms of the revenue potential for AI, look, by all indications, we're still in the early innings. AI is creating one of the most important secular investment opportunities of our time. and that opportunity runs directly through the middle market where Stifel lives. It creates meaningful opportunities for us to advise clients or capital formation and provide insight as our clients evaluate how AI will shape their strategies, capital needs, capital needs and competitive positioning. With that, I'll turn the call over to Jim.

Thanks, Ron, and good morning, everyone. Total non-GAAP revenues of $1.45 billion surpassed the consensus estimate by 2%. Investment Banking was a primary upside driver, exceeding expectations by $23 million or 7% and as we benefited from the close of the sizable transaction late in the quarter, which was the primary factor in our IB revenue coming in above our guidance. In comparison with The Street estimate, capital raising revenue was the primary driver of the beat. Transactional revenue came in 2% below expectation and decreased 3% from the prior year. I'll cover the components in more detail when we get to the institutional segment. Asset Management revenue was 1% above consensus and increased 13% from the prior year, driven by market appreciation and net new asset growth. Net interest income came in at the higher end of our guidance and $4 million above consensus, driven by higher interest-earning assets. Expenses were again well controlled, and we continue to see the benefits of the efficiency initiatives of the past few years. Our comp ratio of 57% with 60 basis points below consensus and down from 57.5% in the first quarter. The higher non-compensation expense was primarily the result of growth in our business. Excluding the more than $4 million of higher investment banking gross-ups and credit provisions, and non-comp expenses would have been relatively in line with estimates. The effective tax rate was 24.4%, slightly below consensus but within our guidance. Turning to Slide 4. Global Wealth Management generated record net revenue of $957 million, up 13% year-on-year. Results were driven by transactional revenue as well as growth in net interest income and asset management revenue. The record results are even more impressive given that this was the first full quarter following the sale of SIA, which reduced our asset management and transactional revenue run rate. We ended the quarter with record total client assets of $580 billion and fee-based assets of $240 billion, up 12% and 16%, respectively, as we benefited from stronger equity markets, and net new asset growth. Excluding the impact of the assets associated with SAA, total client assets and fee-based assets increased more than 14% and 19%, respectively. On organic growth, net new assets in the low single digits were consistent with the first quarter. Our recruiting pipeline remains robust. The activity is episodic and dependent on changing competitive and market dynamics. As Ron mentioned earlier, we increased our loan book meaningfully in the quarter, as we generated an incremental $2 billion in fund banking loans. Based on this incremental growth and a stable NIM, we expect the third quarter net interest income to be in a range of $290 million to $300 million. Over the past year, our combined wealth management and treasury deposits were up approximately $3.3 billion. This includes a more than $1 billion increase in sweep deposits and a $3.8 billion increase in treasury deposits, partially offset by a decline in smart rate. In the quarter, our sequential cash balances were impacted by seasonal tax payments as sweep and smart rate balances declined by $670 million and $930 million, respectively. Non-Wealth client funding increased $410 million, reflecting strong momentum from our venture group. Within Venture, we saw more than $700 million of deposit growth, this was offset by some outflows within fund banking deposits. The second quarter illustrated our ability to fund our loan growth with off-balance sheet deposits. While we moved roughly $2.6 billion of venture deposits onto our balance sheet, we still have more than $3 billion available, and we continue to anticipate additional quarterly growth of $1 billion in venture deposits. Consequently, we are highly confident in our ability to reach our full year guidance of up to $4 billion of loan growth with ample funding flexibility beyond that. Turning to Slide 5. Our institutional group posted its second strongest second quarter in our history. Revenue was $481 million, up 15% year-over-year, driven by increased capital raising. In the first half of 20 Institutional revenue was up 21%, driven by an increase of more than 43% in investment banking. In the second quarter, firm-wide investment banking revenue totaled $332 million, up 42% year-over-year, coming in slightly above our recent guidance. Advisory revenue increased 24% to $157 million, with continued strength in financials, industrials and technology. Capital raising revenue was $102 million, up 121% year-over-year and was our second strongest second quarter result with increased issuer engagement led by health care, industrials, energy and financials. Fixed income underwriting revenue of $64 million was up 18% year-over-year driven by increased public finance activity and higher corporate issuance. We remain the #1 negotiated issue manager and public finance by deal count with a 14% market share year-to-date. Investment banking and advisory pipelines remain very strong. Strategic dialogue is active. The new issue market has reopened and financial sponsor activity, which remains below historical levels, represents a meaningful upside as it recovers. We continue to anticipate a strong 2026. Transactional revenue declined 19% year-over-year, primarily because of lower fixed income revenue as our second quarter 2026 results benefited from a roughly $30 million gain in our aircraft business. Excluding that gain, our results would have been relatively comparable to a year ago. Equity transactional revenue was down 4%, reflecting the impact of our European restructuring. The solid operating environment and benefits of our improved efficiency evident in the institutional Group's pretax margin, which was 19.5% in the first half of 2026, an 850 basis point improvement from the prior year. Moving on to expenses. We're able to recognize some of our improved operating efficiencies through a lower comp ratio in the quarter. We capitalized on the strong operating environment as well as the benefits of our European reorganization and the sale of by lowering our comp ratio by 50 basis points sequentially to 57%. Assuming market conditions hold up for the remainder of 2026, we anticipate additional comp flexibility in the second half of the year. Non-compensation expenses totaled $309 million, up 11% year-over-year, with essentially all of the increases tied to growth in our business, including higher investment banking gross-ups credit provisions, advertising and data processing. Our operating non-comp ratio was 19.6%, which was within our full year guidance of 18% to 20%. Turning to Slide 7. Our capital position remains strong and provides meaningful strategic flexibility. Tier 1 leverage ratio came in at 11.2%, and while the Tier 1 risk-based capital ratio declined to 17.3%, reflecting the deliberate deployment of capital into loan growth. Based on a 10% Tier 1 leverage target, we ended the quarter with nearly $480 million of excess capital, and this is after funding $2.6 billion of loan growth and repurchasing 2.4 million shares of stock during the quarter. Finally, we have 7.8 million shares remaining under the current authorization, assuming no additional repurchases and a stable stock price -- our fully diluted share count for the third quarter is expected to be approximately 160.5 million shares. And with that, Ron, back to you.

Thanks, Jim. Before I turn the call over to the operator, let me come back to where I began. We entered 2026 with a clear plan in 6 months into the year. We've done what we've said we would do. Revenues growing, operating efficiency is improving. We're on pace to achieve our balance sheet growth objectives, and we're deploying capital with the same discipline as guided this firm for decades. . Let me also say a word about capital allocation because I suspect that question is coming. Our priorities haven't changed and they're all measured against really 1 standard, return on invested capital. Our priority has been and always will be organic growth, investing in our advisers, our bankers, our technology and our balance sheet is how we built Stifel over the last 30 years and how we'll continue to build it in the years ahead. Second, we'll continue to repurchase shares when we see a disconnect between our business outlook and the price of our stock. We were more active this quarter because in our judgment, buying back our own stock represented 1 of the highest risk-adjusted returns available to us. Growing our balance sheet substantially while increasing our share repurchase activity illustrates our ability and willingness to put our excess capital to work opportunistically. Third, will remain disciplined on opportunities regarding acquisitions. A key element of our long-term growth strategy has been strategic acquisitions, but we will not compromise our return standards simply to get a deal done. But we are always looking at potential deals, given today's valuations, 1 of the most attractive returns we see is investing in our own business and buying back our own stock. Markets never move in a straight line, but we've built this firm by taking disciplined decisions over many years, not by chasing the moment. That will not change. I know that everyone wants to know about what the second half will look like. Let me start by saying the second half is always seasonally strong. And as we enter the back half of the year, I feel very good about where we are. Asset management revenues are up, our NII run rate is at the higher end of our full year guide. Investment banking pipelines are robust, client activity remains healthy. Our capital position is strong, and we're building a stronger, more valuable people. So while we're proud of what we've accomplished in the first half of the year, we're even more excited about where we're headed. So with that, operator, let's open the line for questions.

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

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

A lot of questions in that question. But sure, I mean, look, first of all, like a lot of people -- for both reasons, highly correlate our advisory with bank depository M&A. And we just announced in July a nice transaction, which I think will close this year with a significant fee. But I would say that bank depository M&A relative to what we expect will happen is relatively muted. There's -- we talked about a buyer strike -- we've talked about a lot of uncertainty in the market. But the core fundamentals haven't changed. But that's not all that's driving my optimism. In fact, I would say it's not. It's across the other parts of Stifel's platform. And people forget that we have a diversified platform in health care, in industrials, in technology, and in energy. And all of those are improving, and we're just -- we're seeing that -- so we're not -- you shouldn't correlate although it's important, you shouldn't just correlate us as a bank depository investment bank. That wouldn't make a mistake. And so -- the -- what's kind of interesting for us, Stephen, is that -- and I'll let Jim add some color. But from my perspective, the environment is strong. And while I'm optimistic, I see upside because sponsor activity will -- if it does pick up, it's really going to help us because a lot of these companies were all pick up or middle market. So the bouncer activity actually shows upside. I think bank M&A has upside from my remarks here. There's more upside potential. Capital raising has been strong, and we continue to see it outside of financials. It was really strong in health care, for example. So when I unpack what I'd like to say is that while I'm optimistic, sometimes I'll say I'm optimistic when I look out below because the market is overly optimistic. Today, I'm optimistic, and I see upside.

I think you covered it very well, Ron. The only thing I would add related to bank M&A, as you sit here today and think about the opportunity for growth there, there's probably around 120 banks over $10 billion today. So you're seeing a little bit more of a measured pace in that M&A cycle. . But the 28 presidential election still puts a focus on this open regulatory window and all the factors Ron talked about, in addition to the fact the economy is good and bank stocks have performed well. You mentioned the recent transaction we just announced. -- there's a lot of active dialogue there, but we're getting to the point in the year that anything we probably announced at this point is going to be a 2027 transaction. but there's a lot of active dialogue there, and it's a driver of what we -- when we come out with our '27 guidance, it will be certainly be a bright spot.

Did I cover all your questions?

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

Yes, I'll take the second question first. I'll let Jim think about the incremental margin. I guess I haven't really thought of it that way, the 39% number you're talking about. But with respect to AI. It's interesting that my views have changed a little bit, Steven. And I think AI will have operational efficiencies across the board. But what I seen and where my perspective has changed, I thought that it would be a replacement for human costs, okay? And what it really is turning out is to be an accelerator of our business. So I thought we don't need as many people. But what's happened is we -- across all of our businesses in wealth and in fixed income and equities and investment banking, we are becoming more skilled at uncovering opportunities and that is leading to needing people. And I think about some of the efficiency things that we can do, and it's like the idea that with -- and even in your space, Dave, you must be saying this, the ability to -- for analysts to cover more companies because a lot of the historical work can be done. But what we really want is like your opinion, but what do you think of the results and I see productivity gains, and that's where I see it. So AI has -- I've changed my view about thinking, Oh, we don't need as many people. That's not true. In fact, we need more talented people to take advantage of what I see is our ability to even compete and greater market share incremental margins.

Yes. In terms of incremental margins, I think the answer is different when you look at each of our individual businesses. When you look at the institutional group, that incremental margin should be over 20% on higher revenues in the Private Client Group, that's probably somewhere north of 20% as well. And then we look at the bank, that's obviously a much higher margin business. But when you look at the consolidated entity, and you think about operating leverage and where we're getting that operating leverage, a lot of that is going to come through the compensation line item. And year-to-date basis, we've been able to take about 80 basis points off the comp to revenue ratio. And that's really a function of the things we hit on the sale of SIA, the restructuring of European activities, you also combine that with a higher net interest income. It produces a pretty strong lever there. On the last quarter call, we talked about taking somewhere between $70 million and $80 million of comp costs out of the -- with the sale and restructuring transactions. And then you look at NII, we're up over $30 million year-to-date. And you can look at our guide for 3Q and then layer on kind of our growth assumptions for the full year, you can see we're going to have a pretty nice second half in terms of NII in our forecast. That comes at a much higher incremental margin. So you combine those 2 factors together, we should be getting more incremental comp leverage. And I think where we're at today, we feel pretty comfortable that if the operating environment holds, we'll be at the midpoint to the lower half of the overall comp guidance range of $56.5 million to $57.5 million.

Yes. That was -- Steve, you get all the questions out to the other people online price thinking gee, -- but I'll say this. Jim just said a lot of words there. It's been a number of years since we've adjusted our comp ratio in the second quarter. okay? You go back and look. And so this year, we did, which probably speaks to your question about incremental margin and how we're viewing the second half of the year. okay? So thanks for your questions. Yes.

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

Great. So I have a similar theme here. I'm going to maybe split it to 2 questions, though. 2 different focuses. So Ron, you brought up a really interesting point on the AI adviser threat concerns that are out there in the market. given the market's fears, I figured there would maybe be greater uncertainty out in the recruitment market and maybe that there would be a little bit less competitive pressure there? It sounds like from your comments, that's not the case. Do you think that, that holds or do you think that there may eventually be a bit of a wait-and-see moment and a little bit more maybe rational activity on the recruitment front?

Look, I think that maybe if there is a little bit of a wait and see, maybe it's us, okay? And it's me trying to say, well, wait a minute, it seems like I'll wake up 1 morning and read about some new AI productivity tool and all the wealth management stocks get hammered. And in the same day, I'll come in and Jim tell me, Oh, my on, everyone is up in the recruiting packages. And I'm like, wow, there's a disconnect here. And to me, what AI will do is we'll actually increase the value of advice, just like it's doing in banking. Like I said, what we're seeing is -- and I always make these comments, AI make talented people more talented than less people -- less talented people less talented. And so it's an amplifier. And I see that with what we can do on the adviser front since you're talking about wealth is just make our advisers more productive, easier to communicate, easier to have meetings and increase the value of advice because as you get more information in the marketplace, which is what AI is doing, it's making it more abundant, the value of human judgment and advice and relationships increases. Everyone thinks no, it doesn't. Someone will just use AI as their adviser. I don't see that, okay? And I'm just going to stick with that. And nor does the mark, okay, otherwise, the market wouldn't be paying what they're paying for the last mile of advice. So that's how I see it.

Okay. Great color. And then sticking on the AI theme, kind of built on what you were just saying there, we've certainly heard stats and read studies about how adviser productivity can pick up. I think the numbers we've seen are about 10% to 30% pickup in productivity for advisers. I'm interested in your take on that. But how do you ensure that the advisers redeploy this freed up time to be more productive? I mean, you talked about kind of the equity research angle. There's an opportunity for analysts to perhaps expand coverage and focus more on the value-added aspects of the value chain. But in the advice space, just curious how you ensure that, that productivity could drive better same-store sales growth over time? And is there a risk that the industry eventually starts to face some fee pressure there as advisers can do more and then perhaps competitors begin to compete that pricing lower to win share?

Well, your second question first. I mean, look, there's been fee pressure in this business since 1975, okay, when May Day occurred. And so you've seen that. But the least amount of fee pressure has been -- the most has been in the building blocks of advice. So ETFs and all the products, and you've seen those fees get compressed because they're the wholesale side of advice. The relationship side, the advice, we don't pick stocks really anymore. -- we provide holistic financial advice. And so of course, there will always be some fee pressure. But net-net, I see it improving overall because the markets generally go up over time, at least we hope so. With respect to how I ensure -- I think it speaks to Stifel's culture in that the way I know that it will be because we leave it to the advisers. I mean these are individuals who are building individual businesses, and I don't need to tell them to be to allocate their time to more productive things. They just do it naturally. And in fact, the fact that I'm not sitting here browbeating people with ought to be more productive is why people like Stifel. We give them the tools they deploy them and we have a highly incentivized system for advisers to be as productive as they see fit. And that's -- so I'm very confident that if we put the tools on the table, our advisers will use it productively as each of them see fit, not as I see it fit at some homogenized fashion. Yes. On the institutional side, look, it will drive because we -- these are all partners and across the business and they want to be more productive. So again, it's an amplifier. All right, not a replacement. And I think that's going to be the new thing that's coming out. You're going to see firms not talk about reducing analyst MD ratios. You're going to start seeing people saying, shoot, this makes us more competitive.

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

So first question, I just want to ask about organic asset growth in wealth and kind of the algorithm. And specifically, I'd love to hear about just kind of client wallet and how that's been evolving just as you guys have added a lot more capabilities over the last 5, 10 years. Just are you winning more assets per clients as we think about kind of that part of the algorithm. And then on the adviser recruiting, Ryan, you mentioned consumer large firms are doing better. We see that as well. do you think they found a new economic model or formula to make this work or maybe it's not sustainable, would just be good to hear thoughts on both. .

With respect to net new assets. It's the same answer every quarter. Obviously, we watch it closely. We believe that we -- a lot of people report this number differently. I'm not quite sure I've always said measure revenue not necessarily NNA. I know you'd like looking at it that way to predict revenue, but we understand productive assets. And what I would say philosophically, and this is something we did, I think, 8 years ago. It was a philosophy that the advisers in the future and more and more so will not be limited to just what we have in custody of Stifel. We have been giving technology and tools that allow us to advise an assets held away and being able to consolidate and report not only assets but expenses in a holistic manner. And when you do that, you start seeing a client full financial picture and then advisers, of course, going back to my comment about them being very entrepreneurial productive will ask about, well, who's managing this? Can I help you with this? Oh, you've got the loan, we can offer a better rate. CPs credit card is at 8%, you're other ones at 18%. Our clients don't borrow, by the way. So that's easy, but it's not a credit card. So all of this is a holistic view of understanding that what technology will do is firms cannot be just focused on their custody stock record, so to speak, they're going to have to look at and be able to look at a holistic view for clients. And that's what we -- I think we were 1 of the first full-service firm to actually look at that and not just have it be a sidebar, but central to how we look at client assets.

No, I think that's great. I appreciate it. And then ask a follow-up here just on lending and just the fund banking lending has obviously been a great growth story for the firm. I'd love to hear about just how you're thinking about that from here and kind of relative capacity kind of supply/demand and then considerations from a risk perspective, I appreciate it's maybe lower risk. But just hear about that? And then other strategic elements in doing that kind of the multiplier that maybe you're seeing in other revenue lines across the firm where you expect to see? And just how that's helpful there as well.

Yes. Well, look, specifically as it points to venture not only fund banking but venture in what I would say, we had a big funnel, okay? And we just started and started competing in this business. We've been in it for a while, but we really made an investment 3 years ago. And we're just getting started. We have things that we have to do we have to be better on the technology front, providing venture clients with good treasury type functions, and we've got a big investment in that. And what I see today is this isn't just about collecting deposits and making venture and fund banking loans. This is about, again, broadening the scope and understanding that we out of this, comes wealth opportunities, investment banking opportunities, fixed income opportunities. And I -- as I have said on previous calls, I am very optimistic and bullish about the investments we've made in this business as I look forward. It's a great ecosystem. It is the new economy. And we -- I don't think that any of you have really understood or at least haven't understood what we're doing and how we can grow that business. So -- but we have a lot of investments that we need to make to be competitive. But I think we're 1 of the players in that business, and it's not just about deposits and loans, but a lot more.

One thing I'd add there, if you think about the loan growth in the second half to get to the $4 billion bogey for the entire year, our guide there, -- you look at our current excess capital, we use less than half of that to fund that loan growth in the second half of the year. So we have the financial flexibility to do more than that as we look forward in the year. If the demand is there, for assets with the proper risk-adjusted returns. And obviously, fund banking, as Ron mentioned, is a very low-risk asset class. We feel very comfortable with it.